People who bite the hand that feeds them usually lick the boot that kicks them

Plato Bets on Tyranny

By Ed Kaitz

It might be worth everyone's while in these troubled times to set aside an evening in order to carefully read Book VIII of Plato's Republic.  The dialogue is nothing less than chilling in its illustration of what happens in a popular government when corrupt politicians inflame the vices of undisciplined citizens in order to destroy the business class and establish a tyranny.

Here's a link to Book VIII.  Plato's objective is to show how highly self-disciplined regimes gradually devolve into more inferior and immoderate governments.  Socrates begins the discussion showing how Aristocracies (rule of the wisest) devolve into Timocracies (rule of the military) which then descend into Oligarchies (rule of the wealthy).  Oligarchies descend into Democracies (rule of the people) which in turn become Tyrannies.

Pay attention to the final section: how a Democracy becomes a Tyranny.  The process starts back when the rulers are Oligarchs.  A kind of Government/Business nexus (think Fannie Mae) figures out that certain undisciplined borrowers will be unable to pay back their loans.  The lenders acquire the property and recoup their losses with some kind of bailout.  Socrates says none of this crazy lending would have happened if the lenders had had to risk their own funds:

"For if it be enacted that voluntary contracts be as a general rule entered into at the proper risk of the contractor, people will be less shameless in their money-dealings in the city, and such ills as we have now described will be less common."

Democracy arises when those thrown out of their homes discover that the rich Oligarchs and their kids are soft and lazy.  They rebel and set up popular rule.  The people want freedom more than anything else, so they are highly sensitive to any kind of "master" including objective standards of behavior, merit, and manners.  Therefore, the people's desire for freedom makes anyone in a position of authority highly suspect. 

Look out for the Pension Bomb

Europe’s $39 Trillion Pension Risk Grows as Economy Falters

By Rebecca Christie and Peter Woodifield

Even before the euro crisis, people were worried about Europe’s pension bomb.

State-funded pension obligations in 19 of the European Union nations were about five times higher than their combined gross debt, according to a study commissioned by the European Central Bank. The countries in the report compiled by the Research Center for Generational Contracts at Freiburg University in 2009 had almost 30 trillion euros ($39.3 trillion) of projected obligations to their existing populations.

Germany accounted for 7.6 trillion euros and France 6.7 trillion euros of the liabilities, authors Christoph Mueller, Bernd Raffelhueschen and Olaf Weddige said in the report.

No end in sight to the European debt crisis

For Europe, Every Day Is A New Adventure

by JOHN RUBINO 

Europe’s parade of surreal financial news just keeps coming. This week, investors are paying Germany to take their money by accepting negative interest rates on new government debt:

Germany Issues Bills With Negative Yields As Economists Agree Country Is In Recession

Continuing the schizoid overnight theme, we look at Germany which just sold €3.9 billion in 6 month zero-coupon Bubills at a record low yield of -0.0122% (negative) compared to 0.001% previously. The bid to cover was 1.8 compared to 3.8 before.

As per the FT: “German short-term debt has traded at negative yields in the secondary market for some weeks with three-month, six-month and one-year debt all below zero. Bills for six-month debt hit a low of minus 0.3 per cent shortly after Christmas…The German auction marks the start of another busy week of debt sales across Europe. France and Slovakia are also selling bills on Monday, with Austria and the Netherlands selling bonds on Tuesday. Germany will auction five-year bonds on Wednesday, while Thursday sees sales of Spanish bonds and Italian bills. Italy finishes the week with a sale of bonds on Friday.”

The empire will be stabbed in the back by its own protectors.

World’s Biggest Zombies

by Bill Bonner

Not much action at the end of last week… Gold closed the week over $1,600. Oil remained over $100.

The show goes on!

We are watching the destruction of an empire. All empires must go away sometime. They are natural things. And nature puts a time bomb in everything she creates.

The US empire is doomed. Just like all the others that went before it. It is doomed by nature herself – condemned by the gods to blow up and die.

None of this should be surprising to you, dear reader. We’ve seen this movie before. Hundreds of empires have come and gone. We know how this movie ends. More or less.

What we know for sure is that the US is going broke. There is hardly any other plausible outcome. We’ve gone over the numbers so often we don’t need to repeat them.

Yes, it is true that the feds could still save themselves….if they had the will. They could cut taxes to a flat 10%…and spend only what they raised in tax revenue… That would do the trick from an economic point of view.

Slip-Sliding Into Tyranny

This is how it happens…

by Charles Goyette

President Obama found a moment of reduced visibility, in an unwatched hour on New Year’s Eve, to sign the latest assault on the Fifth Amendment. In signing the National Defense Authorization Act of 2012 on New Year’s Eve, Obama knew the nation’s attention would be elsewhere, diverted by revelry, football, New Year’s Day, and a Monday national holiday.

In case you haven't heard, the National Defense Authorization Act allows the government to detain people indefinitely – yes, it includes American citizens who can be taken even on our native soil and imprisoned – merely on the basis of accusations.

The measure is "so radical," says Human Rights Watch, "that it would have been considered crazy had it been pushed by the Bush administration." And although Obama appended a signing statement as he put his name to the act, solemnly assuring the nation that the power he insisted on having won’t be used recklessly, it is a political gesture that has no more force of a law than attaching a little yellow sticky note to the bill. If the clear language of the Constitution itself cannot bind the governing classes, it is hard to imagine a post-it note having much effect on the current or future presidents now that the indefinite detention of Americans without trial has been legislatively countenanced.

There you have it in a nutshell, the new American way: Guilty until proven innocent.

This is how once-free people slip into state tyranny and slide into martial law.

Political figures are always careful to paper over their power grabs with spurious legalities and midnight measures, granting themselves the rights they are appropriating. No matter how flimsy the pretext, no matter how forbidden the act, everything must be formalized and enabled. Overturned rights and the pretext of legality.

That is how the Fourth Amendment was trashed… marginalized by a document called the Patriot Act.

And now the Fifth Amendment is under attack.

The Year of the Trojan Water Dragon

News on January 11 2012

Harris & Ewing Listening to the Future September 12, 1938
Washington, D.C. "Acting Czechoslovakian Minister listens to Hitler speech. Dr. Karel Brejska, Charge d'Affaires and acting Minister in the absence of Minister Vladimir Hurban in Czechoslovakia, is pictured listening to Adolf Hitler's radio address today at the legation. He refused to comment on the speech"

By Ilargi

Hmm.

Right, markets are up. Wonder what they're so happy about? A newfound source of suckers, perhaps, or the same old one that still has some juice left? Yeah, US jobs numbers, housing numbers, yada yada, I know. But does anyone with a sound mind have the guts to risk their wealth on that? 

Merkel and Sarkozy are doing emergency meeting 1000, the next one, number 1001, is on January 20. What do they talk about by now? US jobs numbers? Hard to imagine.

Hungary perhaps? It’s fast becoming a major threat to Europe's finances, since Austrian banks are deeply embedded in the country. And in Bulgaria, Romania.

And the Magyar government pushes through one new law after the other, including some concerning the central bank that the IMF and EU don't like one bit. The central bank's independence is under threat, is their complaint. But can anyone name even one example where the IMF stood up to protect a central bank's independence from the IMF? Or doesn't that count?

Hungary’s constitution and democracy are "trampled on", say the headlines. Yes, well, what's new? Are we sure this indignation is well directed? For one thing, not that far from Budapest, Italy and Greece have installed unelected technocrat governments, under pressure from the same IMF and EU. Certainly undemocratic, and almost certainly contrary to their respective constitutions. 

I have little sympathy for a government that also writes up new laws that take issues like abortion and gay rights on a journey back in time, but I do think we must ask ourselves who exactly is doing the trampling these days.

In America, anybody at all can now be arrested without any recourse at all, no lawyer, no trial, no formal accusation. Constitution, anyone? A few years back in Europe, a new EU constitution was voted down repeatedly by voters in several member countries. It still went through. Merkel and Sarkozy push hard to change that constitution again, to allow for a two thirds majority to suffice for far reaching "reforms". Democracy, anyone?

Quote of the Day

The Glory of the Market vs. the Compulsory Monopoly of Bureaucratic Government

"The essence and the glory of the free market is that individual firms and businesses, competing on the market, provide an ever-changing orchestration of efficient and progressive goods and services: continually improving products and markets, advancing technology, cutting costs, and meeting changing consumer demands as swiftly and as efficiently as possible.

The libertarian economist can try to offer a few guidelines on how markets might develop where they are now prevented or re­stricted from developing; but he can do little more than point the way toward freedom, to call for government to get out of the way of the productive and ever-inventive energies of the public as expressed in voluntary market activity. No one can predict the number of firms, the size of each firm, the pricing policies, etc., of any future market in any service or commodity. We just know—by economic theory and by historical insight—that such a free market will do the job infinitely better than the compulsory monopoly of bureaucratic government."

                                                                    ~Murray Rothbard in "For a New Liberty"

A nation of dodos

The New Authoritarianism

By Fred Siegel

 “I refuse to take ‘No’ for an answer,” said President Obama this week as he claimed new powers for himself in making recess appointments while Congress wasn’t legally in recess. The chief executive’s power grab in naming appointees to the Consumer Financial Protection Bureau and the National Labor Relations Board has been depicted by administration supporters as one forced upon a reluctant Obama by Republican intransigence. But this isn’t the first example of the president’s increasing tendency to govern with executive-branch powers. He has already explained that “where Congress is not willing to act, we’re going to go ahead and do it ourselves.” On a variety of issues, from immigration to the environment to labor law, that’s just what he’s been doing—and he may try it even more boldly should he win reelection. This “go it alone” philosophy reflects an authoritarian trend emerging on the political left since the conservative triumph in the 2010 elections.

The president and his coterie could have responded to the 2010 elections by conceding the widespread public hostility to excessive government spending and regulation. That’s what the more clued-in Clintonites did after their 1994 midterm defeats. But unlike Clinton, who came from the party’s moderate wing and hailed from the rural South, the highly urban progressive rump that is Obama’s true base of support has little appreciation for suburban or rural Democrats. In fact, some liberals even celebrated the 2010 demise of the Blue Dog and Plains States Democrats, concluding that the purged party could embrace a purer version of the liberal agenda. So instead of appealing to the middle, the White House has pressed ahead with Keynesian spending and a progressive regulatory agenda.

Much of the administration’s approach has to do with a change in the nature of liberal politics. Today’s progressives cannot be viewed primarily as pragmatic Truman- or Clinton-style majoritarians. Rather, they resemble the medieval clerical class. Their goal is governmental control over everything from what sort of climate science is permissible to how we choose to live our lives. Many of today’s progressives can be as dogmatic in their beliefs as the most strident evangelical minister or mullah. Like Al Gore declaring the debate over climate change closed, despite the Climategate e-mails and widespread skepticism, the clerisy takes its beliefs as based on absolute truth. Critics lie beyond the pale.

The problem for the clerisy lies in political reality. The country’s largely suburban and increasingly Southern electorate does not see big government as its friend or wise liberal mandarins as the source of its salvation. This sets up a potential political crisis between those who know what’s good and a presumptively ignorant majority. Obama is burdened, says Joe Klein of Time, by governing a “nation of dodos” that is “too dumb to thrive,” as the title of his story puts it, without the guidance of our president. But if the people are too deluded to cooperate, elements in the progressive tradition have a solution: European-style governance by a largely unelected bureaucratic class.

The tension between self-government and “good” government has existed since the origins of modern liberalism. Thinkers such as Herbert Croly and Randolph Bourne staked a claim to a priestly wisdom far greater than that possessed by the ordinary mortal. As Croly explained, “any increase in centralized power and responsibility . . . is injurious to certain aspects of traditional American democracy. But the fault in that case lies with the democratic tradition” and the fact that “the average American individual is morally and intellectually inadequate to a serious and consistent conception of his responsibilities as a democrat.”

Still Lying to Children

How No Child Left Behind Corrupted Education

Expecting all students to be college ready is a hopeless utopian goal that inevitably produces test-score inflation and bad results.

by Sol Stern  

When George W. Bush signed No Child Left Behind legislation into law 10 years ago this week, it seemed like the perfect expression of his brand of “compassionate conservatism,” while also redeeming his campaign pledge to use education reform to overcome “the soft bigotry of low expectations.” NCLB passed Congress by overwhelming bipartisan majorities (87 to 10 in the Senate; 381 to 41 in the House) and a beaming Ted Kennedy stood alongside President Bush at the bill-signing ceremony.

Before NCLB, the federal government had attempted to achieve some degree of educational equity through the Title I compensatory funding program, which sent nearly $200 billion to the nation’s highest-poverty schools over four decades. This massive transfer of funds yielded meager results, however. With the new education law the Bush administration pushed for a results-oriented approach to education reform. The federal government now would require school districts to meet specific goals in return for their Title I funds. The states were required to conduct annual tests in reading and math for all children in grades three through eight, with the results—broken down by race, sex, and socioeconomic status—made public. Narrowing the racial achievement gap framed the measure as a “civil rights” reform that conservatives could easily embrace.

Though well intentioned, NCLB’s perverse incentives left the door wide open to the corruption of educational standards. The law stipulated that all American students must become “proficient” in reading and math by 2014 --- a hopelessly utopian goal – and then set sanctions for those states that didn’t make “adequate yearly progress” in meeting that goal. But the law also allowed each state to determine its own proficiency standard. Since men are not angels, it was inevitable that state and local education authorities would dumb down the tests to make themselves look good to the feds and to the voters.

The best evidence of test-score inflation over the past decade was the growing gap between the number of students that states deemed proficient on their own tests-those administered under the terms of NCLB-and the number deemed proficient by the National Assessment of Educational Progress (NAEP), often referred to as the "nation's report card."

The framers of NCLB might have avoided this outcome if they had familiarized themselves with the work of the great American social scientist Donald Campbell. According to Campbell, “when test scores become the goal of the teaching process, they both lose their value as indicators of educational status and distort the educational process in undesirable ways.” That’s exactly what seems to have happened.

The best evidence of test-score inflation over the past decade was the growing gap between the number of students that states deemed proficient on their own tests—those administered under the terms of NCLB—and the number deemed proficient by the National Assessment of Educational Progress (NAEP), often referred to as the “nation’s report card.” One reason the NAEP tests are the gold standard in student assessment is that they can’t be gamed by teachers or administrators. Every two years, NAEP math and reading tests are given to a statistically valid sample of all fourth- and eighth-grade students in each state. Teachers aren’t able to teach to the test, and school districts can’t offer students practice tests because no one knows ahead of time which students will be tested.

“Since men are not angels, it was inevitable that state and local education authorities would dumb down the tests to make themselves look good to the feds and to the voters.”

Most states in the union have reported huge gains on their own tests while their NAEP results haven’t budged. In New York, for example, the percentage of eighth-graders reaching proficiency on the state’s math test rose from 58.8 percent in 2007 to a stunning 80.2 percent in 2009, while the NAEP math scores remained flat over the same span with less than 30 percent of students deemed proficient.

It’s hard to escape the conclusion that states were gaming their tests—not only to satisfy NCLB regulations, but also to celebrate the education miracles that their elected officials have supposedly worked.

One other perverse incentive in NCLB: Because the law emphasized mere “proficiency” and rewarded schools for getting their students to achieve that fairly low standard, teachers and administrators were pressed to boost the test scores of their lowest-performing students but were given no such incentive to improve instruction for the brightest students – the nation’s future engineers and scientists.

A decade after the signing of NCLB, education reformers finally seem to understand the legislation’s conceptual errors and the degree to which it has contributed to a false picture of education progress. Unfortunately, the Obama administration seems determined to double down on the same flawed approach to federal education policy. The administration has offered waivers on the absurd 2014 proficiency goal, but only if the states accept new federal mandates linked to progress on the same unreliable state tests.

“We have to stop lying to children,” Obama’s education secretary, Arne Duncan, announced last year at a meeting of the National Governors Association. “We have to look them in the eye and tell them the truth at every stage of their educational trajectory.” A nice sentiment, but Mr. Duncan concocted the biggest lie of all when he replaced NCLB’s 2014 proficiency goal with the pledge that all American children will be prepared for college-level work by the year 2020.

Sacred Cows

Let The Market Decide The Post Office's Fate As It Has Kodak's

By THOMAS SOWELL 

The news that Eastman Kodak is preparing to file for bankruptcy, after being the leading photographic company in the world for more than a hundred years, truly marks the end of an era.

The skills required to use the cameras and chemicals required by the photography of the mid-19th century were far beyond those of most people — until a man named George Eastman created a company called Kodak, which made cameras that ordinary people could use.

It was Kodak's humble and affordable box Brownie that put photography on the map for millions of people, who just wanted to take simple pictures of family, friends and places they visited.

As the complicated photographic plates used by 19th century photographers gave way to film, Kodak became the leading film maker of the 20th century.

But sales of film declined for the first time in 2000, and sales of digital cameras surpassed the sales of film cameras just three years later.

Just as Kodak's technology made older modes of photography obsolete more than a hundred years ago, so the new technology of the digital age has left Kodak behind.

Great names of companies in other fields have likewise vanished as new technology brought new rivals to the forefront, or else made the whole product obsolete, as happened with typewriters, slide rules and other products now remembered only by an older generation.

That is what happens in a market economy, and we all benefit from it as consumers Unfortunately, that is not what happens in government.

The post office is a classic example.

Post offices were once even more important than Eastman Kodak, and for a longer time, as the mail provided vital communications linking people and organizations across thousands of miles.

But, today, technology has moved even further beyond the post office than it has beyond Eastman Kodak.

The difference is that, although the Postal Service is technically a private business, its income doesn't cover all its costs — and taxpayers are on the hook for the difference.

Moreover, the government makes it illegal for anyone else to put anything into your mail box, even though you bought the mail box and it is your property. That means you don't have the option to have some other private company deliver your mail.

In India, when private companies like Federal Express and United Parcel Service were allowed to deliver mail, the amount of mail delivered by that country's post offices was cut in half between 2000 and 2005.

What should be the fate of the Postal Service in the United States? In a sense, no one really knows. Nor is there any reason why they should.

The real answer to the question whether the Postal Service is worth what it is costing can be found only when various indirect government subsidies stop and when the government stops forbidding others from carrying the mail — if that ever happens.

If FedEx, UPS or someone else can carry the mail cheaper or better than the Postal Service, there is no reason why the public should not get the benefit of having their mail delivered cheaper or better.

Politics is the reason why no such test is likely any time soon. Various special interests currently benefit from the way the post office is run — and especially by the way government backing keeps it afloat.

Junk mail, for example, does not have to cover all its costs. You might be happy to get less junk mail if it had to pay a postage rate that covered the full cost of delivering it. But people who send junk mail would lobby Congress to stay on the gravy train.

So would people who live in remote areas, where the cost of delivering all mail is higher. But if people who decide to live in remote areas don't pay the costs that their decision imposes on the Postal Service, electric utilities and others, why should other people be forced to pay those costs?

A society in which some people make decisions, and other people are forced to pay the costs created by those decisions, is a society where a lot of decisions can be made despite their costs being greater than their benefits.

That is why the post office should have to face competition in the market, instead of lobbying politicians for government help. We cannot preserve everything that was once useful.

Human Snails

It’s time to mine New Zealand’s potential

by Theresa Clifford 

Following the recent national elections in November 2010, the thorny issue of mining in New Zealand is back on the agenda. NZ prime minister John Key has put economic growth and jobs at the top of his agenda, with the prime slots in his new cabinet handed to ministers whose main role will be to boost the economy. Steven Joyce has been appointed the new jobs tsar’ and given responsibility for lifting economic growth. A key task will be to sell the advantages of mining exploration to the NZ public.

The need to look at mining is now a serious discussion in NZ. New Zealanders know that Australia’s mining industry has been the catalyst for its economic growth in the past decade. Large quantities of minerals and resources are found in Australia and they are in high demand in China. This demand has led to massive Chinese investment in Australia’s mining industry. From 2007 to 2010, Chinese investment in Australia amounted to nearly US$60 billion. Australia’s mineral exports grew by 55 per cent to US$139 billion in 2010 and are projected to reach US$180 billion in 2011, thanks to China’s strong economic performance.

The Key coalition government is keen to emulate Australia’s mining success. In 2009, Gerard Brownlee, the then minister of energy proposed a series of changes to the Crown Minerals Act, which under Schedule 4 protects national parks and conservation reserves from mineral exploration and extraction. He also called for a loosening of access requirements to lands administered by the Department of Conservation.

NZ is rich in natural resources and has great potential for the discovery of new, high-value minerals including platinum, gold and other metals. The mining sector in NZ is currently much smaller than its tourism sector, but its economic impact could triple over the next 20 years. An important report by Richard Barker, a consulting geologist and a trustee for the Australian Institute of Mining and Metallurgy, shows that NZ is sitting on a huge amount of valuable natural resources: US$140 billion of metallic minerals, with brown coal alone worth at least an additional US$100 billion. Plus NZ has great potential for the discovery of new oil and gas resources.

The development of the natural-resource sector would create thousands of new jobs, boost the wider economy and be a key element in the future growth of NZ. The greatest value of the mineral sector to the NZ economy is through its vital, supportive function for other industry sectors and its contribution to export income. Growth sectors such as the dairy industry depend heavily on fertilisers and road transport, for which industrial minerals and aggregates are essential. Coal, lignite, gold, iron, sand and industrial minerals like china clay and bentonite are all in high demand in the export market. Within NZ, industrial minerals can be used for construction, electricity generation, papermaking, manufacturing, steelmaking, gold-ore processing, water treatment and farming.

Investing in this sector could deliver improved export performance, develop key infrastructure within NZ and bring with it huge benefits and advancements in science and technology and other spin-offs, such as the growth of the engineering sector (as can be seen in Australia).

Adding to the case for exploring the mining potential of NZ is the fact that the commodity market (minerals and energy in particular) is now among the most profitable industrial sectors in the world. In February 2011, Jim Rogers, co-founder of Quantum Funds with George Soros, announced that he was setting up a global resources equity index which will focus on the top companies in agriculture, mining, metals and energy sectors. He believes that power is shifting from the financial centres to the producers of real goods, particularly commodities, raw materials and natural resources.

So it would seem a no-brainer for NZ to explore this potentially lucrative market. But environmentalists have been quick to challenge the mining proposals. Greenpeace accused the Key government of attempting to drag NZ back to the nineteenth century. Senior Greenpeace spokesperson, Simon Boxer, claimed that, ‘the National Party’s rudimentary approach to economic development is fast consigning “clean green” New Zealand to the historical dustbin. Its rip shit and bust approach to growth is destroying everything we stand for as a country.’

Forest and Bird, a prominent NZ environmental group, also raised the alarm in 2010, with its estimates that 40 per cent of conservation lands (approximately 14 per cent of the country’s total land area) would fall under Schedule 4 and so ruin many areas of outstanding beauty in NZ. In reality, mining uses less than 0.1 per cent of NZ’s land area and sites of former mines are now rehabilitated for other uses.

Forest and Bird claims that mining has limited potential for NZ’s economy but carries immense costs to the environment. It believes that mining is inherently in conflict with the protection of natural NZ and the ‘100% Pure’ brand that NZ’s tourism, agricultural and innovation industries use to gain market advantage. Again the reality is very different: there are at least 82 mines already operating on conservation land and this has not impacted on tourism. In fact, international tourist numbers to NZ rose from 1.8million in 2000 to 2.45million in 2008, thanks in large part to increasing numbers of visitors from China.

Campaigns led by Forest and Bird have already hindered mining development in NZ. Four years ago, controversy erupted over the rare powelliphanta augusta snail. Solid Energy, the largest coal-mining company in NZ and a state-owned enterprise, wanted the coal from the snail’s habitat at Mount Augusta Ridge Stockton mine, the home of 6,000 of these snails. Under pressure from environmentalists and keen to demonstrate its ‘green’ credentials, Solid Energy agreed to remove the snails, with 4,000 relocated and the rest kept in captivity to safeguard the population from extinction. Approximately 1,300 of the evacuated snails are still living in small two-litre ice-cream containers in fridges. A lot of work and money – well over $7million so far - goes into keeping the snails alive. Solid Energy provides regular updates on the progress of the snails on its corporate website and has even produced a DVD of the snails’ adventures!

Reclaiming the word ‘conversation’ from our illiberal rulers.

Declaring war against bluster and rhetoric

By Frank Furedi 

I never thought I would have an allergic reaction to the word ‘conversation’. I have very happy recollections of the intense emotions that can be provoked through delicious, thought-provoking conversations with people on one’s own wavelength. Through intimate conversations, we cultivate the signals that give our personal communication special meaning. Even small talk plays a role in the interchange of thoughts and ideas. Sadly, however, ‘conversation’ has been hijacked by public figures who try to repackage their monologues as genuine dialogue.

Increasingly, the word conversation is used in an entirely rhetorical fashion and has become disassociated from the intimate act of talking between engaged individuals. In the hands of public figures, ‘conversation’ has become a self-conscious, pre-planned exercise in impression-management. I remember feeling that a very human word had been corrupted when Tony Blair launched New Labour’s ‘Big Conversation’ in November 2003. He said his aim was to initiate the biggest-ever consultation exercise with the electorate. In the real world, however, you launch boats, not conversations.

The very idea of ‘launching’ a conversation shows how meaningless and hollowed-out the concept has become. Conversation emerges from human interaction; it is not something that needs to be announced, promoted or celebrated. A public conversation is a contradiction in terms. The real aim of a ‘public conversation’ is to influence public opinion. Those who initiate such an exercise are really taking part in a public performance. Such performances often take the form of an animated public figure having a Q&A with a handpicked audience. Conversation with a capital C has been embraced by a variety of interest groups desperate to convey the idea that they are concerned about our views. But when you have a Big Conversation, can Big Brother be far behind?

Big Conversations are often promoted by people who use that disingenuous term: deliberative democracy. Adherents to the idea of deliberative democracy present it as an enlightened alternative to representative democracy. Deliberative democracy usually involves having a small forum where people can engage in face-to-face conversation and allegedly have time to reason with one another. It is said that deliberative democracy gives meaning to participation, since the participants are involved in a dialogue that directly leads to a discernible outcome. But the consequences these decisions have are rarely discussed. This is not surprising, considering that deliberative democrats believe that deliberation is an end in itself. The focus on consultation displaces the old idea that democracy should be an instrument for genuinely involving the public in the running of society, and replaces it with a stultified, formal ‘conversation’. As one academic study has argued, this approach ‘renders the concept of democracy redundant’ as it turns it into a ‘purely consultative process’ (1).

In these situations, ‘consultation’ is turned into a tool of management masquerading as genuine deliberation. The demand for deliberation always comes from above, and the terms of these ‘public conversations’ are always set by professional consultants. The process of deliberation depends on ‘procedures, techniques and methods’ worked out by experts (2). The exercise itself is overseen by professional facilitators, whose rules are really designed to assist in the observation and management of the participants. These phoney conversations are not forums where the participants interact as equals – rather, skilled facilitators are employed to create the right kind of environment and desirable outcomes. One writer sings the praises of ‘citizens’ juries’ – a common form of deliberative democracy – by saying that such juries rely on ‘trained moderators’ who ensure ‘fair proceedings’ (3). With zero self-consciousness, the writers endorses such a highly manipulative environment as being superior to ‘liberal institutions’, which apparently only encourage passivity amongst citizens (4). What we have is a pretence of deliberation and a reality of manipulation.

Deliberative democracy is neither deliberative nor democratic. Rather, it is about promoting propaganda through the pretence of having an open conversation. However, when it comes to manipulating the public imagination, ‘deliberative polling’ beats deliberative democracy to the finishing line. Deliberative polling stage-manages an allegedly open discussion on a controversial issue in order subliminally to alter people’s views and convictions. According to one of the advocates of deliberative polling, the beauty of this exercise is that ‘many participants changed their voting intentions as a result of the dialogue’. The author, Carne Ross, offers a scenario where, prior to an exercise in deliberative polling, 40 per cent of people surveyed said they would vote for mainstream centrist parties, 22 per cent for socialists, nine per cent for centrist liberals and eight per cent for greens. However, by carefully finessing the wording of the choices available to the participants, the deliberative manipulators successfully increased the number of participants who wanted to ‘emphasise the fight against climate change’ from 49 to 61 per cent (5).

Deliberative democrats are not shy about acknowledging that their support for conversational forums is contingent upon the participants reaching the ‘right’ decisions. Deliberative democracy is often promoted on the basis that it provides an environment conducive to changing people’s minds and having them adopt the ethos of the forum’s organisers. Deliberation is the preferred method of communication, because it can be a useful tool for transmitting the outlook of the organisers. To ensure that this objective is achieved, the group’s interpersonal dynamic is carefully controlled. To prevent the spontaneous emergence of informal group leaders, ‘most moderators are alert to the manner in which deliberations can be dominated by confident and outspoken individuals’, assures one assessment of deliberative democracy (6). It appears that deliberative democracy works best when ‘confident and outspoken individuals’ are put in their place.

The depiction of an exercise in brainwashing as a new form of democracy shows that political rhetoric is just that these days – empty rhetoric. It is a sign of the times that a procedure that could have come straight out of George Orwell’s Nineteen Eighty-Four can be presented as an enlightened alternative to representative democracy. The assumption that the professional facilitator has the moral authority to determine how people should think and emote speaks volumes about the patronising attitude of today’s ‘deliberators’.

Orwell, in his famous 1946 essay, ‘Politics and the English Language’, rightly expressed concern about the standard of political rhetoric in his time. He was also perturbed by the way in which jargon was used to obscure reality. ‘In our time, political speech and writing are largely the defence of the indefensible’, he observed. He noted how things such as British rule in India, the Stalinist purges or the dropping of the atom bomb on Hiroshima were justified through euphemisms and meaningless phraseology. Today, too, political rhetoric continues to be used to justify the indefensible.

My new year’s resolution is to devote more time towards exploring the public language of twenty-first-century society. To that end, I will be writing a monthly column on spiked titled ‘Hollow Thoughts’. The aim will be to re-appropriate the sort of language that could help ensure that public debate really is a debate, rather than an exercise in manipulation and impression-management.

In February’s ‘Hollow Thoughts’ column: Inclusion.

(1) Gorg, C. & Hirsch, J. (1998) ‘Is international democracy possible?’, Review of International Political Economy, vol. 5, no.4.p.598

(2) Pimbert, M. & Wakeford, T. (2001) ‘Overview – deliberative democracy and citizen empowerement’, PLA Notes, 40, February, p23.

(3) Smith,G. & Wales, C. (2000) ‘ Citizens’ Juries and Deliberative Democracy’, Political Studies, vol.4, p.55.

Democracy and Debt

The Broken Link

By Michael Hudson

Book V of Aristotle’s Politics describes the eternal transition of oligarchies making themselves into hereditary aristocracies – which end up being overthrown by tyrants or develop internal rivalries as some families decide to “take the multitude into their camp” and usher in democracy, within which an oligarchy emerges once again, followed by aristocracy, democracy, and so on throughout history.

Debt has been the main dynamic driving these shifts – always with new twists and turns. It polarizes wealth to create a creditor class, whose oligarchic rule is ended as new leaders (“tyrants” to Aristotle) win popular support by cancelling the debts and redistributing property or taking its usufruct for the state.

Since the Renaissance, however, bankers have shifted their political support to democracies. This did not reflect egalitarian or liberal political convictions as such, but rather a desire for better security for their loans. As James Steuart explained in 1767, royal borrowings remained private affairs rather than truly public debts [1]. For a sovereign’s debts to become binding upon the entire nation, elected representatives had to enact the taxes to pay their interest charges.

By giving taxpayers this voice in government, the Dutch and British democracies provided creditors with much safer claims for payment than did kings and princes whose debts died with them. But the recent debt protests from Iceland to Greece and Spain suggest that creditors are shifting their support away from democracies. They are demanding fiscal austerity and even privatization sell-offs.

This is turning international finance into a new mode of warfare. Its objective is the same as military conquest in times past: to appropriate land and mineral resources, communal infrastructure and extract tribute. In response, democracies are demanding referendums over whether to pay creditors by selling off the public domain and raising taxes to impose unemployment, falling wages and economic depression. The alternative is to write down debts or even annul them, and to re-assert regulatory control over the financial sector.

Near Eastern rulers proclaimed Clean Slates to preserve economic balance

Charging interest on advances of goods or money was not originally intended to polarize economies. First administered early in the third millennium BC as a contractual arrangement by Sumer’s temples and palaces with merchants and entrepreneurs who typically worked in the royal bureaucracy, interest at 20% (doubling the principal in five years) was supposed to approximate a fair share of the returns from long-distance trade or leasing land and other public assets such as workshops, boats and ale houses.

As the practice was privatized by royal collectors of user fees and rents, “divine kingship” protected agrarian debtors. Hammurabi’s laws (c. 1750 BC) cancelled their debts in times of flood or drought. All the rulers of his Babylonian dynasty began their first full year on the throne by cancelling agrarian debts so as to clear out payment arrears by proclaiming a clean slate. Bondservants, land or crop rights and other pledges were returned to the debtors to “restore order” in an idealized “original” condition of balance. This practice survived in the Jubilee Year of Mosaic Law in Leviticus 25.

The logic was clear enough. Ancient societies needed to field armies to defend their land, and this required liberating indebted citizens from bondage. Hammurabi’s laws protected charioteers and other fighters from being reduced to debt bondage, and blocked creditors from taking the crops of tenants on royal and other public lands and on communal land that owed manpower and military service to the palace.

In Egypt, the pharaoh Bakenranef (c. 720-715 BC, “Bocchoris” in Greek) proclaimed a debt amnesty and abolished debt-servitude when faced with a military threat from Ethiopia. According to Diodorus of Sicily (I, 79, writing in 40-30 BC), he ruled that if a debtor contested the claim, the debt was nullified if the creditor could not back up his claim by producing a written contract. (It seems that creditors always have been prone to exaggerate the balances due.) The pharaoh reasoned that “the bodies of citizens should belong to the state, to the end that it might avail itself of the services which its citizens owed it, in times of both war and peace. For he felt that it would be absurd for a soldier … to be haled to prison by his creditor for an unpaid loan, and that the greed of private citizens should in this way endanger the safety of all.”

The fact that the main Near Eastern creditors were the palace, temples and their collectors made it politically easy to cancel the debts. It always is easy to annul debts owed to oneself. Even Roman emperors burned the tax records to prevent a crisis. But it was much harder to cancel debts owed to private creditors as the practice of charging interest spread westward to Mediterranean chiefdoms after about 750 BC. Instead of enabling families to bridge gaps between income and outgo, debt became the major lever of land expropriation, polarizing communities between creditor oligarchies and indebted clients. In Judah, the prophet Isaiah (5:8-9) decried foreclosing creditors who “add house to house and join field to field till no space is left and you live alone in the land.”

Creditor power and stable growth rarely have gone together. Most personal debts in this classical period were the product of small amounts of money lent to individuals living on the edge of subsistence and who could not make ends meet. Forfeiture of land and assets – and personal liberty – forced debtors into bondage that became irreversible. By the 7th century BC, “tyrants” (popular leaders) emerged to overthrow the aristocracies in Corinth and other wealthy Greek cities, gaining support by canceling the debts. In a less tyrannical manner, Solon founded the Athenian democracy in 594 BC by banning debt bondage.

But oligarchies re-emerged and called in Rome when Sparta’s kings Agis, Cleomenes and their successor Nabis sought to cancel debts late in the third century BC. They were killed and their supporters driven out. It has been a political constant of history since antiquity that creditor interests opposed both popular democracy and royal power able to limit the financial conquest of society – a conquest aimed at attaching interest-bearing debt claims for payment on as much of the economic surplus as possible.

When the Gracchi brothers and their followers tried to reform the credit laws in 133 BC, the dominant Senatorial class acted with violence, killing them and inaugurating a century of Social War, resolved by the ascension of Augustus as emperor in 29 BC.

Rome’s creditor oligarchy wins the Social War, enserfs the population and brings on a Dark Age

Matters were more bloody abroad. Aristotle did not mention empire building as part of his political schema, but foreign conquest always has been a major factor in imposing debts, and war debts have been the major cause of public debt in modern times. Antiquity’s harshest debt levy was by Rome, whose creditors spread out to plague Asia Minor, its most prosperous province. The rule of law all but disappeared when the publican creditor “knights” arrived. Mithridates of Pontus led three popular revolts, and local populations in Ephesus and other cities rose up and killed a reported 80,000 Romans in 88 BC. The Roman army retaliated, and Sulla imposed war tribute of 20,000 talents in 84 BC. Charges for back interest multiplied this sum six-fold by 70 BC.

In praise of peddlers, merchants, and money lenders

Cavemen and Middlemen

By Richard W. Fulmer

If a caveman could specialize in a single craft, such as making obsidian knives, he would likely become skilled through sheer repetition.  He would soon learn to create better products more quickly and with less effort than if he had to spend potential knife-building time hunting, fishing, gathering food, constructing shelters, building fires, and crafting baskets, pottery, and clothing.  Specialization, however, would only be possible if there were sufficient demand for his tools.  If the caveman’s clan were small, demand would be limited, making it unlikely that he would be able to trade his knives for enough food, clothing, and other goods to ensure his survival.

The size of the market determines the degree of specialization possible and therefore the productivity of the caveman’s clan.  Its productivity in turn determines how well the members live.  If the market could be expanded, a higher degree of specialization would be possible, raising both productivity and living standards.

Suppose that Rok, an itinerant caveman, notices that his clan makes particularly good knives, another, miles away, makes excellent bone needles, and that still another makes fine loin cloths.  Rok is lucky in a hunt one day, killing a large deer.  He trades most of the meat for stone knives reasoning that he can easily transport the knives to the other clans and exchange them for needles and loin cloths, which he can then bring back and trade for even more knives – which he can trade with the other clans for still more goods.

Dynamic Process Unleashed

Rok has done far more than simply transport products between clans.  He has unleashed a complex dynamic, iterative process.  First, by expanding the marketplace to three clans, he has enabled more cavemen to specialize, increasing their productivity and raising the welfare of their clans.  By opening trade between the clans, he has increased each clan’s chances for survival.  If a hunt goes badly for one, it may be able to trade for food with another that has had better luck.

In addition Rok has introduced clans to goods they have never seen before, sparking new ideas and planting the seeds for improved and perhaps entirely new products.  If he profits by the exchanges he makes, he also provides an example to others who may go into direct competition with him, increasing the volume of trade among the three clans, or who may open trade with still other clans, potentially discovering new products and ideas.

No Value Added?

Unfortunately Rok also sparks anger among some clan members.  A few cavemen believe Rok is cheating them out of the full value of their labor.  They see that he is simply transporting goods between the clans and making a profit even though he does not improve the goods in any way.  They do not see that he adds value to the goods by moving them from where they are valued less to where they are valued more.  Nor do they, along with Rok himself, see the subtle, though critically important, processes he has unleashed by expanding each clan’s market, nor the clans’ greater resilience and rising prosperity through increased specialization and communication of ideas.

Rok moreover is seen as an outsider to the members of two of the clans with which he trades.  People’s natural distrust of strangers, their resentment of Rok’s “exploitation,” and their envy of his relative prosperity may lead them to drive him away.  If so, they may later wonder why their living standards fell after Rok’s exile and will probably see no connection.  These clans are far less likely to survive and prosper than those that welcome, or at least tolerate, Rok and other middlemen.

Rok’s descendants are what Thomas Sowell called “minority middlemen”: Jews across the world, “Armenians in the Ottoman Empire, Ibos in Nigeria, Marwaris in Burma, overseas Chinese in Southeast Asia, and Lebanese in a number of countries.”  A significant number of people from each of these groups have for a variety of geographical, cultural, and historical reasons, worked far from their homelands as peddlers, merchants, and money lenders.  They and other middlemen helped bring mankind out of caves and into prosperity. In return they have been reviled, persecuted, and killed.