Wednesday, December 18, 2013

The Constitution’s Vanishing Act

For decades, Supreme Court justices have been rewriting key parts of our governing document.
by Richard A. Epstein
The United States Constitution is at its core a classical liberal document. But over the last hundred years, much of it has turned into a progressive text thanks in large part to Supreme Court justices who interpret it creatively, thereby skirting the laborious amendment process of Article V. Here, I address one major, if underappreciated, cause of the problem—the fine art of making its critical words and letters just disappear through the Court’s imaginative application of its power of judicial review. This constitutional disappearing act does not take sides in the longstanding debate over judicial restraint and activism. In some cases, it unduly expands judicial power; in other cases, it wrongly contracts it. The two best illustrations of how this process works are found in the Eighth Amendment and in Article 1, which sets out the federal government’s taxing power.
Cruel and Unusual Punishments
The Eighth Amendment reads in full: “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.” Its use of the passive voice creates an interpretive ambiguity. Does the amendment bind only the federal government or does it bind the states as well? Using the word “excessive” twice in one 16-word sentence is not a model of clarity.
But for these purposes, the most critical word is “punishments.” The letter “s” has disappeared during the arduous process of constitutional interpretation. Just Google the phrase “cruel and unusual punishment,” and 1,740,000 entries come up. Add the “s” and that number drops by 80 percent to 330,000 entries, most of which refer to punishments without the “s.”
The importance of the slip is evident from the 2012 Supreme Court decision Miller v. Alabama, which struck down a mandatory lifetime sentence for a fourteen year-old guilty of murder. In writing her opinion, Justice Elena Kagan included the “s” in quoting the clause. But during the analysis, that “s” disappears, thereby transforming the constitutional text:
The Eighth Amendment’s prohibition of cruel and unusual punishment “guarantees individuals the right not to be subjected to excessive sanctions.” That right, we have explained, “flows from the basic ‘precept of justice that punishment for crime should be graduated and proportioned’ ” to both the offender and the offense. 
Justice Kagan faithfully references earlier cases that take her position. But the wealth of precedent does not conceal the major shift in constitutional focus. The prohibition against “cruel and unusual punishments” conjures up a list of punishments that should be rejected because they are cruel, no matter what the offense. The issue of proportionality never arises.
That interpretation makes sense because this clause is lifted word for word from the English Bill of Rights of 1689, after it accuses the deposed King James II of inflicting “illegal and cruel punishments.” The clause outlaws the rack, the thumb-screw, drawing and quartering, and other fiendish activities. In no sense did it outlaw the death penalty. Nor could that reading be sensibly made of our own Constitution, whose Fifth Amendment contains references to the death penalty in connection with due process, grand jury presentments, and double jeopardy.
Yet once the “s” is dropped, it is far easier to read the clause as Justice Kagan did, demanding proportionality between the offense and the punishment. At this point, the Court can question the death penalty in many cases, including child rape. In 2008, the Court in Kennedy v. Louisiana found that the Eighth Amendment should be read in light of “the evolving standards of decency that mark the progress of a maturing society.” But this line of reasoning is simply pop sociology. Historically, there has been much principled and popular opposition to the repeal of the death penalty that should not be so easily cast aside.
Even the most austere account of limited government offers no coherent theory to explain whether the death penalty should be retained or junked, and if so, for what offenses. If there were ever a legislative function, this is it. The disappearance of that “s” was not just a random event. It paved the way for the justices to create a code of criminal sentencing, whose effects are so widespread and profound that it must be regarded as a constitutional amendment, and an unwise one at that.
The Taxing Power
My second example of a disappearing constitutional provision concerns the taxing power found in Article I:
Section 8. Clause 1. The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.
This clause is a big deal because it remedies one of the major defects of the Articles of Confederation, under which the federal government had to beg the individual states for the revenues needed to discharge its own collective function. But in overturning earlier practice, the Founders were nervous about lurching too far in the opposite direction, so they limited the general power of taxation to three specified objects: “payment of debts, provision of common Defence, and the general Welfare of the United States.”
So it is important to understand that the clause is not a catchall that sweeps in every objective under the sun. Federal taxes are meant to fund only a short list of public—i.e. nonexcludable—goods that only the central government can provide. The Congressional power to levy taxes is needed to prevent free-riding by individual states. The limited purposes help prevent politically corrosive cross-subsidies between states that could sink the Union.
The proper interpretation of the clause raises thorny questions about whether, for example, the United States could provide disaster relief that benefits some but not all states. President Grover Cleveland thought that the answer was an emphatic “no” in 1887 when he vetoed the Texas Seed Bill, which allocated $10,000 for Texas drought relief. Under the Constitution, he did “not believe that the power and duty of the General Government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit.”
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Learning the Wrong Lessons From the Financial Crisis

The rule of law has many enemies. One of them is bad law.
BY JR NYQUIST
In a book titled Theory and History, Ludwig von Mises wrote,
“Because history is not a useless pastime but a study of the utmost practical importance, people have been eager to falsify historical evidence and to misrepresent the course of events.” 
In recent history, the champions of regulation and state control of the economy would endeavor to depict the financial events of 2007-2008 as a failure of regulation. At least one historian is worried that we might have “learned” the wrong lessons if we suppose any such thing.
Historian Niall Ferguson of Harvard University says that insufficient regulation may not be at the heart of the financial crisis. Ferguson calls into question Princeton economist Paul Krugman’s assertion that Reagan era deregulation of financial institutions triggered the crisis. “For one thing,” wrote Ferguson in The Great Degeneration, “it is hard to think of a major event in the US crisis — beginning with the failures of Bear Stearns and Lehman Brothers — that could not equally well have happened with Glass-Steagall still in force.”
History teaches that rule of law plus economic freedom makes for prosperity, yet we are supposed to believe that restricting freedom — or eliminating vital aspects of freedom — will somehow prevent financial ills. According to Ferguson, 
“there is something especially implausible about the story that regulated financial markets were responsible for rapid growth, while deregulation caused crisis.” 
The fact that heavily regulated markets in the past have created less wealth than free markets under the rule of law must surely count for something. Furthermore, there is no progress without risk, no advances without partial setbacks. And what does the history of capitalism show if not the fact that the advances have far outweighed the setbacks. And if freedom means progress then we must accept the consequences of that progress instead of introducing regulations that will, in the end, choke off progress altogether.
Ludwig von Mises wrote: 
“To lie about historical facts and to destroy evidence has been in the opinion of hosts of statesmen, diplomats, politicians, and writers a legitimate part of the conduct of public affairs and of writing history. One of the main problems of historical research is to unmask such falsehoods.” 
Ferguson’s unmasking of falsehood reminds us that spectacular economic progress is not found in eras of complex or heavy-handed financial regulation. The sad truth is that regulation has far more to do with causing crises than deregulation. 
“The financial crisis that began in 2007 had its origins precisely in over-complex regulation,” wrote Ferguson. “A serious history of the crisis would need to have at least five chapters on its perverse consequences….”
Ferguson wrote up a brief overview of his proposed five chapters on the role of government interference in the financial crisis, which may be summarized as follows: 
(1) incentives were given to bank executives toward low risk assets;
(2) Risk was weighed on ratings given to securities; 
(3) monetary policy consisted of cutting interest rates at the abrupt fall of asset prices, but not if they rose rapidly (as in the housing bubble); 
(4) Congress passed legislation that effectively offered home loans to people who would not otherwise have qualified, inflating real estate prices with “unhedged and unidirectional bets on the US housing market”; 
(5) Chinese currency manipulation effectively and artificially provided the United States with “a vast credit line.”
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Is Vladimir Putin a paleoconservative?

Putin’s Paleoconservative Moment
By PATRICK J. BUCHANAN
In the culture war for mankind’s future, is he one of us?
While such a question may be blasphemous in Western circles, consider the content of the Russian president’s state of the nation address.
With America clearly in mind, Putin declared, “In many countries today, moral and ethical norms are being reconsidered.”
“They’re now requiring not only the proper acknowledgment of freedom of conscience, political views and private life, but also the mandatory acknowledgment of the equality of good and evil.”
Translation: While privacy and freedom of thought, religion and speech are cherished rights, to equate traditional marriage and same-sex marriage is to equate good with evil.
No moral confusion here, this is moral clarity, agree or disagree.
President Reagan once called the old Soviet Empire “the focus of evil in the modern world.” President Putin is implying that Barack Obama’s America may deserve the title in the 21st century.
Nor is he without an argument when we reflect on America’s embrace of abortion on demand, homosexual marriage, pornography, promiscuity, and the whole panoply of Hollywood values.
Our grandparents would not recognize the America in which we live.
Moreover, Putin asserts, the new immorality has been imposed undemocratically.
The “destruction of traditional values” in these countries, he said, comes “from the top” and is “inherently undemocratic because it is based on abstract ideas and runs counter to the will of the majority of people.”
Does he not have a point?
Unelected justices declared abortion and homosexual acts to be constitutionally protected rights. Judges have been the driving force behind the imposition of same-sex marriage. Attorney General Eric Holder refused to enforce the Defense of Marriage Act.
America was de-Christianized in the second half of the 20th century by court orders, over the vehement objections of a huge majority of a country that was overwhelmingly Christian.
And same-sex marriage is indeed an “abstract” idea unrooted in the history or tradition of the West. Where did it come from?

Peoples all over the world, claims Putin, are supporting Russia’s “defense of traditional values” against a “so-called tolerance” that is “genderless and infertile.”
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Ragnarok – Iceland and the ‘Doom of the Gods’

Working with Real Things
By Nicole Foss
Countries caught in the grip of financial crisis, with austerity measures compounding their problems, are continually being told to follow Iceland’s example. The assumption is that if a state can disregard the claims of the banking sector, it can address the threat of financial crisis relatively painlessly and get back to ‘normal’ quite quickly. Iceland is held up as an example, but the situation is actually far more complex. As such, it is worth exploring the situation in Iceland in all its complexity. It is an example in some sense, but not necessarily in ways which are transferable. It does, however, illustrate a number of lessons for post-bubble economies, and there will be many of those over the next few years.
Iceland, which achieved independence from Denmark in 1944, was once a relatively poor country of primary producers – fishermen and farmers – but it reinvented itself in the era of globalization under its longest serving Prime Minister, Davíd Oddsson:
It was Oddsson who engineered Iceland’s biggest move since NATO: its 1994 membership in a free-trade zone called the European Economic Area. Oddsson then put in place a comprehensive economic-transformation program that included tax cuts, large-scale privatization, and a big leap into international finance. He deregulated the state-dominated banking sector in the mid-1990s, and in 2001 he changed currency policy to allow the króna to float freely rather than have it fixed against a basket of currencies including the dollar. In 2002 he privatized the banks. When he stepped down as Prime Minister in 2004, he did a stint as Foreign Minister before becoming governor of the central bank in 2005.
The economy expanded and diversified in many ways, attracting ecotourists, moving into new technologies, taking advantage of its abundance of renewable to expand manufacturing and developing a more comprehensive service sector. It became a highly internationalized economy, with the means to import goods from all over the world thanks to a strong currency. With GDP growth running at 4-6% for a number of years, the average family’s wealth increased markedly, with much of it invested in property. As a result, house prices in Iceland saw greater than 10% annual price appreciation from 2003-2007.
The financial sector took off following privatization:
But the principal fuel for Iceland’s boom was finance and, above all, leverage. The country became a giant hedge fund, and once-restrained Icelandic households amassed debts exceeding 220% of disposable income – almost twice the proportion of American consumers.
Very large amounts of money were loaned were to the public, allowing them to further bid up the price of property. The fact that many of these loans were denominated in foreign currency (Japanese yen, Swiss francs etc) added currency risk to the resulting speculative mania. Three large banks – Glitnir, Landsbanki and Kaupthing – grew to dwarf the size of the island’s real economy in a financial bubble of unprecedented size (in comparison with a host economy based on only 320,000 people). Total debt to GDP peaked at over 1200%, reflecting the grossly disproportionate nature of the financial sector. This had been a cause for concernat the central bank as far back as 2005, but nothing was done to reign in credit expansion. At the peak of this period of great affluence, the Icelandic population was lauded as the richest people in the world, but it was not to last:
A visitor seeking a sense of how Iceland’s clique of powerful financiers saw themselves before their empire came tumbling down need look no further than Reykjavik’s Harpa concert hall. The extravagant steel and glass structure, which has more seats than London’s Royal Opera House, looks like a futuristic beehive glowing above the grey buildings that make up most of the capital. It was commissioned by Bjorgolfur Gudmundsson, one of the “Icelandic oligarchs” who exploited cheap credit following the aggressive financial deregulation of the early 2000s to create a billion-dollar empire. He set out in 2007 to build a cultural venue to match the country’s new found wealth – but when the global financial crisis hit the next year, and Iceland’s over-leveraged banks collapsed, he went bankrupt, leaving the state to complete the project.
The structural instabilities upon which the illusion of prosperity was based proved fatal in late 2008. Maturity mismatching (issuing short-term debt in order to invest in long term assets) was rife, requiring that short term liabilities be continually rolled over until long term assets matured. Reserve requirements were reduced, increasing the money multiplier. The huge increase in the effective money supply, much of the credit denominated in foreign currencies, combined with a 35% fall in the value of the Icelandic króna relative to the euro, led to substantial price increases – 14% in the year before the system reached its limit. As mortgage principle is typically indexed to CPI in Iceland, this price inflation was compounding the effect of a housing bubble.
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Tuesday, December 17, 2013

The Krugmanian Platonic universe

Krugman’s Slice of Labor
by Theodore Dalrymple
One would hesitate, for the most obvious of reasons, to dispute astrophysics with a Nobel Prize-winning astrophysicist, but the case is quite otherwise with a Nobel prize-winning economist. This at the very least suggests a difference in the intellectual difficulty, rigor, or foundation of the two sciences. Common sense will not get you very far with black holes or antimatter, but in economics common sense is a necessary if not a sufficient quality in him who would think about it.
I therefore read with interest an article entitled “The Punishment Cure,” published on 9 December in the New York Times by the Nobel Prize-winning economist, Paul Krugman. It seemed to me entirely lacking in common sense, and to disregard considerations obvious to any intelligent person over the age of 15 or 16. In this I might, of course, be mistaken.
Let me begin by pointing out the author’s facile resort to abuse as if it were argument. In respect of a proposal to reduce the period during which the unemployed in America may claim unemployment benefits, Mr Krugman refers to the Republican’s ‘desire to punish the unemployed’ [my emphasis].
I have little doubt that there are some among Republicans who viscerally hate the poor and wish to visit suffering upon them in order to relieve their own feelings, just as there are some among the Democrats who see in the unemployed a permanent constituency for themselves. But in fact there is a legitimate debate to be had about how to reduce unemployment in a modern economy without at the same time introducing unsustainable costs or deformations into it. If it were easy, everyone would have done it by now.
Mr Krugman takes the Republicans to task for believing that if unemployment benefits were more limited, more of the unemployed would find work from the sheer necessity to do so. This, he says, is fallacy. He writes:
Ask yourself how, exactly, ending unemployment benefits would create more jobs. It’s true that some of the currently unemployed, finding themselves even more desperate than before, might snatch away jobs from those who already have them.
Now this passage seems to me to indicate that the model of an economy in the author’s mind is that of a static zero-sum game, in which one man’s job is another man’s unemployment and vice versa: the view of an economy that fueled the two disastrous totalitarianisms of the Twentieth Century, communism and Nazism. Furthermore (and very oddly for any economist, let alone one who won the Nobel Prize), Mr Krugman lives in a world without prices, for he says:
The point is that employment in today’s American economy is limited by demand, not supply. Demand and supply, then, live in some kind of Krugmanian Platonic universe, completely divorced from price.
It’s obvious that price is not the only determinant of demand. If I don’t like caviar, then halving of its price will not encourage me to go out and buy some. Whatever the price of alcohol, I shall never become an alcoholic. Reducing or stopping unemployment benefits will not affect neurosurgeons very much because most unemployed people are not neurosurgeons and can never be turned into such. Something more than mere availability for work is required of neurosurgeons.
If the price of labor, however, had nothing important to do with the number of jobs, how would Mr Krugman explain the outsourcing of jobs to countries such as China and India? It is not for reasons of climate that jobs once done in America or Europe have migrated to the other end of the earth. But in fact there are many conceivable jobs that the unemployed could perform in Europe and America if the price of their labor made it worthwhile for people to hire them to do those jobs. Forcing the wages of the unemployed down to that level might not be the right thing to do because there are many other things to be considered, but if unemployment is an evil independent of remuneration (which, within limits, it is), then reducing the incomes of the unemployed might not merely be what Mr Krugman calls ‘a perfect marriage of callousness… with bad economics.’
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A Quick Guide To What's Fake: Everything That's Officially Sanctioned

Neofeudal financialization and unproductive State/corporate vested interests have bled the middle class dry 
by Charles Hugh-Smith
Let's cut to the chase and generalize "what's fake": everything that is officially sanctioned: narratives, policies, statistics, you name it--all fake-- massaged, packaged, gamed or manipulated to serve the interests of the ruling Elites.
Anything that might introduce a shadow of skepticism or doubt about the sustainability, fairness and transparency of the status quo (i.e. anything authentic and genuine) is recast or repackaged into a fake that can be substituted for the authentic when everyone's gaze is distracted by the latest fad/media sensation/scandal.
ObamaCare: fake, a simulacrum of insurance and healthcare.
The National Security State: fake, a cover for global Empire.
The Patriot Act: Orwellian cover for state-corporate fascism.
Student loans: parasitic, exploitive loan-sharking enforced by the Central State for often worthless "higher education."
And so on.
Yesterday I explored the peculiar dynamic that motivates us to accept forgeries, fakes and illusions as authentic: What's Real? What's Fake?. If the fake enables our fantasy (of free money, of owning an authentic canvas by a famous artist, that rising wealth inequality is just a side-effect of freewheeling capitalism, etc. etc. etc.), then we want to believe it so badly that we overlook all the evidence of chicanery, forgery, illusion and fakery.
Consider our willingness to accept the conventional narrative about why the Great American Middle Class has been in decline since 1973: rising energy costs, globalization, and the declining purchasing power of the U.S. dollar.
While these trends have certainly undermined middle-class wealth and income, there are five other more politically combustible dynamics at work:

1. The divergence of State/corporate vested interests and the interests of the middle class
2. The emergence of financialization as the key driver of profits and political power
3. The neofeudal “colonization” of the “home market” by ascendant financial Elites
4. The increasing burden of indirect “taxes” as productive enterprises and people involuntarily subsidize unproductive, parasitic, corrupt, but politically dominant vested interests
5. The emergence of crony capitalism as the lowest-risk, highest-profit business model in the U.S. economy
The non-fake narratives are considerably different from the status quo ones. Please consider two: The Neofeudal Colonization of Home Markets and the Happy Marriage of the Parasitic Central State and Crony Capitalist Cartels.
The Neofeudal Colonization of Home Markets
The use of credit to garner outsized profits and political power is well-established in Neoliberal Capitalism.  In what we might call the Neoliberal Colonial Model (NCM) of financialization, credit-poor developing world economies are suddenly offered unlimited credit at very low or even negative interest rates. It is “an offer that’s too good to refuse” and the resultant explosion of private credit feeds what appears to be a “virtuous cycle” of rampant consumption and rapidly rising assets such as equities, land and housing.
Essential to the appeal of this colonialist model is the broad-based access to credit: everyone and his sister can suddenly afford to speculate in housing, stocks, commodities, etc., and to live a consumption-based lifestyle that was once the exclusive preserve of the upper class and State Elites (in developing nations, this is often the same group of people).
In the 19th century colonialist model, the immensely profitable consumables being marketed by global cartels were sugar (rum), tea, coffee, and tobacco—all highly addictive, and all complementary:   tea goes with sugar, and so on.  (For more, please refer to Sidney Mintz’s landmark study, Sweetness and Power: The Place of Sugar in Modern History).
In the Neoliberal Colonial Model, the addictive substance is credit and the speculative consumerist fever it fosters.
In the financialization model, the opportunities to exploit “home markets" were even better than those found abroad, for the simple reason that the U.S. government itself stood ready to guarantee there would be no messy expropriations of capital or repudiation of debt by local authorities who decided to throw off the yokes of credit colonization.
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http://charleshughsmith.blogspot.gr/2013/12/a-quick-guide-to-whats-fake-everything_16.html

What's Real? What's Fake?

The unemployment rate is obviously fake, but we want to believe the fake is real for a variety of reasons.
by Charles Hugh-Smith
We like to think we know the difference between what's real and what's fake. When we're fooled by a fake Rolex watch purchased for $20 on some humid Asian street corner, we shrug it off: it's no big deal because the fake isn't harming anyone.
And when it's difficult to discern the fake from the legitimate, as in fine art paintings and financial policy, we rely on experts to differentiate between the two.
But what if the "experts" are as clueless as the rest of us? What if they've been corrupted by easy money to authenticate the fake as legitimate? Consider ObamaCare, an extraordinarily complex policy that "experts" assure us is a phenomenal advancement that is "working well."
But what if ObamaCare is a fake? What if it is really not insurance at all, but a giant skimming machine designed to enrich and solidify the power of the state-cartel that operates the sickcare system?
"Experts" (PhDs and Federal Reserve economists) assure us our financial system is the core engine of "growth" in our economy. But what if this assertion is simply a useful illusion, and the reality is that the U.S. financial system is a giant skimming operation that harvests immense profits off the real economy to the benefit of the few, the financial cartels and their lapdogs in the Central State?
"Experts" in the Federal government assure us the unemployment rate is 7%. But if we include the 91.5 million people of working age who could be working (and would be working in a work-fare economy), then the real unemployment rate is double the official rate: 14% or even higher.
Is the unemployment rate real or fake? It is obviously fake, but we want to believe the fake is real for a variety of reasons.
The 1974 Orson Welles documentary (recommended by correspondent K.K.)  F For Fake helps elucidate this peculiar dynamic of human nature.
The master art forger who plays a central role in F For Fake noted (self-servingly, but amusingly so) that his addition of a few fake Modigliani paintings into the world's collections did no damage to Modigliani (long since deceased) or the collectors, who benefited from the opportunity buy a Modigliani masterpiece.
We want to believe the fake unemployment rate of 7% rather than the real rate of 14+% because the officially sanctioned forgery feeds our belief that our bloated, corrupt Empire of Debt is sustainable, fair and working well. To accept that we've been bamboozled, ripped off, taken advantage of and ultimately cheated out of an authentic economy and life by swindlers is too painful.
Read more at:
http://charleshughsmith.blogspot.gr/2013/12/whats-real-whats-fake.html


Philanthropy’s Original Sin

Philanthropic Support for Eugenics
By William A. Schambra
Philanthropy has many wonderful qualities — and never tires of proclaiming them, for one quality it sorely lacks is humility. It regularly thumps itself on the back, for instance, for devoting some $300 billion a year to good causes. And though philanthropic spending on social causes is dwarfed by that of the government, foundations proudly claim that dollar for dollar their spending is in fact more effective than the government’s. While government tends to stick with the safe and the routine, philanthropy regularly and energetically seeks out the next new thing; it claims it is at the cutting edge of social change, being innovative, scientific, and progressive. Philanthropy, as legendary Ford Foundation program officer Paul Ylvisaker once claimed, is society’s “passing gear.”
Indeed, philanthropy increasingly prides itself on its ability to shape and guide government spending, testing out potential solutions for social problems and then aggressively advocating for their replication by government. Any employee of a philanthropic organization can immediately tick off a list of major accomplishments of American foundations, all of which followed this pattern of bold experimentation leading to government adoption. For example, Andrew Carnegie’s library program pledged funding to construct the buildings, if the local municipalities would provide the sites and help pay for the libraries’ operation. The Rockefeller Foundation funded a moderately successful hookworm abatement program in the southern 
United States, which strongly involved local governments. The Ford Foundation’s “gray areas” project in the 1960s experimented with new approaches to urban poverty that then became the basis for the Great Society’s War on Poverty.
And yet, in all this deafening clamor of self-approbation, we rarely hear from these foundations about another undertaking that bears all the strategic hallmarks of American philanthropy’s much-touted successes, with far more significant results: that the first American foundations were deeply immersed in eugenics — the effort to promote the reproduction of the “fit” and to suppress the reproduction of the “unfit.”
Philanthropy vs. Charity
Although some of its animating ideas of course reach much further back into history, modern eugenics began with the mid-nineteenth-century work of Sir Francis Galton, the great English statistician and cousin of Charles Darwin. Galton proposed that talent and high social rank had hereditary origins, and that society could and should give monetary incentives for marriages of and progeny from eminent couples. By the turn of the twentieth century, eugenics was considered a cutting-edge scientific discipline backed up by a growing political and social movement — and therefore a particularly worthy candidate for philanthropists’ attention. It is no surprise, then, that the first major foundations devoted resources not only to the research behind the movement, but also to lobbying for government adoption of eugenic policies: at the federal level, restricting immigration of the “unfit”; at the state level, their mandatory institutionalization and sterilization.
Eugenics was American philanthropy’s first great global success. It inspired and cultivated programs around the world, but nowhere with more consequence than in the nation that sought most ferventlyto imitate America’s eugenic example, Adolf Hitler’s Third Reich.
How did American philanthropy become involved with so reactionary and misanthropic a venture as eugenics? As recent scholarship on eugenics has shown, the movement was not considered reactionary at the time. To the contrary, eugenics was very much an essential feature of the American progressive movement at the beginning of the twentieth century.
America’s first general-purpose philanthropic foundations — Russell Sage (founded 1907), Carnegie (1911), and Rockefeller (1913) — backed eugenics precisely because they considered themselves to be progressive. After all, eugenics had begun to point the way to a bold, hopeful human future through the application of the rapidly advancing natural sciences and the newly forming social sciences to human problems. By investing in the progress and application of these fields, foundations boasted that they could delve down to the very roots of social problems, rather than merely treating their symptoms. Just as tracking physiological diseases back to parasites and microbes had begun to eliminate the sources of many medical ailments, so tracking social pathology — crime, pauperism, dipsomania, and “feeblemindedness,” a catch-all term for intellectual disabilities — back to defective genes would allow us to attack it at its source. As John D. Rockefeller put it, “the best philanthropy is constantly in search of the finalities — a search for cause, an attempt to cure evils at their source.”
In their understanding of themselves, foundations’ determination to reach root causes efficiently and scientifically came to distinguish American philanthropy from mere charity. The old, discredited charitable approach had taken too seriously and had wasted its time addressing the immediate, partial, parochial problems of individuals and small groups. Charity lacked the steely, detached scientific resolve to see through the bewildering, distracting, superficial manifestations of social ailments down to their ultimate sources, which we now had the power to cure once and for all.
Consequently, the first large foundations poured resources into the development and deployment of the natural sciences, as well as promising new social sciences like economics, psychology, sociology, and public administration. Early philanthropists shaped the first major American research universities at Johns Hopkins and Chicago, as well as public policy research institutes like Brookings and the National Bureau of Economic Research, and academic coordinating bodies like the Social Science Research Council.
Alexis de Tocqueville’s idea that America was ennobled by everyday, charitable citizens stepping forward to solve their own problems became less attractive than a new view of social change: objective, nonpartisan professionals and experts could grasp and manage more efficiently and scientifically the complexities of modern industrial life than individuals ever could. Foundation grants would pave the way for this transfer of authority: as one Rockefeller report put it, the foundation’s funding was designed to “increase the body of knowledge which in the hands of competent technicians may be expected in time to result in substantial social control.” Centralized control in the hands of social technicians would require an effort to circumvent and diminish local ethnic, fraternal, and neighborhood groups and charities, which still took their bearings from benighted moral and religious orthodoxies rather than from the new sciences of society.
According to the perspective of philanthropic eugenics, the old practice of charity — that is, simply alleviating human suffering — was not only inefficient and unenlightened; it was downright harmful and immoral. It tended to interfere with the salutary operations of the biological laws of nature, which would weed out the unfit, if only charity, reflecting the antiquated notion of the God-given dignity of each individual, wouldn’t make such a fuss about attending to the “least of these.” Birth-control activist Margaret Sanger, a Rockefeller grantee, included a chapter called “The Cruelty of Charity” in her 1922 book The Pivot of Civilization, arguing that America’s charitable institutions are the “surest signs that our civilization has bred, is breeding and is perpetuating constantly increasing numbers of defectives, delinquents and dependents.” Organizations that treat symptoms permit and even encourage social ills instead of curing them.
Charles B. Davenport, a Harvard-trained biologist, spoke directly to philanthropy’s contempt for charity, along with the former’s yearning to solve problems at their roots. In a booklet published in 1910, Davenport bemoaned the fact that “tens of millions have been given to bolster up the weak and alleviate the suffering of the sick” while “no important means have been provided to enable us to learn how the stream of weak and susceptible protoplasm may be checked.” He insisted that “vastly more effective than ten million dollars to ‘charity’ would be ten millions to Eugenics. He who, by such a gift, should redeem mankind from vice, imbecility and suffering would be the world’s wisest philanthropist.”
Philanthropic Support for Eugenics
Davenport found several wise philanthropists eager to take him up on his proposition to save humanity by funding eugenics. With the help of Mary Harriman, the wealthy widow of railroad magnate E. H. Harriman, Davenport was able to open the Eugenics Record Office (ERO) in 1910, adding it to the Station for Experimental Evolution at Cold Spring Harbor in New York, which had been launched earlier by the Carnegie Institution of Washington. The Rockefeller family and the Carnegie Institution, in turn, added funds to the Eugenics Record Office.
The ERO became a remarkably aggressive and effective institution, skillfully deploying all the available scientific, cultural, and political tools at its disposal to promote its cause. As the top independently funded eugenics institution in the United States, its activities ranged from scientific and policy research, to public education and political advocacy, to training expert field workers whose job it was to track the “stream of weak and susceptible protoplasm” into every nook and cranny of the nation.
Davenport hired Harry H. Laughlin, at the time a teacher of agriculture with an interest in breeding, to manage the ERO. Laughlin became the world’s leading expert on and champion of sterilization. He compiled the authoritative study of its theory and practice; designed a model sterilization statute, variants of which came to be adopted by thirty states; and served as an expert eugenics witnesstestifying before the congressional committee determined to stem the rising tide of new and defective immigrants from southern and eastern Europe, who were deemed biologically inferior to the earlier immigrants from the northern and western parts. In the notorious 1927 Supreme Court caseBuck v. Bell, which upheld the constitutionality of state sterilization laws, Laughlin even provided a deposition confirming Carrie Buck’s feeblemindedness without ever having laid eyes on her.
But philanthropy’s involvement in eugenics went far beyond the success of the ERO. The Rockefeller Foundation helped fund the research institutions in Germany behind the Nazi programs of sterilization and euthanasia. Rockefeller money also supported the work of French surgeon and biologist Alexis Carrel, whose discoveries in vascular suturing earned him the Nobel Prize in 1912. While working at the Rockefeller Institute for Medical Research (today renamed Rockefeller University), Carrel wrote his bestseller Man, the Unknown (1935), which lent his prestige to eugenics, suggested the use of gas to euthanize lawbreakers, and in a later edition endorsed the German “suppression” of “the defective.” The Russell Sage Foundation for two decades employed Hastings H. Hart, a Congregationalist minister-turned-social worker, as a senior official and a consultant; while Hart didn’t support the sterilization of the feebleminded, he was an avid proponent of mandatorily sequestering them.

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Lessons from Nazi Germany

Starvation and Military Keynesianism
by Julian Adorney
Many Americans, from the Glenview State Bank of Chicago to author Ellen Brown assume that the Nazi economic regime was successful, but closer examination tells a tale of rationing, shortages, and starvation. Learning why their economy failed can teach us how to avoid the same fate.
Background
The myth endures that after Hitler inherited a country ravaged by the Great Depression in 1933, his aggressive policies turned the nation around and created an economic powerhouse. But the truth, as Professor Evans of the University of Cambridge argues in his seminal history The Third Reich Trilogy, is something far different.[1]
Evans, a Marxist sympathetic to Keynes and state intervention, nonetheless tells a story of rationing, shortages, and misery in the Third Reich. The Reich Food Estate, the state-controlled corporation responsible for agricultural production, regularly failed to feed its people. Agricultural output rarely surpassed 1913 levels, in spite of 20 years of technological advancement. Demand outstripped supply by 30 percent in basic foodstuffs like pork, fruit, and fats. That meant that for every ten German workers who stood in line to buy meat from the state-owned supply depots, three went home hungry.[2]
The same story was retold when it came to cars, clothing, and iron. New houses had to be built with wooden plumbing, because iron was so scarce. Nationalized iron depots couldn’t produce enough for the army, let alone civilians. Clothing was rationed. Fuel and rubber shortages led to what one US observer called, “drastic restrictions on the use of motor vehicles.”[3] Of course, because the state dictated which car and truck models could be produced, there weren’t very many motor vehicles to begin with.
The overall tale is one of misery for the average German citizen. So how did the Nazis so hurt their people, and what lessons can we learn?
Lesson 1: Military Keynesianism Produces Austerity
Hitler’s rearmament program was military Keynesianism on a vast scale. Hermann Goering, Hitler’s economic administrator, poured every available resource into making planes, tanks, and guns. In 1933 German military spending was 750 million Reichsmarks. By 1938 it has risen to 17 billion with 21 percent of GDP was taken up by military spending. Government spending all told was 35 percent of Germany’s GDP.
Many liberals, especially Paul Krugman, routinely argue that our stimulus programs in America aren’t big enough, so when they fail it’s not an indictment of Keynesianism. Fair enough. But no-one could say that Hitler’s rearmament program was too small. Economists expected it to create a multiplier effect and jump-start a flagging economy. Instead, it produced military wealth while private citizens starved. Employed on the largest scale ever seen, military Keynesianism created only ruin.
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So many secrets in the East China Sea

The whole drama is far from being just about a few islets and rocks
By Pepe Escobar 
It's been a source of endless fascination to follow the game of geopolitical Go being played since China declared an air defense identification zone (ADIZ) in the East China Sea. 

The spin in the United States is relentless; this was no less than "saber-rattling", a "bellicose" posture and a unilateral "provocation". The meeting last week between Chinese President Xi Jinping and US Vice-President Joe Biden in Beijing may have done nothing to dispel it. 

This is what the White House says Xi and Biden talked about; Beijing did not release a transcript. In the hysteria front, this op-edin the Financial Times - reflecting a warped consensus in the City of London - even managed to crank it up to pre-World War II levels. 

Now compare it with the official Chinese media view, from a more conciliatory take 
in China Daily to a no-holds barred assertion of sovereignty in the in the Global Times

Which brings us to the scenario that the original provocation may have been actually Japanese, and not Chinese. 

Mr Xi, tear down this wall
The whole drama is far from being just about a few islets and rocks that China calls Diaoyu and Japan Senkaku, or the crucial access to the precious waters that surround them, harboring untold riches in oil and natural gas; it concerns no less than the future of China as a sea power rivaling the US. 

Let's start with the facts on the sea. Meiji-era documents prove without a doubt that the Japanese government not only admitted that these islands were Chinese (since at least the 16th century) but was also plotting to grab them; that's exactly what happened in 1895, during the first Sino-Japanese war, a historical juncture when China was extremely vulnerable. 

After the Japanese occupation of China and World War II, Washington was in control of the territory. A document signed by the Japanese promised the return of the islands to China after the war. It was never fulfilled. In 1972, the US handed over their "administration" to Japan - but without pronouncing itself about who owned them. A gentlemen's agreement between Chinese premier Zhou Enlai and Japanese prime minister Kakuei Tanaka was also in effect. It was also ignored. 

Tokyo ended up buying the islands from a private landowner, the Kurihara family, nationalizing them in September 2012 only a day after a summit between then Chinese President Hu Jintao and PM Yoshihiko Noda, and this after Hu had told Noda not to change the status quo. 

Recently, to make matters worse, the Obama administration issued yet one more of its absurd "red lines", affirming it would support Japan in the event of a war revolving around the islands. 

Geostrategically, it's even more complex. Virtually all of China's sea trade flows through choke points whose borders are either controlled by close US allies or nations that are not exactly allied with China. 

Imagine yourself as a Chinese naval strategist. You look at the seascapes around you and all you see is what strategists call the First Island Chain. That virtual arc goes from Japan and the Ryukyu islands and the Korean peninsula, in the north, moving southwards via Taiwan, Philippines and Indonesia towards Australia. It's your ultimate nightmare. Assuming any serious confrontation along this arc, the US Navy will be able to move its aircraft carriers around and seriously compromise China's access to its oil transported via the straits of Malacca.

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