Underestimating the resilience of the nation state

The Euro elite are totally out of touch with the modern world

The realities of 21st-century politics are finally catching up with the guardians of the single currency.

By Matthew d'Ancona

It is extraordinary to recall that, until June last year, HM Treasury still had a “euro preparations unit”, finally abolished in George Osborne’s emergency Budget. This was the last, fossilised remains of the “prepare and decide” strategy adopted by New Labour, the premise of which – at least in the Blair years – was that Britain should and would join the single currency at some point in the future.

In past weeks, we have grown used to the eurozone as supplicant: the garlicky tramp on the pavement with a piece of cardboard on a string round his neck, bearing the words: “Will work for bail-out.” Even now, Osborne’s team is working on a host of contingency plans, to be triggered by crises ranging from Greece’s exit from the single currency, to the full-blown collapse of the eurozone.

How far Europe has travelled since Tony Blair unveiled his National Changeover Plan in February 1999, the preparatory campaign to make Britain’s businesses, banks, retailers, public authorities, and media ready for the referendum that he assumed would take place in his second term – and if not then, eventually. In his 2002 party conference speech, Blair referred to the euro as “not just about our economy, but our destiny”.

If the Cannes G20 summit established anything beyond doubt, it is that the European Union unaided cannot resolve this crisis. That much is clear from the International Monetary Fund’s new role as Silvio Berlusconi’s fiscal supervisor (or, to use the local idiom, his bunga bunga minda). No 10 despairs at the intransigence of Germany. Nicolas Sarkozy growls at Cameron that eurozone leaders are “sick of you criticising us and telling what to do”. Sans doute, M Le President: but what exactly are you doing? How confident are you that Greece will avoid disaster – or Italy, for that matter? How sure are you that Mario Draghi, the new president of the European Central Bank, is capable of overhauling the ECB and its functions?

Looking up at the huge modern edifice of the euro tottering, tilting and melting – a Corbusian nightmare as imagined by Dalí – it is easy to forget how prevalent was the view that Britain would condemn itself to a second-class status in Europe and a lesser role on the global stage if it stayed out of the shiny new currency. Even some of the staunchest Eurosceptics, who saw that the euro was economic folly and a constitutional affront, fretted privately that it would bulldoze all before it. Elsewhere, there was brash talk – hilarious to remember – of the euro becoming a global reserve currency like the dollar.

For the Coalition, a number of narrow political questions arise from the Cannes gathering. Already Tory euro-rebels, joined by Labour, are objecting to the prospective increase in the British contribution to the IMF. The Prime Minister insists that the last Commons vote on the UK’s obligation “allowed some extra headroom”, and that no further parliamentary approval will be necessary. That may be arithmetically so, but Ed Balls and the Tory sceptics will not let sums stand in the way of their demands.

“This [crisis] is having a chilling effect on our economy,” said the PM at his press conference in Cannes. “Every day that it goes on unresolved is a day that’s not good for our economic prospects.” True enough, but also politically pivotal: it is of the utmost importance to Conservative electoral prospects that the public buys into the claim that the eurozone crisis bears much of the blame for the sheer duration of their hardships. It is toward past Labour crime and present euro-folly that Cameron wants the voters to direct their resentment – lest they pay heed to the cries from the Left (spend even more!) or the Right (spend even less!).

Such is the political ticker tape spilling out of Cannes to Westminster. But it is pommes de terre petites compared to the greater meaning of this crisis. Though its internal contradictions may yet have appalling economic consequences, the euro was always a political project, and one based on a quasi-religious, providential view of history and Europe’s destiny. After 1989, the EU and the idea of the euro filled the Marx-shaped hole in the world-view of the Left, and presented a new teleology in which a whole continent was going to be bound together, inexorably, by a single currency.

It is astonishing to hear the very same people who said Britain would be consigned to irrelevance outside the euro now insisting that we have a neighbourly duty to prevent its implosion: we do have such a duty, but it is based on hard-nosed self-interest, not obligation to the continental sages who – betraying their ignorance of history and its magnificent unpredictability – once insisted that their grand projet would inevitably succeed.

One of the many errors the Founding Fathers of the euro made was to underestimate the resilience of the nation state. Yes, we live in a world in which technology, money and people flow across borders with greater ease than ever before. Globalisation makes the planet dramatically interdependent: Philip Bobbitt, the constitutional historian, has written brilliantly of the emergence of what he calls the “market state”. Even so, the nation has retained much of its cohesion, its significance and its grip on popular loyalty. One of the reasons that international elites hate Israel so much is that it is the clearest and most passionate example of this durability.

In the case of the euro, nation states have, predictably, followed fiscal strategies that suit them, rather than the rules and pacts that support the currency. That’s what nations do – which is why the euro will need some kind of formal fiscal union if it is to survive, an even bigger pooling of sovereignty than the abolition of 17 national currencies (most recently, in January, the Estonian kroon).

As nation states have survived more than five decades of euro-bombast, so supra-national politicians are finding themselves increasingly at odds with what might be called “referendal” politics. Direct democracy, plebiscites, e-petitions, the “Occupy” protests around the world, even the culture of phone voting in television shows: it is here that the impetus and the energy lie, uncoordinated and multidirectional though the phenomenon may be. The entire Cannes summit was nearly thrown off course by the wild-card threat of a referendum in Greece on the latest rescue plan. The psychology of the EU – a postwar elite bureaucracy – is entirely out of kilter with this very modern surge of popular protest: technology-driven, non-hierarchical, anti-elitist. It is like trying to connect an old ribbon typewriter to an iPad.

This crisis is about much more than the fate of a 12-year-old currency. It is a test of what politicians are for, what they can achieve when pitted against market caprice and fiscal incontinence. John Major used to say that this country belonged “at the heart of Europe”. Now, David Cameron is among the ring of medics yelling “Clear!”, as defibrillation is administered to the very same failing organ. Turns out that the heart of Europe was dicky all along. And for that cardiac frailty, the global body politic may yet pay a deep and terrible price.

Wolves and sheep

All Roads Lead to (Ancient) Rome

The old empire could teach us a thing or two about the euro and its flaws.

by Gilles Bransbourg 

Europe enjoyed a common currency regime 2,000 years ago. Back then, as today, there was no single common language, rather limited workforce mobility, and quite an active trade network. The Roman Empire brought relative internal peace to a wide area never to be united again. And it brought the sestertius—or, to be more accurate, a coinage of gold, silver, and bronze of which the bronze sestertius became the most commonly spread denomination. It certainly lacked a central bank, but it lasted for many centuries.

As a severe and predictable European debt crisis is slowly unfolding, it seems unlikely that the euro will achieve anything approaching the success or longevity of its distant predecessor. What went wrong, beyond the lack of political vision that is the only thing European governments seem to share?

Europe’s fundamental sin is actually simple. The Maastricht Treaty of 1992, in creating a single legal tender and monopolistic currency for the countries that ratified it, fundamentally undermined the very founding principle it ostensibly enshrined: that of “subsidiarity,” or the principle that holds it is always better for a matter to be handled at a local level than by a centralized authority.

The peculiarity of the Roman political system was indeed its taste for subsidiarity. The imperial government was usually quite happy to restrict itself to the essentials—mainly military defense and the rule of law—while devolving to local civic authorities most of the burden of managing their own issues. As such, the cities and regions, notably in the Greek or Syriac-speaking East, struck their own lower-value bronze coins as a complement to the usually higher-value imperial coins, leading to specific monetary zones.

As a result, the issuance of local money was to a large extent a local matter. Gaius, the second-century jurist, wrote that “money, although it should enjoy the same power of purchasing everywhere, is easier to obtain in some locations and interest rates are lower, while it is harder to find in other locations and interest rates are higher.” (Would that he were available today for a powwow with Mario Draghi, president of the European Central Bank.)

We are touching here on the essential shortcoming of the euro. Since its creation, Greek, Spanish, and Irish banks and governments have been able to borrow like Germans, Austrians, or the Dutch, under the cover of what was perceived to be the implicit uniformity and guarantee of the euro. As such, the common currency fueled insane property bubbles and equally insane public and private indebtedness and corruption. Logically, internal trade imbalances and competitive gaps kept widening. To simplify, life under that common currency regime has been like telling wolves and sheep to enjoy freedom together in open fields, while the suggested write-down on the Greek debt is equivalent to providing more grass to those sheep in the hope they will last longer. Incidentally, if consulted, the sheep may say no to the bailout package and the euro altogether.

America is not so different. There, an even more general asset and liability bubble has expanded under the influence of the low interest rates, counterproductive tax system, and lax regulatory environment that have prevailed for most of the past two decades. Only the dominance of federal over local government debts, the facilities offered by holding the world reserve currency, and the stabilizing role of a few very large foreign sovereign investors effectively funding American consumers through massive purchases of U.S. assets have prevented something similar to (or worse than) the European debt crisis from happening—so far. The current path is neither sustainable nor desirable.

Ancient Rome teaches us two things. The first is that there should be some explicit quantitative policy regarding monetary creation. Ancient economies’ monetary aggregates were capped by the availability of precious metals. Counting on private borrowers to create money leads post-gold-exchange-standards economies to a dangerous dependence on profligacy. This fuels a general sense of irresponsibility at all levels of our societies. Political authorities should not be thinking of ways to encourage essentially bankrupt consumers to borrow more. Consumers should stop thinking of themselves as consumers, reflect on what they bring to the outside world, and adjust their expectations accordingly. Wealth should be a consequence of adding more value, not of borrowing more.

By the same token, the access to unlimited funding, directly responsible for fueling reckless corporate-governance practices, should be curtailed. Flooding the capital markets with dollars has only resulted in a general cash glut at the higher end of the wealth scale while pushing the lower strata of the population into a real deflationary situation, contributing to unacceptable levels of inequality. In not facing these fundamental challenges, current governments will encourage social unrest and force their successors to adopt a combination of predatory taxation, sovereign default, inflation, and devaluation, with unfavorable demographics compounding all these issues.

The second lesson, the devolution of the monetary monopoly of the state, leads to the concept of local (or specific-purpose) subsidiary currencies. People are familiar with air miles, coupons, rewards, and tokens. This could be generalized inside economic zones or even virtual networks. Those who find themselves unwilling or unable to monetize their skills under the mainstream currency system, or who have lost access to credit, should be able to exchange their potential output through local units of account and barter. In doing so they would stand a chance of reintegration into a more open society.

Concerns about taxation and the central currency monopoly are misguided. Any positive contribution, taxed or not, is better than inactivity or, worse, social parasitism.

Still, today, all roads lead to Rome.

Politics and the Mob

Democracy Versus Mob Rule

By Thomas Sowell

In various cities across the country, mobs of mostly young, mostly incoherent, often noisy and sometimes violent demonstrators are making themselves a major nuisance.

Meanwhile, many in the media are practically gushing over these "protesters," and giving them the free publicity they crave for themselves and their cause — whatever that is, beyond venting their emotions on television.

Members of the mobs apparently believe that other people, who are working while they are out trashing the streets, should be forced to subsidize their college education — and apparently the President of the United States thinks so too.

But if these loud mouths' inability to put together a coherent line of thought is any indication of their education, the taxpayers should demand their money back for having that money wasted on them for years in the public schools.

Sloppy words and sloppy thinking often go together, both in the mobs and in the media that are covering them. It is common, for example, to hear in the media how some "protesters" were arrested. But anyone who reads this column regularly knows that I protest against all sorts of things — and don't get arrested.

The difference is that I don't block traffic, join mobs sleeping overnight in parks or urinate in the street. If the media cannot distinguish between protesting and disturbing the peace, then their education may also have wasted a lot of taxpayers' money.

Among the favorite sloppy words used by the shrill mobs in the streets is "Wall Street greed." But even if you think people in Wall Street, or anywhere else, are making more money than they deserve, "greed" is no explanation whatever.

"Greed" says how much you want. But you can become the greediest person on earth and that will not increase your pay in the slightest. It is what other people pay you that increases your income.

If the government has been sending too much of the taxpayers' money to people in Wall Street — or anywhere else — then the irresponsibility or corruption of politicians is the problem. "Occupy Wall Street" hooligans should be occupying Pennsylvania Avenue in Washington.

Maybe some of the bankers or financiers should have turned down the millions and billions that politicians were offering them. But sainthood is no more common in Wall Street than on Pennsylvania Avenue — or in the media or academia, for that matter.

Actually, some banks did try to refuse the government bailout money, to avoid the interference with their business that they knew would come with it. But the feds insisted — and federal regulators' power to create big financial problems for banks made it hard to say no. The feds made them an offer they couldn't refuse.

People who cannot distinguish between democracy and mob rule may fall for the idea that the hooligans in the street represent the 99 percent who are protesting about the "greed" of the one percent. But these hooligans are less than one percent and they are grossly violating the rights of vastly larger numbers of people who have to put up with their trashing of the streets by day and their noise that keeps working people awake at night.

As for the "top one percent" in income that attract so much attention, angst and denunciation, there is always going to be a top one percent, unless everybody has the same income. That top one percent has no more monopoly on sainthood or villainy than people in any other bracket.

Moreover, that top one percent does not consist of the "millionaires and billionaires" that Barack Obama talks about. You don't even have to make half a million dollars to be in the top one percent.

Moreover, this is not an enduring class of people. Nor are people in other income brackets. Most of the people in the top one percent at any given time are there for only one year. Anyone who sells an average home in San Francisco can get into the top one percent in income — for that year. Other one-time spikes in income account for most of the people in that top one percent.

But such plain facts carry little weight amid the heady rhetoric and mindless emotions of the mob and the media.

A few generations of moral cripples

Moral Abdication

The withdrawal from any kind of judgment is yielding a generation of moral cripples.

By MONA CHAREN

My high-school-sophomore son was grumbling as he read his world-history textbook. He pointed me to this sentence about the encounter between European and Mesoamerican civilizations.

The American Indian societies had many religious ideas and practices that shocked Christian observers, and aspects of their social and familial arrangements clashed with European sensibilities.

The text, World Civilizations: The Global Experience by Peter N. Stearns et al, was a little oblique about the nature of those ideas and practices. It mentioned human sacrifice but then rushed to add that “many of those who most condemned human sacrifice, polygamy, or the despotism of Indian rulers were also those who tried to justify European conquest and control, mass violence, and theft on a continental scale.”

The authors clearly wish to avoid the unpleasant details of Indian practices in their rush to condemn European depredations. A curious student would have to discover on his own that the Aztecs themselves claimed to have ritually sacrificed 80,400 people over the course of four days at the rededication of the Great Pyramid of Tenochtitlán in 1487. While this was probably bragging, historian Victor Davis Hanson estimates that at least 20,000 victims were sacrificed yearly. Most were slaves, criminals, debtors, children, and prisoners of war — the Aztecs fought to capture, not kill, so as to provide a steady stream of sacrifices. These were bloody and brutal, with the victim’s chest being sliced open and the still-beating heart pulled from the body.

When the topic of human sacrifice was broached in the classroom, my son reported that none of his classmates was comfortable condemning the practice as immoral. “It was their culture,” his classmates said. And it’s wrong to impose your values on someone else’s culture.

This is not a fluke. In Lost in Transition: The Dark Side of Emerging Adulthood, Christian Smith and his co-authors recount the results of their decade-long study of a representative sample of Americans aged 18–23. Through in-depth interviews, they examined their subjects’ lives and concluded that an alarming percentage of young people are highly materialistic, commitment averse, disengaged from political and civic life, sexually irresponsible, often heavily intoxicated, and morally confused. In fact, the authors contend, they lack even the vocabulary to think in moral terms.

The products of a culture that dares not condemn even human sacrifice for fear of transgressing multicultural taboos, these young people are morally adrift.

Six out of ten told the authors that morality is a “personal choice,” like preferring long or short hair. “Moral rights and wrongs are essentially matters of individual opinion.” One young woman, a student at an Ivy League college, explained that while she doesn’t cheat, she is loath to judge others who do. “I guess that’s a decision that everyone is entitled to make for themselves. I’m sort of a proponent of not telling other people what to do.” A young man offered that “a lot of the time it’s personal. It changes from person to person. What you may think is right may not necessarily be right for me, understand? So it’s all individual.” Forty-seven percent of the cohort agreed that “morals are relative, there are not definite rights and wrongs for everybody.”

It goes beyond cheating or failing to give to charity. One young man who stressed “everyone’s right to choose” was pressed about whether murder would be such a choice. He wasn’t sure. “I mean, in today’s society, sure, like to murder someone is just ridiculous. I don’t know. In some societies, back in time, maybe it’s a good thing.”

The irony is that this supposed reluctance to make moral judgments is itself a moral posture. The young people in the study, like the authors of my son’s textbook, and much of the American establishment, believe that it is morally wrong to judge people harshly. (Except perhaps if it’s Western civilization in the dock.)

My son was most exasperated by the textbook’s suggestion that Western civilization’s response to other cultures was “complex” and that this was probably just as true of Chinese, Persians, and others. No, he protested, the only civilization that is self-critical at all is our own. Other world civilizations continue to express pride and even arrogance about their own histories.

Those who resist the self-flagellation that travels under the name multiculturalism are accused of chauvinism. But the withdrawal from any kind of judgment is yielding a generation of moral cripples.

Another day for the Religion of peace

Scores Killed In Attack On Nigeria Churches, Police

Several churches have been destroyed in Nigeria.

 By Stefan J. Bos

ABUJA, NIGERIA (BosNewsLife)-- Islamic militants shouting "Allahu Akbar", or 'Allah is great', carried out coordinated gun and bomb attacks on churches and police stations in northern Nigeria, killing at least 67 people and injuring some 100 others, aid workers and witnesses confirmed Saturday, November 5.

Militant group Boko Haram, or 'Western education is a sin', claimed responsibility for the attacks Saturday, November 4, while frightened mourners tried to leave their homes to begin burying their dead.

The group, which seeks strict implementation of Shariah, or Islamic law, across the nation of more than 160 million people, pledged more attacks.

The Red Cross aid group and witnesses said fighting began Friday, November 4, around Damaturu, the capital of Yobe state, when a car bomb exploded outside a three-story building used as a military office and barracks, with many uniformed security agents dying in the blasts.

Lieutenant Colonel Hassan Mohammed told reporters that the "suicide" attackers, driving a black sports utility vehicle, detonated their explosives near the gate of the building, used by the Joint Task Force (JTF), the military unit deployed to curb violence there.

CHURCHES ATTACKED

Several other police stations, a bank and up to six churches were also attacked, residents and aid workers said. Among areas targeted by militants was the Jerusalem area, a predominantly Christian neighborhood, according to witnesses.

One resident, Isa Jakusko, was quoted by French News Agency AFP as saying that city had been thrown into chaos. “There have been several bomb explosions and shooting. As I am talking to you there is still fire exchanges between the attackers and security personnel with the attackers shouting ‘Allahu Akbar’,” he reportedly said.

Gunshots were reportedly still heard Saturday, November 5, from different parts of the city with the sky dark with smoke, apparently from burning buildings.

In another part of northern Nigeria, hundreds of youths staged angry protests after gunmen opened fire on a congregation of Christians praying at a village in Kaduna state overnight, witnesses said.

The attack occurred in an area where hundreds of people were killed in violence which erupted after the April election victory of President Goodluck Jonathan, a Christian, against his closest rival Muhammadu Buhari, a Muslim.

VILLAGE BLASTED

Witnesses said the gunmen also attacked the nearby village of Potiskum and city of Maiduguri earlier in the day and engaged in several hours of running gunbattles with security forces, witnesses said.

Elsewhere in northern Nigeria youth protested against a deadly attack on a church in the Tabak Village in Zangon Kataf Local Government Area of Kaduna State, Christian activists told BosNewsLife.

Local youths blocked roads overnight to an attack Thursday, November 3, on a village prayer meeting of the St. Augustine Catholic Church, that left two people dead, said advocacy group Christian Solidarity Worldwide (CSW).

Witnesses reportedly said that gunmen raided the church as the prayer meeting was coming to an end, fired at a congregation consisting mainly of women and children, and escaped into the bush.

"Two women died at the scene, twelve other people were wounded mainly in the arms and legs, and are receiving treatment at St. Louis Hospital in nearby Zonkwa," CSW said in a statement to BosNewsLife.

PREDAWN RAID

The attack on Tabak Village followes a predawn raid in late October on a police station and bank in Saminaka Town in the same area by suspected members of Boko Haram, who reportedly escaped in the direction of Bauchi State carrying cash and weaponry CSW said.

In a statement issued on behalf of the Kaduna State Chapter of the Christian Association of Nigeria (CAN), the organisation’s secretary, the Reverend Yunusa Nmadu condemned the armed attack “on innocent Christian worshipers in the church”, and expressed anger that the raid occurred “in spite of the heavy presence of soldiers in the area”.

He urged authorities to "ensure that the perpetrators of this evil act are fished out and brought to book. Meanwhile we call on all Christians to be calm and prayerful in the face of this new dimension of attack on the Church”.

In September, soldiers and riot police were drafted to the region following an armed attack by Fulani tribesmen in which four people were killed and over ten injured, according to Christian rights activists.

"INNOCENT CONGREGATION" 

CSW’s Advocacy Director Andrew Johnston said Thursday's attack "on an innocent congregation of mostly women and children is deplorable, and the fact it could occur despite a heavy military presence in the area is a cause for great concern."

He said his group has urged the government to improve secutity as "it is vital that these raids are brought to a halt quickly in order to restore confidence and security to the local population.”

But with more bloodshed reported Saturday, November 5, there was little sign of more security.

Voice of Reason

Murray Rothbard on Economic Recessions

By http://www.libertarianism.org

Propagandists of the State

Why Do Intellectuals Oppose Capitalism?

Noting that “wordsmith intellectuals” are disproportionately likely to lean left, Nozick attributes their animosity towards capitalism to the difference in value judgments and reward structure between formal schools and capitalist society at large.

By R. Nozick

It is surprising that intellectuals oppose capitalism so. Other groups of comparable socio-economic status do not show the same degree of opposition in the same proportions. Statistically, then, intellectuals are an anomaly.

Not all intellectuals are on the “left.” Like other groups, their opinions are spread along a curve. But in their case, the curve is shifted and skewed to the political left.

By intellectuals, I do not mean all people of intelligence or of a certain level of education, but those who, in their vocation, deal with ideas as expressed in words, shaping the word flow others receive. These wordsmiths include poets, novelists, literary critics, newspaper and magazine journalists, and many professors. It does not include those who primarily produce and transmit quantitatively or mathematically formulated information (the numbersmiths) or those working in visual media, painters, sculptors, cameramen. Unlike the wordsmiths, people in these occupations do not disproportionately oppose capitalism. The wordsmiths are concentrated in certain occupational sites: academia, the media, government bureaucracy.

Wordsmith intellectuals fare well in capitalist society; there they have great freedom to formulate, encounter, and propagate new ideas, to read and discuss them. Their occupational skills are in demand, their income much above average. Why then do they disproportionately oppose capitalism? Indeed, some data suggest that the more prosperous and successful the intellectual, the more likely he is to oppose capitalism. This opposition to capitalism is mainly “from the left” but not solely so. Yeats, Eliot, and Pound opposed market society from the right.

The opposition of wordsmith intellectuals to capitalism is a fact of social significance. They shape our ideas and images of society; they state the policy alternatives bureaucracies consider. From treatises to slogans, they give us the sentences to express ourselves. Their opposition matters, especially in a society that depends increasingly upon the explicit formulation and dissemination of information.

We can distinguish two types of explanation for the relatively high proportion of intellectuals in opposition to capitalism. One type finds a factor unique to the anti-capitalist intellectuals. The second type of explanation identifies a factor applying to all intellectuals, a force propelling them toward anti-capitalist views. Whether it pushes any particular intellectual over into anti-capitalism will depend upon the other forces acting upon him. In the aggregate, though, since it makes anti-capitalism more likely for each intellectual, such a factor will produce a larger proportion of anti-capitalist intellectuals. Our explanation will be of this second type. We will identify a factor which tilts intellectuals toward anti-capitalist attitudes but does not guarantee it in any particular case.

THE VALUE OF INTELLECTUALS

Intellectuals now expect to be the most highly valued people in a society, those with the most prestige and power, those with the greatest rewards. Intellectuals feel entitled to this. But, by and large, a capitalist society does not honor its intellectuals. Ludwig von Mises explains the special resentment of intellectuals, in contrast to workers, by saying they mix socially with successful capitalists and so have them as a salient comparison group and are humiliated by their lesser status. However, even those intellectuals who do not mix socially are similarly resentful, while merely mixing is not enough—the sports and dancing instructors who cater to the rich and have affairs with them are not noticeably anti-capitalist.

Why then do contemporary intellectuals feel entitled to the highest rewards their society has to offer and resentful when they do not receive this? Intellectuals feel they are the most valuable people, the ones with the highest merit, and that society should reward people in accordance with their value and merit. But a capitalist society does not satisfy the principle of distribution “to each according to his merit or value.” Apart from the gifts, inheritances, and gambling winnings that occur in a free society, the market distributes to those who satisfy the perceived market-expressed demands of others, and how much it so distributes depends on how much is demanded and how great the alternative supply is. Unsuccessful businessmen and workers do not have the same animus against the capitalist system as do the wordsmith intellectuals. Only the sense of unrecognized superiority, of entitlement betrayed, produces that animus.

Why do wordsmith intellectuals think they are most valuable, and why do they think distribution should be in accordance with value? Note that this latter principle is not a necessary one. Other distributional patterns have been proposed, including equal distribution, distribution according to moral merit, distribution according to need. Indeed, there need not be any pattern of distribution a society is aiming to achieve, even a society concerned with justice. The justice of a distribution may reside in its arising from a just process of voluntary exchange of justly acquired property and services. Whatever outcome is produced by that process will be just, but there is no particular pattern the outcome must fit. Why, then, do wordsmiths view themselves as most valuable and accept the principle of distribution in accordance with value?

From the beginnings of recorded thought, intellectuals have told us their activity is most valuable. Plato valued the rational faculty above courage and the appetites and deemed that philosophers should rule; Aristotle held that intellectual contemplation was the highest activity. It is not surprising that surviving texts record this high evaluation of intellectual activity. The people who formulated evaluations, who wrote them down with reasons to back them up, were intellectuals, after all. They were praising themselves. Those who valued other things more than thinking things through with words, whether hunting or power or uninterrupted sensual pleasure, did not bother to leave enduring written records. Only the intellectual worked out a theory of who was best.

THE SCHOOLING OF INTELLECTUALS

What factor produced feelings of superior value on the part of intellectuals? I want to focus on one institution in particular: schools. As book knowledge became increasingly important, schooling—the education together in classes of young people in reading and book knowledge—spread. Schools became the major institution outside of the family to shape the attitudes of young people, and almost all those who later became intellectuals went through schools. There they were successful. They were judged against others and deemed superior. They were praised and rewarded, the teacher’s favorites. How could they fail to see themselves as superior? Daily, they experienced differences in facility with ideas, in quick-wittedness. The schools told them, and showed them, they were better.

The schools, too, exhibited and thereby taught the principle of reward in accordance with (intellectual) merit. To the intellectually meritorious went the praise, the teacher’s smiles, and the highest grades. In the currency the schools had to offer, the smartest constituted the upper class. Though not part of the official curricula, in the schools the intellectuals learned the lessons of their own greater value in comparison with the others, and of how this greater value entitled them to greater rewards.

The wider market society, however, taught a different lesson. There the greatest rewards did not go to the verbally brightest. There the intellectual skills were not most highly valued. Schooled in the lesson that they were most valuable, the most deserving of reward, the most entitled to reward, how could the intellectuals, by and large, fail to resent the capitalist society which deprived them of the just deserts to which their superiority “entitled” them? Is it surprising that what the schooled intellectuals felt for capitalist society was a deep and sullen animus that, although clothed with various publicly appropriate reasons, continued even when those particular reasons were shown to be inadequate?

Government against the people, as usual

Man vs. Beetle

 

The Puritan tiger beetle has better lawyers than homeowners at Maryland's Chesapeake Bay Estates.

By MARK HYMAN 

Chesapeake Ranch Estates is a bayside community of about 4,000 homes located in southern Maryland overlooking the mouth of the Chesapeake Bay. It is filled with spectacular views and abundant wildlife. Residents believe they enjoy the best of both worlds. It is about a 90-minute commute to Washington, D.C. and yet, the region is distinctly rural.

Unfortunately, about 100 Chesapeake Ranch homeowners are currently living a nightmare. Their homes are located along Golden West Way, a small two-lane road that snakes along cliffs that rise about one hundred feet above the Chesapeake Bay. Today, about one-quarter mile of Golden West is closed as it is deemed no longer to be safe for vehicle travel as the cliff edge is now too close to the road; in some places, a mere 25 feet. Concrete barriers block vehicles from accessing the stretch of road.

It is not just the inconvenience of having to circumnavigate much of the community in order to travel a mere half-mile down the road that irks local residents. Homeowners along Golden West have watched helplessly as their properties have collapsed into the bay. In 1996, 12-year Wendy Miller who was walking along the beach with her familyperished when she was crushed under falling earth. Her death caused the beach to be closed.

The problem with the eroding cliffs could be solved with a relatively straightforward undertaking. The homeowners could shore up the cliffs with riprap or revetments in order to stabilize their properties. Unfortunately, they are prohibited from doing so by enforcement of the Endangered Species Act because the cliffs are the natural habitat of the Puritan tiger beetle.

The Puritan tiger beetle (Cicindela puritana) is one of the 1,967 species worldwide that is on the endangered species list. It was addedto the list as a "threatened" species in 1990. According to entomologists, the beetle's preferred habitat is sandy beaches with adjoining cliff faces that are devoid of vegetation. The continuous erosion of the cliffs precludes vegetation from growing and thereby provides the very soil in which the female beetles burrow and lay the eggs. At least 6,500 and as many as 10,000 tiger beetles are estimated to live in the cliffs along the Chesapeake Bay.

For two decades, homeowners in Chesapeake Ranch and elsewhere along 26 miles of the western shore of the Chesapeake have been prevented from taking any reasonable action to shore up the cliffs and slow the erosion as it could result in vegetation growing along the cliff face. There is no resale market for their homes as it is only a matter of time before the properties collapse into the bay.

A detailed study completed in late 2010 found 234 homes are located within 100 feet of the cliff, 43 are within 20 feet, 20 are within 10 feet and 19 homes are within five feet. One home is overhanging a cliff. The homeowners' predicament could not be more dire in spite of the fact the Puritan tiger beetle is present in only half of the endangered properties.

Federal and state officials have allowed few efforts to stop the erosion. A $200,000 plan undertaken by four families to deploy nearly 600 two-ton hollow concrete domes off-shore as a man-made reef to slow the waves crashing on the beach yielded few results. Another family's proposal to build a breakwater about a hundred feet into the bay to slow the cliff erosion was disapproved because it might harm the local crab habitat. The Maryland blue crab -- whilepricey to the consumer -- is neither endangered nor threatened.

In recent weeks, a combined federal-state mitigation plan has been in the works. Homeowners may apply for an "incidental take permit"that allows "private parties undertaking otherwise lawful projects that might result in the take of an endangered or threatened species." In concert with the application, homeowners would be assessed a fee that paid into a fund that would finance an existing tiger beetle habitat elsewhere or would finance a relocation effort.

Complicating matters is that a comprehensive, community-wide plan -- which would be the most sensible approach -- has been discouraged. Instead, federal and state officials are encouraging a piecemeal approach by requesting homeowners to submit individual plans.

Earlier this year, the U.S. Fish and Wildlife Service issued a $2.4 million grant to purchase about 225 acres of shorefront property as an easement (and 230 acres for a similar easement on the Sassafras River on Maryland's eastern shore) for a protected tiger beetle habitat. There are not any known efforts underway to reintroduce captive-reared or relocated tiger beetles into the preserve.

No permits have yet been issued to any homeowners under the mitigation plan. The large number of federal and state agencies involved in the approval process (U.S. Fish and Wildlife Service, U.S. Army Corps of Engineers, and three Maryland agencies: Natural Resources, Environment, and Emergency) virtually ensure approval will be a long and drawn-out affair. Further, a source involved with current permit discussions has reported that an unofficial limit has been set at 15 percent of the affected properties. If true, then five out of six property owners will eventually lose their homes. To a beetle.

The Great Transition ?

What If Middle-Class Jobs Disappear?

Structural change is an important factor in the current rate of high unemployment. The economy is in a state of transition, in which the middle-class jobs that emerged after World War II have begun to decline.

By Arnold Kling

The most recent recession in the United States began in December of 2007 and ended in June of 2009, according to the official arbiter of recession dating, the National Bureau of Economic Research.  However, two years after the official end of the recession, few Americans would say that economic troubles are behind us. The unemployment rate, in particular, remains above 9 percent. Some labor market indicators, such as the proportion of long-term unemployed, are worse now than for any postwar recession.

There are two widely circulated narratives to explain what is going on. The Keynesian narrative is that there has been a major drop in aggregate demand. According to this narrative, the slump can be largely cured by using monetary and fiscal stimulus.

The main anti-Keynesian narrative is that businesses are suffering from uncertainty and over-regulation. According to this narrative, the slump can be cured by having the government commit to and follow a more hands-off approach.

I want to suggest a third interpretation. Without ruling out a role for aggregate demand or for the regulatory environment, I wish to suggest that structural change is an important factor in the current rate of high unemployment. The economy is in a state of transition, in which the middle-class jobs that emerged after World War II have begun to decline.

As Erik Brynjolfsson and Andrew McAfee put it in a recent e-book Race Against the Machine:

The root of our problems is not that we're in a Great Recession, or a Great Stagnation, but rather that we are in the early throes of a Great Restructuring.

In fact, I believe that the Great Depression of the 1930s can also be interpreted in part as an economic transition. The impact of the internal combustion engine and the small electric motor on farming and manufacturing reduced the value of uneducated laborers. Instead, by the 1950s, a middle class of largely clerical workers was the most significant part of the labor force.

The Great Transition from 1930 to 1950

Between 1930 and 1950, the United States economy underwent a Great Transition. Demand fell for human effort such as lifting, squeezing, and hammering. Demand increased for workers who could read and follow directions. The evolutionary process eventually changed us from a nation of laborers to a nation of clerks.

The proportion of employment classified as “clerical and kindred workers” grew from 5.2 percent in 1910 to a peak of 19.3 percent in 1980. (However, by 2000 this proportion had edged down to 17.4 percent.)¹ Overall, workers classified as clerical, professional workers, technical workers, managers, officials, and proprietors exceeded 50 percent of the labor force by 2000.

Corresponding declines took place in the manual occupations. Workers classified as laborers, other than farm or mine, peaked at 11.4 percent of the labor force in 1920 but were barely 6 percent by 1950 and less than 4 percent by 2000. Farmers and farm laborers fell from 33 percent of the labor force in 1910 to less than 15 percent by 1950 and only 1.2 percent in 2000.

The advent of the tractor and improvements in the factory rapidly reduced the demand for uneducated workers. By the 1930s, a marginal farm hand could not produce enough to justify his employment. Sharecropping, never much better than a subsistence occupation, was no longer viable. Meanwhile, machines were replacing manufacturing occupations like cigar rolling and glass blowing for light bulbs.²

World War II also demonstrated the increase in the relative importance of white-collar workers and machines. With all due respect to GI Joe and Rosie the Riveter, it could be that Cynthia the Clerk is a more appropriate symbol of the war effort, as logistics and communications came to be dominant factors. Although Winston Churchill famously praised “the few” who flew airplanes during the Battle of Britain, historians emphasize the role played by the communications and control systems on the ground, staffed to a considerable extent by women, in making the British victory possible. Female clerks also played a crucial role in the process of decoding German messages—the famous Enigma intercepts.

The structural-transition interpretation of the unemployment problem of the 1930s would be that the demand for uneducated workers in the United States had fallen, but the supply remained high. The high school graduation rate was only 8.8 percent in 1912 and still just 29 percent in 1931. By 1950, it had reached 59 percent.³ With a new generation of workers who had completed high school, the mismatch between skills and jobs had been greatly reduced.

What took place after the Second World War was not the revival of a 1920s economy, with its small farming units, urban manufacturing, and plurality of laborers. Instead, the 1950s saw the creation of a new suburban economy, with a plurality of white-collar workers. With an expanded transportation and communications infrastructure, businesses needed telephone operators, shipping clerks, and similar occupations. If you could read, follow simple instructions, and settle into a routine, you could find a job in the post-war economy.

The trend away from manual labor has continued. Even within the manufacturing sector, the share of production and non-supervisory workers in manufacturing employment went from over 85 percent just after the Second World War to less than 70 percent in more recent years. To put this another way, the proportion of white-collar work in manufacturing has doubled over the past 50 years. On the factory floor itself, work has become less physically demanding. Instead, it requires more cognitive skills and the ability to understand and carry out well-defined procedures.

The Current Transition

As noted earlier, the proportion of clerical workers in the economy peaked in 1980. By that date, computers and advanced communications equipment had already begun to affect telephone operations and banking. The rise of the personal computer and the Internet has widened the impact of these technologies to include nearly every business and industry.

The economy today differs from that of a generation ago. Mortgage and consumer loan underwriters have been replaced by credit scoring. Record stores have been replaced by music downloads. Book stores are closing, while sales of books on electronic readers have increased. Data entry has been moved off shore. Routine customer support also has been outsourced overseas.

These trends serve to limit the availability of well-defined jobs. If a job can be characterized by a precise set of instructions, then that job is a candidate to be automated or outsourced to modestly educated workers in developing countries.

The result is what David Autor calls the polarization of the American job market. Autor and various research collaborators have documented a number of findings that reflect this polarization:⁴

•    In recent decades, wage and employment growth have both been lowest at the middle segment of the skill distribution. Wage improvements have tended to be concentrated at the high end, and employment gains have tended to be largest at the low end of the skill distribution.

•    This particular symptom of polarization is also prevalent in OECD countries other than the United States.

•    In the United States, this polarization was exacerbated by the economic downturn. While both high- and low-skill jobs have held steady, the brunt of the recession has been borne by mid-skill workers. For example, growth in employment in sales was 54 percent from 1979 to 1989, 14 percent from 1989 to 1999, 4 percent from 1999 to 2007, and -7 percent from 2007 to 2009. Employment in sales was a key component of upward economic mobility after World War II, but technological change and globalization appear to have stalled or perhaps reversed this engine of middle-class affluence.

•    From 1980 to 2007, real wages for male workers with only a high school degree fell by 12 percent, real wages of male workers with only a college degree rose by 10 percent, and real wages of males with post-graduate degrees increased by 26 percent. Female workers show a similar pattern, although wage gains were generally higher for females over this period.

Using the latest Census Bureau data, Matthew Slaughter found that from 2000 to 2010 the real earnings of college graduates (with no advanced degree) fell by more in percentage terms than the earnings of high school graduates. In fact, over this period the only education category to show an increase in earnings was those with advanced degrees.⁵