Category: State capitalism

We have little of any pure free market. Much of what private business interests laud as “free markets” is a regulatory state where business manipulates regulators, tax credits and the like – i.e., State capitalism.

Mitch Daniels vulnerable on corruption?

The Advance Indiana blog (see blogroll, right) has some obsessions, and those obsessions seem to involve the corner-cutting, corporatism and downright corruption of the Republicans in power in Indianapolis — both state and local government. That would be no surprise were not the blogger himself a Republican. (Doug Masson beat me to the punch on this, but I started before lunch and his appeared between now and then.)

The blog is relentless in criticizing the Indy Mayor Greg Ballard’s administration for its subservience to the interests of billionaire sports franchise owners (here, here, here, & here — and that’s just the recent ones; but don’t think he’s just an anti-sports sissy).

Today, he hits a higher target — the Daniels administration:

I’m telling you that Daniels has some big-time scandals brewing in his administration. The Obama Justice Department can bury any presidential ambitions he may have if they so desire to investigate these various scandals. I thought Mitch was smart enough to avoid this kind of corruption in his administration when he first got elected, but my once favorable impression of him is fading with the passage of every day. I’m not surprised by [State Rep. Eric] Turner’s obvious self-dealing, and I doubt many others who’ve watched him over at the State House over the years are either. The ACS [company hired to privatize Medicaid administration] connections run deeper than [Mitch] Roob. Barnes & Thornburg’s Bob Grand and Joe Loftus have lobbied the state and the City of Indianapolis for the firm. They firm as also lobbied the state for [Daniels insider John] Bales’ Venture Real Estate. CIB President Ann Lathrop, who replaced Grand in that role, used to work at ACS with Roob and former Mayor Steve Goldsmith, who employed both of them in his administration. Lathrop now works for Crowe Horwath, which has several contracts with the City of Indianapolis. Lathrop personally inked a contract with the Ballard administration’s budget office, which Lathrop ran during the Goldsmith administration. And I could go on but you get the point. It’s just one incestuous cesspool.

“Incenstuous cesspool” almost earned this re-blog a “damn rackets” categorization, but I’m holding off on that a bit longer.

Still, I had a lot of trouble with the Medicaid privatization debacle, which put Daniels’ willful streak on display and was so patently misguided — long before he nevertheless went ahead and did it — that only two theories came to mind for why he’d do it:

  1. He cynically wanted to screw up Medicaid — a massive and virtually uncontrollable entitlement — so badly that nobody would even want to bother applying (which in essence would move the cost of caregiving “off book” by forcing family members to skip economically productive jobs to care for aging parents even more than they already do); or
  2. He or someone he likes/owes stood to profit mightily from privatization. (This was barely on my radar, frankly.)

I want to like Mitch. I want to be proud of him. I’d like to want him to become President. But don’t bet on it — whether “it” is is me wanting him to become President or him actually becoming President. I knew nothing of his youthful pot use, divorce and, now, possible corruption (or closeness to corruption) until he became one of the frontrunners (or coy draft candidates) du jour.

Expect more dirt to be unearthed — not necessarily because Advance Indiana is right, but because that’s the way political sabotage works, and it’s hard to do all Mitch has done in his life without getting at least splashed with some ugly mud along the way.

I’m almost 62, and I’m going to say what I think …

I was at a small party tonite for a young friend who’s (1) turning a year older and (2) soon going away for more schooling. The host, a bright not-so-young man (though he’s younger than me) and I enjoy each other’s company quite a lot, and our lives are intertwined in multiple ways, including that he’s my grandson’s godfather.

On some political cultural issues, we found ourselves not only agreeing on the substance, but mutually marveling, after he brought it up, at how widespread is the virtual ban on uttering our opinions aloud. In some of the more or less conservative circles we travel in (we did not discuss all these; some were his list, some mine):

  • You can’t talk about caring for God’s good creation without being thought a left-wing environmentalist (especially if you call it “the environment,” which I try not to).
  • You can’t say that capitalism has its limits.
  • You can’t say that “creative destruction” is profoundly un-conservative in a very important sense.
  • You can’t question “American Exceptionalism” or you’ll be accused of something like “moral equivalence.”
  • You can’t suggest that America isn’t omnipotent and can’t do any stupid thing it chooses with impunity.
  • You can’t suggest that we’re not going to grow our way out of this malaise – or that if we do, there nevertheless will come some day, probably soon, a malaise we cannot outgrow, and that our mountains of debt have a lot to do with that.
  • You can’t say that our economic system is not fundamentally different than the state capitalism David Brooks was trying to distinguish from our system a few days ago.
  • You can’t suggest that we’re running out of oil and that the days of the automobile as so central a feature of life are numbered.
  • I’m not even sure you can safely say “the sexual revolution was at best a mixed blessing, and I think it was a net setback for humanity.” Not even in “conservative” circles as “conservative” mags like National Review now have writers who are shacking up without (or at least before) wedlock. (Wanna know why same-sex marriage has valence? Look at what heteros have done to marriage.)

To his observation, and after running down a quick mental list of my own, I found myself saying “I’m almost 62 years old and I’m going to say what I believe — if only so I can say ‘I told you so’ some day.”

I’m wondering if that should be the new subheading on the blog instead of my beloved Latin maxim. That’s kind of what I’ve been doing in this blog. But I am pretty eclectic, and it’s not all negative or adulatory. Some of it’s just my sense of intrigue on a topic that I want to share.

Anyway, all those things you can’t say? I just said ’em. And I’m stickin’ to it.

Quote of the day

No, don’t expect one every day, but for now, try this:

It’s funny that we require more proof of a person’s need to become eligible to receive welfare than we require of these billionaire sports team owners when they ask for tens of millions more annually in public assistance.

HT: Advance Indiana blog.

Note, by the way, how I’ve added a new category since “corporatism” and “state capitalism,” while apt, seemed too tame.

Welcome to the oligarchy

John Médaille in Doing God’s Work at Goldman’s notes that Greece’s banking problem — Crony Capitalism that privatized profits and socialized losses, leading to certain collapse — is, by the lights of an IMF economist, is the same as ours, and as we busted up the banking offenders in Greece, so should we here.

But of course we won’t. We have quasi-religious rationales for letting the bastards do as they wish, but in the end, we’re just making a virtue of necessity. We’re trapped.

[T]he country is formally an oligarchy, with a government of the rich, by the rich, for the rich. Partisan fights are beside the point. As Obama amply demonstrates, “change” means more of the same, for the same people fund both sides. As entertaining as our political process is, it is meaningless, full of the sound and the fury, no doubt, but signifying nothing. The real power lay elsewhere. The president and the congress seek office to run the country, only to find that the country runs them. Or rather that part of the country in and around Wall Street.

Not much I can add to that.

“Hostess Twinkie Market” – no nutritional value

A very important but taciturn investor (that explains why I hadn’t heard of him) speaks to the Wall Street Journal, and his prognosis ain’t pretty:

  • He compared the financial markets to a Hostess Twinkie. “There is no nutritional value,” he said. “There is nothing natural in the markets. Everything is being manipulated by the government.”
  • “The government is now in the business of giving bad advice … By holding interest rates at zero, the government is basically tricking the population into going long on just about every kind of security except cash, at the price of almost certainly not getting an adequate return for the risks they are running. People can’t stand earning 0% on their money, so the government is forcing everyone in the investing public to speculate….”
  • “[I]t was in some ways helpful to carry a Depression mentality throughout their later lives, because it meant they were thrifty with their money and prudent in their investment decisions … All we got out of this crisis was a Really Bad Couple of Weeks mentality.”
  • He is buying “way out-of-the-money puts on bonds”—options that have no value unless Treasury bonds plummet. “It’s cheap disaster insurance for five years out,” he said.
  • “All the obvious hedges”—commodities and foreign currencies, for example—”are already extremely expensive,” he warned.

I’d tell you how I’m hedging, but since I have an audience of dozens, some with money in the bank, I don’t want to risk driving up the price before I’m more fully invested. 😉

HT: Patrick Deneen at Front Porch Republic.

Meanwhile, Ross Douthat says the demographic crunch every sentient creature knew was coming has arrived way early – now instead of the late 2010s: a “lost decade.” I’m not sure he’s right blaming Bush (he at least is clear that he’s talking hindsight) except that Bush had what tort lawyers call the “last clear chance” to avert catastrophe.

Paradigm Busters

My crystal ball has never worked very well, but the part of me that longs, that aches, for something better than our Ponzi-scheme economy refuses to give up on dreams of a humane future.

This sort of thing – rumored for weeks – could be it:

PITTSBURGH – The United Steelworkers (USW) and MONDRAGON Internacional, S.A. today announced a framework agreement for collaboration in establishing MONDRAGON cooperatives in the manufacturing sector within the United States and Canada.  The USW and MONDRAGON will work to establish manufacturing cooperatives that adapt collective bargaining principles to the MONDRAGON worker ownership model of “one worker, one vote.”

“We see today’s agreement as a historic first step towards making union co-ops a viable business model that can create good jobs, empower workers, and support communities in the United States and Canada,” said USW International President Leo W. Gerard.  “Too often we have seen Wall Street hollow out companies by draining their cash and assets and hollowing out communities by shedding jobs and shuttering plants. We need a new business model that invests in workers and invests in communities.”

Josu Ugarte, President of MONDGRAGON Internacional added: “What we are announcing today represents a historic first – combining the world’s largest industrial worker cooperative with one of the world’s most progressive and forward-thinking manufacturing unions to work together so that our combined know-how and complimentary visions can transform manufacturing practices in North America.”

Highlighting the differences between Employee Stock Ownership Plans (ESOPs) and union co-ops, Gerard said, “We have lots of experience with ESOPs, but have found that it doesn’t take long for the Wall Street types to push workers aside and take back control.  We see Mondragon’s cooperative model with ‘one worker, one vote’ ownership as a means to re-empower workers and make business accountable to Main Street instead of Wall Street.”

Both the USW and MONDRAGON emphasized the shared values that will drive this collaboration.  Mr. Ugarte commented, “We feel inspired to take this step based on our common set of values with the Steelworkers who have proved time and again that the future belongs to those who connect vision and values to people and put all three first. We are excited about working with Mondragon because of our shared values, that work should empower workers and sustain families and communities,” Gerard added.

In the coming months, the USW and MONDRAGON will seek opportunities to implement this union co-op hybrid approach by sharing the common values put forward by the USW and MONDGRAGON and by operating in similar manufacturing segments in which both the USW and MONDRAGON already participate.

…

About MONDRAGON:

The MONDRAGON Corporation mission is to produce and sell goods and provide services and distribution using democratic methods in its organizational structure and distributing the assets generated for the benefit of its members and the community, as a measure of solidarity.  MONDRAGON began its activities in 1956 in the Basque town of Mondragon by a rural village priest with a transformative vision who believed in the values of worker collaboration and working hard to reach for and realize the common good.

Today, with approximately 100,000 cooperative members in over 260 cooperative enterprises present in more than forty countries; MONDRAGON Corporation is committed to the creation of greater social wealth through customer satisfaction, job creation, technological and business development, continuous improvement, the promotion of education, and respect for the environment.   In 2008, MONDRAGON Corporation reached annual sales of more than sixteen billion euros with its own cooperative university, cooperative bank, and cooperative social security mutual and is ranked as the top Basque business group, the seventh largest in Spain, and the world’s largest industrial workers cooperative.

About the USW:

The USW is North America’s largest industrial union representing 1.2 million active and retired members in a diverse range of industries.

Here’s the Ocholphobist – a guy who’s experienced at making beautiful objects with his hands, but who seldom writes on such things any more – weighing and balancing the workers’ cooperative model:

I recently spoke with an old Catholic Worker friend of mine who told me of a talk given recently in which he heard that Mondragón is worried that an EU style bailout of Spain along the lines of what happened in Greece would actually hurt the cooperatives (Mondragón is not the only one) in Spain. Large financiers generally do not like cooperatives like Mondragón because they do not run with the sort of debt load and constant large debt shifting that a typical corporation does, and the debt they have tends to be decentralized – spread out over a number of smaller financial institutions (note that one of the “four areas of activity” Mondragón is engaged in is finance – this is common among worker cooperatives in Europe — just as many communities and groups of workers in America have local credit unions and many large corporations have their own finance divisions) . And these EU bailouts, like the American bailouts, buttress large finance, with the de facto result that midsize, small, and micro finance options are left in a less competitive position than they would be were there no bailouts, or less centralized bailouts.
The labor movement in the U.S. has little leverage against corporations and its impotence is increasingly pathetic. Often in the American context, when a union does manage to maintain some real power it uses it in as corrupt and abusive a manner (often abusive toward their own, these days) as corportatist power brokers do. But usually American unions are in the business of losing what power they have had so this is less and less a concern. It seems to me that if there is to be any future in workers organizing for their own protection and aid in the United States it will primarily be along the lines of models such as the one Mondragón provides. But I rather doubt that will happen beyond a few small scale efforts and the occasional lipservice. Worker cooperatives do not really fit into the destructive plutocratic order in which we find ourselves today.
It should be noted that in most worker cooperatives (I daresay nearly all of them that last for more than a few years) there is not a utopian vision of financial egalitarianism. There is still a meritocracy at play, arguably more so than in current corporatist models. A worker (or a small worker owned business seeking membership in the cooperative) is not guaranteed to be vested in the cooperative, but must earn it over years and invest himself or herself in a manner which shows to others competence and seriousness and follows well established protocols, with a system in place to curb abuses and address complaints. One will see in a worker cooperative, however, more money staying within the communities where the cooperative is found, and nothing like the radical disparity between the wages of workers and the salaries of executives such as we see in most U.S. corporations, in which execs are paid for their skills in social networking and an ability to manipulate government and lying to the public with that perfected air of banality we routinely see from our suits.
All that said, the ethos of Mondragón Corp has undergone something of a change since EU integration and taken something of a more EU character. The EU is a sly dog. Within the EU constitution there is a mandate which requires the EU to follow the principle of subsidiarity, but as we see with the recent bailout of Greece (along with a host of other moves), the EU is often the furthest thing from an institution which follows the principle of subsidiarity. There is the possibility of a convenient use of subsidiarity rhetoric whilst actually following centralized, top-down, corporo-statist models. It is quite conceivable that cooperatives could be formed which, on paper, look like cooperatives, but which actually function more like corporations.
It is now not uncommon for American Orthodox to argue how neo-con, paleo-con, or libertarian political and/or economic orders are somehow in keeping with Orthodoxy. I suppose an Orthodox embracing subsidiarity would simply be another act in that circus. The chief fault of subsidiarity, as I see it, is that the notion is too vague to be of serious use when applied to any macro-economic vision. One finds both Leftists and those on the Right espousing the ‘true’ version of subsidiarity. Subsidiarity works best as a flexible guiding model in particular micro-economic environments, a part of an economic order with a wide array of labor structures, such as we see with Mondragón Corp in the context of Spain. I have a friend who says he would never fly Distributivist Air, were there such a company. I am not sure that a well run worker cooperative airline would be any less safe than the typical corporate airline, but I have worked for a family owned business of which the thought of the coworkers I had at said business owning that business sends shivers down my spine. Another business I once worked for did go for a varient of the subsidiarity model, and is now in dire straights with half of the staff let go, instead of being sold to a friend of mine who could have actually kept the business thriving, seeing as how he had run it successfully for some years. The original owner, instead of selling to my friend, decided to follow a hasty subsidiarity minded scheme presented by an employee with many ideals and little actual experience in the business and now, out of desperation, the company mimics corporate stores more than it ever did. I suppose that in business, as in most of life, there is a charism to doing things well and any economic order can get in the way of a given charism at a given time.
I was unaware of this book until the Ochlophobist linked it. It’s on my wish list now. And here’s more about Mondragon (in a Wikipedia article that the Wikipedia poobahs would like to see rewritten for greater objectivity).

God bless the child

Sometimes a song is more than a song:

Them that’s got shall get
Them that’s not shall lose
So the Bible said and it still is news
Mama may have, Papa may have
But God bless the child that’s got his own
That’s got his own

Yes, the strong gets more
While the weak ones fade
Empty pockets don’t ever make the grade
Mama may have, Papa may have
But God bless the child that’s got his own
That’s got his own

Money, you’ve got lots of friends
Crowding round the door
When you’re gone, spending ends
They don’t come no more
Rich relations give
Crust of bread and such
You can help yourself
But don’t take too much
Mama may have, Papa may have
But God bless the child that’s got his own
That’s got his own

Mama may have, Papa may have
But God bless the child that’s got his own
That’s got his own
He just worry ’bout nothin’
Cause he’s got his own

God Bless the Child, Billie Holliday and Arthur Herzog, Jr.

Nothing much has changed, has it? Ross Douthat’s Monday column at the New York Times, “The Great Consolidation,” surveys the events of the past few years and concludes:

This is the perverse logic of meritocracy. Once a system grows sufficiently complex, it doesn’t matter how badly our best and brightest foul things up. Every crisis increases their authority, because they seem to be the only ones who understand the system well enough to fix it.

But their fixes tend to make the system even more complex and centralized, and more vulnerable to the next national-security surprise, the next natural disaster, the next economic crisis. Which is why, despite all the populist backlash and all the promises from Washington, this isn’t the end of the “too big to fail” era. It’s the beginning.

If it doesn’t ring true to you, I’m surprised you’re reading this blog at all.

Is this the result of a conspiracy? Are there some bastards we can shoot to end it? I rather think of it as tragedy, not conspiracy. And, having grown up as I did, I sometimes think of it as misadventure (looks sorta like tragedy, but the reversal of fortune is brought about by an external cause, says Aristotle).

Even in tragedy, there can be comic moments, as when POTUS (President of the United States) rationalizes a Supreme Court Appointment:

In the past week, I’ve read two news stories about Kagan in my local paper that featured absurd language.  The first was an AP story by Ben Feller on May 10.  The second was an AP story by Julie Hirschfeld Davis on May 12.

The second story quotes Harry Reid as saying Kagan “has fresh ideas” because she’s been “out in the real world recently.”  Reid is trying to turn a negative into a positive. Kagan’s lack of judicial experience means she has been doing other things instead of being cloistered among black robes.  But are the other things she’s been doing part of “the real world”?  For the past decade, she has been professor and then dean of Harvard Law School, followed by a year as U.S. solicitor general.  That’s pretty rarefied living.  In the ‘90s, she was a White House counsel and policy advisor.  Is there anything “fresh” about a retread from the corrupt and sleazy Clinton years?

The first story reports, “The president has grown vocal in his concern that the conservative-tilting court is giving too little voice to average people.”  Obama—he of the famed analysis regarding bitterness and clinging—has now condescended to express a tender regard for the vox populi.  In between his policy talks with Bernanke, Geithner, and Blankfein; his strategy sessions with Chicago machine cogs; and his social visits with the Beverly Hills and Martha’s Vineyard set.  Somehow he finds time to worry about the little guys and gals and then express that worry while the press dutifully notes the expression.

We are told that Kagan is a manifestation of Obama’s concern that the common people are not being heard by the Supreme Court.  So he appoints a person who attended an exclusive high school, then Princeton, then Oxford, and then Harvard.  Just the sort of person who is most likely to be in touch with the struggles and aspirations, the stances and aims of We the People.  Ain’t democracy grand?

(Jeff Taylor, Few v. Many: The Topsy-Turvy World of Judicial Demographics, at Front Porch Republic)

Rima Fakih is soooo yesterday. Where’s my bread? Where’s the next circus?

Yes, Jeff: Democracy is grand.

Red Tories | Front Porch Republic

I haven’t decided yet whether I like The American Conservative enough to renew my subscription, but the June issue is excellent, and I’d recommend that you pick it up before the next issue rolls around.

The feature article of the June issue is “Shattered Society,” an essay by Brittish philosopher and politics wonk Phillip Blond, who styles himself a “Red Tory.” The subhead is “Liberalism, Right and Left,  has made lonely serfs of us all,” and asks “Does the Red Tory tradition offer a remedy?”

The article is powerful. The responses (e.g., Daniel McCarthy, Nicholas Capalidi) are provocative. Like Daniel Larison at Front Porch Republic, I thought Capaldi’s response was badly misguided. I even though it was condescending psychobabble, probably a calculated hatchet-job commissioned by corporate interests. That’s why I blog while Daniel Larison blogs and can actually get a job writing professionally. He insinutes the same sort of thing but does it more nicely.

Making Money

I’ve been intrigued, and troubled, by the concept that “banks literally lend money into existence” ever since I first heard it.

Today a very occasional contributor to Front Porch Republic lays out how it’s done and how the confluence of that and some other factors leaves the economy in great structural peril still. Better yet, he tells how we can get out of it with minimal pain – at least initially.

The contributor, Eric Zencey, is a novelist, essayist, and Visiting Associate Professor of Historical and Political Studies for Empire State College in Europe and New York. His writing in environmental history and political theory has been supported by grants from the Rockefeller, Guggenheim, and Bogliasco Foundations. Today’s essay is a glimpse into his forthcoming book The Other Road to Serfdom: Essays in Sustainable Democracy (University Press of New England, Fall 2011).

That banks lend money into existence is not necessarily a secret worthy of outrage. It is a conscious policy decision at the national level to loosen the federal grasp of a traditionally sovereign prerogative, seigniorage: the difference between the face value money and its cost of production; the profit that comes from creating money.

But outrageous or not, allowing banks into the game changes it pretty fundamentally, especially when the banks are backed by the FDIC is they get so far out there as to create a crisis of confidence and consequent “run on the bank.”

Zency lays it out well if you’re interested. It seems to me that this is a major factor in our manic-depressive economic mood swings.