Union of Church and State

Wednesday, January 21st, 2009

In trying to provide a gentle introduction to his political thinking, Mencius Moldbug goes back to one of his earliest Sith mind tricks — looking at the separation of church and state and asking, What do we mean by church?

The question seems difficult. So let’s procrastinate. For a straw definition of church, though, let’s say a church is an organization or movement which specializes in telling people what to think. I would not inquire into this definition too closely — lest you ruin the suspense — but surely it fits Scientology, the Southern Baptists, Buddhism, etc. That’s close enough for now.
[...]
There are two kinds of government: those whose formula of legitimacy depends on popular consent, and those whose doesn’t. Following contemporary usage, we can classify these as authoritarian and democratic.

An authoritarian state has no need to tell its subjects what to think, because it has no reason to care what they think.
[...]
A democratic state which tells its citizens what to think is a political solecism. Think about the motivation for democracy: it consigns the state to the collective responsibility of its citizens, because it feels this is an independent and well-anchored hook on which to hang the common good. Once the republic has an established church, this hook is no longer independent, and the (postulated) value-add of democracy is nullified.

Without separation of church and state, it is easy be for a democracy to indulge itself in arbitrarily irresponsible misgovernment, simply by telling its bishops to inform their congregations that black is white and white is black. Thus misdirected, they are easily persuaded to support counterproductive policies which they wrongly consider productive.

A common syndrome is the case in which a purported solution is in fact the cause of the problem. As a Russian politician once said of his opponents: “These people think they are the doctors of society. In fact, they are the disease.” (It is indeed surprising that Nassim Taleb has just learned the word iatrogenic. BTW, if you know Taleb, please point him at UR. If you know someone who knows Taleb, please…)

Union of church and state can foster stable iatrogenic misgovernment as follows. First, the church fosters and maintains a popular misconception that the problem exists, and the solution solves it. Secondly, the state responds by extruding an arm, agency, or other pseudopod in order to apply the solution. Agency and church are thus cooperating in the creation of unproductive or counterproductive jobs, as “doctors.” Presumably they can find a way to split the take.

The root problem with a state church in a democratic state is that, to believe in democracy, one must believe that the levers of power terminate with the voters. But if your democracy has an effective state church, the actual levers of power pass through the voters, and go back to the church. The church teaches the voters what to think; the voters tell the politicians what to do. Naturally, it is easy for the politicians to short-circuit this process and just listen to the bishops.

Thus the government has a closed power loop. With the church at its apex, of course. Which is exactly what we were hoping to avoid when we decided to make our state democratic, rather than authoritarian — an independent and unaccountable authority, which is in charge of everything else. In this case our authority is, of course, the church itself. Oops! We have engineered ourselves a big bucket of FAIL.

In other words, our so-called democracy is dependent not on the wisdom of the people, but on the internal power politics of the official church. If these politics produce a political platform which translates to responsible and effective actions, the government will be good. If they don’t, it will suck. Either way, we have consigned the state to an unaccountable conclave of bishops. Why this is an improvement on monarchy, or any other form of autocracy, is unclear.

This political architecture, an abortion by any standard, is commonly known as a theocracy. Oddly enough, the classic historical case of a theocracy is… wait, hang on, I’m forgetting… oh, yes! Right here, in North America. Under those strange people we call the “Puritans.”
[...]
Notice that our definition of church has not invoked any of the typical attributes of religion. In particular, we have avoided any requirement that (a) the doctrines of the church be either partially or entirely supernatural in nature (think of Buddhism or Scientology — or, for that matter, Nazism or Bolshevism), or (b) the structure of the church be in any way centrally organized (a Quaker theocracy is just as excluded as a Catholic theocracy — and once your church is united with the state, there is no shortage of structure).

We have just said: a church is an organization or movement which tells people how to think. A broad definition, but it turns out to be perfectly adequate to validate our case for separation of church and state. And it contains all our test cases.

There’s just one problem. The definition is slightly too broad. It captures some cases which we obviously don’t want to include. You see, under this definition, Harvard is a church.

And we surely can’t mean that there should be separation of Harvard and state. Yet somehow — this is the result the computer keeps giving us. Perhaps there is some mistake?

We have stumbled, of course, into Professor Staloff’s definition. Unlike the Harvard of 1639, the Harvard of 2009 bases its authority not on the interpretation of scripture, but on some other intellectually legitimating principle like reason or rationality. Everything else is the same.

It could be, of course, that Harvard of 2009′s application of reason or rationality is inherently accurate, ie, endowed with an automatic efficacy that need simply be applied to any problem to generate a univocal solution. Whether or not this is the case, many behave as if it were.

But even if it is, all we are looking at is a condition we rejected earlier as unsatisfactory: a state church which teaches only the truth. Perhaps Harvard of 2009 teaches only the truth. And Harvard of 2010? 2020? We resign the answer to the tempests of academic power politics. If this is transparent and accountable, so is mud.

The basic security hole is this word, education. Education is defined as the inculcation of correct facts and good morals. Thus an institution which is educational and secular, such as Harvard, simply becomes a “Church, which shall Teach only the Truth.” Like the Puritans of old New England, in seeking to disestablish one state church, we have established another.

It is also hard to argue that we enjoy separation of Harvard and state. Harvard is conventionally described as a “private” university. This term is strictly nominal. Vast streams of cash flow from the taxpayer’s pocket into Harvard’s — as they do not flow to, say, the Vatican.

And we can see easily that Harvard is attached to something, because the perspective of Harvard in 2009, while wildly different from the perspective of Harvard in 1959, is not in any way different from the perspective of Stanford in 2009. If a shared attachment to Uncle Sam isn’t what keeps Harvard and Stanford on the same page, what is? It’s not football.

Except for a few unimportant institutions of non-mainstream religious affiliation, we simply do not see multiple, divergent, competing schools of thought within the American university system. The whole vast archipelago, though evenly speckled with a salting of contrarians, displays no factional structure whatsoever. It seems almost perfectly synchronized.

There are two explanations for this synchronization. One, Harvard and Stanford are synchronized because they both arrive at the same truth. I am willing to concede this for, say, chemistry. When it comes to, say, African-American studies, I am not quite so sure. Are you? Surely it is arguable that the latter is a legitimate area of inquiry. But surely it is arguable that it is not. So how is it, exactly, that Harvard, Stanford, and everyone else gets the same answer?

I’m afraid the only logical alternative, however awful and unimaginable, is the conclusion that Harvard and Stanford are synchronized because both are remoras attached, in some unthinkable way, to some great, invisible predator of the deep — perhaps even Cthulhu himself.

Certainly, the synchronization is not coordinated by any human hierarchical authority. (Yes, there are accreditation agencies, but a Harvard or a Stanford could easily fight them.) The system may be Orwellian, but it has no Goebbels. It produces Gleichschaltung without a Gestapo. It has a Party line without a Party. A neat trick. We of the Sith would certainly like to understand it.

Blue Pills Soaked in Red #3

Tuesday, January 20th, 2009

Mencius Moldbug tries to provide a gentle introduction to his “reactionary” blog, Unqualified Reservations, but he realizes there’s no such thing:

There is no such thing as a gentle introduction to UR. It’s like talking about a “mild DMT trip.” If it was mild, it wasn’t DMT.

UR is a strange blog: its goal is to cure your brain. We’ve all seen The Matrix. We know about red pills. Many claim to sell them. You can go, for example, to any bookstore, and ask the guy behind the counter for some Noam Chomsky. What you’ll get is blue pills soaked in Red #3.

Mencius hijacked my brain last year with his list of ten red pills:

  1. Peace, prosperity, and freedom
    • Democracy is responsible for the present state of peace, prosperity, and freedom in the US, Europe and Japan.
    • The rule of law is responsible for the present state of peace, prosperity and freedom in the US, Europe and Japan.

  2. Democracy, freedom, and law
    • Democracy is inseparable from freedom and law.
    • At best, democracy is sand in the gears of freedom and law. At worst it excludes them entirely, as in Iraq.

  3. Fascism and communism
    • The disasters of fascism and communism demonstrate the importance of representative democracy.
    • Fascism and communism are best understood as forms of democracy. The difference between single-party and multiparty democracy is like the difference between a malignant tumor and a benign one.

  4. The nature of the state
    • The state is established by citizens to serve their needs. Its actions are generally righteous.
    • The state is just another giant corporation. Its actions generally advance its own interests. Sometimes these interests coincide with ours, sometimes they don’t.

  5. The power structure of the West
    • Power in the West is held by the people, who have to guard it closely against corrupt politicians and corporations.
    • Power in the West is held by the civil service, that is, the permanent employees of the state. In any struggle between the civil service and politicians or corporations, the civil service wins.

  6. The extent of the state
    • The state consists of elected officials and their appointees.
    • The state consists of all those whose interests are aligned with the state. This includes NGOs, universities, and the press, all of whose employees are effectively civil servants, and side with the civil service in almost all conflicts.

  7. The danger of right-wing politics
    • Right-wing politicians, and the ignorant masses who support them, are a danger to democracy. They must be stopped.
    • Right-wing politicians are a classic democratic phenomenon. Domestically, they have little power and are mostly harmless. Their international adventures are destructive, but they are inescapable consequences of democracy itself.

  8. Democracy and nonpartisan government
    • True democracy is not merely the rule of politicians. For a democracy to succeed, a nonpartisan decisionmaking process is essential. Civil servants, especially judges, must be isolated from politics, or they will become corrupt.
    • Democracy is politics. Any other definition is Orwellian. The absence of politics is the absence of democracy, and apolitical civil-service government is indeed better than democracy. But this is a low standard to surpass.

  9. The history of Western government
    • The present system of Western government is the result of adapting 19th-century classical liberalism to the complex modern world.
    • Western governments today are clones of the quasi-democratic FDR regime, whose best modern comparisons are leaders like Mubarak, Putin or Suharto. Its origin was the Progressive movement, which broke classical liberalism, then complained that it didn’t work.

  10. The future of Western government
    • The Western world is moving toward a globalized, transnational free market in which politics is increasingly irrelevant, and technocratic experts and NGOs play larger roles in fighting corruption, protecting the environment, and delivering essential public services.
    • Civil-service government works well at first, but it degrades. Its limit as time approaches infinity is sclerotic Brezhnevism. Its justification for ruling is inseparable from democracy, which is mystical nonsense and is rapidly disappearing. It cannot survive without a captive media and educational system, which the Internet will route around. Also, its financial system is a mess and could collapse at any minute. The whole thing will be lucky if it lasts another ten years.

Mencius laments, “Alas, our genuine red pill is not ready for the mass market.”

Three Kinds of Voters

Tuesday, December 2nd, 2008

Mencius Moldbug sees three kinds of voterstribal, populist, and institutionalist.

Tribal voters vote on the basis of ethnic and familial identity:

In one very legitimate sense, they are the most rational voters around. A tribal voter is acting collectively to benefit his or her tribe. This group can be hereditary, adoptive, occupational, etc, as long as it feels some sort of collective cohesion or asabiya.

In a civilized, stable democracy, only a minority of voters can be tribal. If you want to see a democracy with a tribal majority, I give you South Africa. As a minority, tribal voting blocs generally serve as vote banks for more dominant players. The tribal bloc or blocs become clients of whichever party is strong enough to buy their votes. This can be done as straight-out, lawless graft, or by steering various benefits — payments, loans, jobs, etc — to members and/or leaders of the tribe.

Populist voters genuinely believe in democracy:

When populists vote, they are trying to compel the government to act in accordance with their own beliefs, generally derived from a mixture of common sense, tradition and personal experience, of what is right for a government to do.

Populists voters are people who genuinely believe in democracy. They believe that the way Washington works is that the people elect a President, who “runs the country.” I once had an email exchange with a very successful, and quite erudite, populist political blogger who did not understand that President Bush cannot fire a State Department employee, just because that employee is openly trying to sabotage White House initiatives.

This is an excellent example of the level of complete structural misconception that a populist voter can entertain when attempting to vote. If populists had any idea at all of how Washington actually works, they would not continue to participate in the increasingly farcical elections by which they repeatedly endorse it.

The fact of the matter is that Washington as it exists today, 21st-century Washington, is designed to resist populist politics in roughly the same way that a lighthouse is designed to resist waves. The entire thrust of 20th-century American government has been to separate public policy from politics, ie, to eliminate the menace of democracy. If you read about what American politics was a century ago, this program — originally the program of the Mugwumps, and then of various flavors of liberal and progressive, including of course the New Deal — is perfectly understandable.

The problem is basically solved. Populist resistance, a la Poujadisme, no longer exists in Washington’s test facilities in Western Europe, now governed largely by a central administration which has no discernible ties to any democratic election. At present, the primary distinction between the EU and the late Soviet Union is that the latter was much more Russian, thus exhibiting a mixture of incompetence and brutality that is hard to duplicate west of the Elbe. But give it a few years.

Populism still has a solid position in the American political system, but it is fading rapidly, as is the importance of politics. The Obama administration seems set to be an almost entirely ceremonial one — at least, the President-elect has displayed no strong evidence of any fixed opinions on any subject. Even the populism of the Bush administration is greatly overstated; a significant minority of the American foreign-policy establishment supported the invasion of Iraq, which was neither an explosion of jingoist fervor, nor the President’s personal whim, nor the conspiracy of some Texan “deep state.”

The basic advantage of populism is that, if the claimed virtues of democracy are anywhere, they are here. Common sense and plain thinking, in a reasonably intelligent brain, are remarkably immune to the ethereal delusions that so easily infect the brilliant and educated. However, common sense cannot exist without tradition. The best traditions of the American populist voter are steadily being eroded by an educational system that populists do not control, and his worst traditions are steadily being exacerbated by churches and talk-radio networks that populists do control.

The entire political structure of the American populist tradition is set up to select for ignorance and stupidity, and select against organization and cohesion. Thus it is simultaneously undesirable and ineffective, and even those of us who like myself sympathize with it to a considerable degree are often slightly relieved to see it lose, as it always does.

Even when populists win Presidential elections, they simply have no way to control Washington. Even with Congress and the Presidency, the White House has no real authority over the civil service, who outside the military are institutionalist by definition. The “Reagan Revolution” started out as a populist tsunami designed to smash the New Deal, and turned into nothing at all. Nixon’s “silent majority” met an even more inglorious fate. At most a few token populist policies can be advanced. Populists can of course disrupt the institutional bowels of the state, leading to a sort of policy constipation, but like the old House of Lords, their only real power is to delay.

Since populists have no idea of any of this, they participate enthusiastically in the sham. Sometimes they win a little, but in the end they always lose. And they are such gentlemen about it, too. Somehow no one has ever explained to Middle America that if you don’t know who the sucker at the table is, the sucker is you.

Institutionalists form the ruling class:

The institutionalist voter votes not because she believes government policies should be decided at the ballot box, but because she believes they shouldn’t.

Rather, she believes that government policies should be determined by a set of official and quasiofficial agencies which have earned her trust permanently and completely, the way a good Catholic trusts the Vatican. Following the analogy, here at UR we refer to this meta-institution as the Cathedral. The Cathedral consists of the universities and the press. Its spire is the Ivy League and the New York Times, whose faculty and news desk respectively are endowed with an almost pure connection to the inner light — lesser institutions, of course, following their lead.

It is not that the institutionalist voter does not believe in democracy. She does believe in democracy. She believes passionately in democracy. But her democracy is very different from the democracy of her mortal enemy, the populist.

To the institutionalist, the way democracy works is that democracy depends on the educated voter. The voter is to be educated by institutionalists, of course, because institutionalists are right. Some level of ignorance and recalcitrance can be expected, and there will always be dissent, but through this cycle of education and election we are always advancing into the future. The reason we have elected officials is not so that they can manage the government, a task which must of course be left to the experts (who are institutionalists, of course). Rather, officials such as the President are essentially educational figures, participating in a public discourse in which the “bully pulpit” — an oddly revealing term — delivers further education. In turn, by electing a good President, the voters demonstrate the depth of their educated wisdom. Und so weiter.

Note the function of populist and tribal voters in the institutionalist’s mind. The populist electorate supplies the bogeyman. The fear of a populist takeover, which is theoretically always a possibility and has even happened once or twice in history (eg, Nazi Germany), can keep even the most jaded of institutionalist voters coming back to the polls. Even though it never seems to actually happen. Moreover, the populists are barraged by a flood of institutionalist messages more or less from birth to death. They are naturally resistant, but the programming wears them down over time.

Meanwhile, the tribals, who are votes for rent, will always support the institutionalist bloc (and may even make up a majority of their support, though at a certain level this becomes dangerous.) Their votes are guaranteed in exchange for permanent government programs, administered by institutionalists, that render them dependent on the Cathedral’s rule for their lives and livelihoods.

As for the institution itself — the Cathedral — it is, except in its majestic extent and intricacy, not unusual by any historical standard. The Cathedral is a selective aristocracy, which is more or less the way China was run for about 2500 years. It is also the way the Soviet Union was run, the way the Catholic Church was run, the way China today is run, and the way Nazi Germany probably would have been run if we still had a Nazi Germany to kick around. As in all these institutions, rank and place in it is in high demand, and those who rise to the top are men and women of no mean capacity.

However, there is just one little problem: the Cathedral is not responsible. At least, if it is responsible, we cannot detect any mechanism by which it is responsible.

What should the government do?

Saturday, November 22nd, 2008

What should the government do? Wrong question. Mencius Moldbug explains:

Most people, when they take a whack at designing a government, tend to ask themselves: what should the government do? Of course this is the wrong question. The right question is: what will the government do?

For example, most democratic citizens are firm believers in the concept of limited government. In the all-curing magic black bag of democracy, limited government is the first-line ointment. Apparently a government can prevent itself and its successors indefinite from doing bad things, just by writing a note to itself that says “don’t do bad things.”

The key is that word should:

When you say your government “should do X,” or “should not do Y,” you are speaking in the hieratic language of democracy. You are postulating some ethereal and benign higher sovereign, which can enforce promises made by the mere government to whose whims you would otherwise be subject. In reality, while your government can certainly promise to do X or not to do Y, there is no power that can hold it to this promise. Or if there is, it is that power which is your real government. Your whining should be addressed to it.

Moldbug hopes to side-step this problem by turning governments into profit-maximizing landlords, a system he calls neocameralism:

The neocameralist structure of Patchwork realms, which are sovereign joint-stock companies, creates a different kind of should. This is the profitable should. We can say that a realm should do X rather than Y, because X is more profitable than Y. Since sovereign means sovereign, nothing can compel the realm to do X and not Y. But, with an anonymous capital structure, we can expect administrators to be generally responsible and not make obvious stupid mistakes.

Another way to say this is that a realm is financially responsible. The general observation here is that, to paraphrase Tolstoy, financially responsible organizations are all alike. By definition, they do not waste money. By definition, their irresponsible counterparts do, and by definition there are an infinite number of ways to waste money. Think of a rope: a financially responsible organization is a tight rope. It only has one shape. But if there is slack in the rope, it can flap around in all kinds of crazy ways.

It is immediately clear that the neocameralist should, the tight rope, is far inferior to the ethereal should, the magic leash of God. (Typically these days arriving in the form of vox populi, vox Dei. Or, as a cynic might put it: vox populi, vox praeceptori.)

Given the choice between financial responsibility and moral responsibility, I will take the latter every time. If it was possible to write a set of rules on paper and require one’s children and one’s children’s children to comply with this bible, all sorts of eternal principles for good government and healthy living could be set out.

But we cannot construct a political structure that will enforce moral responsibility. We can construct a political structure that will enforce financial responsibility. Thus neocameralism. We might say that financial responsibility is the raw material of moral responsibility. The two are not by any means identical, but they are surprisingly similar, and the gap seems bridgeable.

This creates a bit of a paradox for libertarians:

Libertarians in particular may have a great deal of trouble understanding how an authoritarian, omnipotent and omniscient sovereign can be expected to create a free society. The fundamental diagnosis of libertarianism — that today’s democratic governments are much larger and much more intrusive than they should be — is obviously correct. The remedy proposed, however, does not have anything like a track record of success.

In fact, I believe the libertarian opposition to sovereignty, dating back to Locke, is a major cause of modern big government. Our present establishments, not to mention our tax rates, dwarf any divine-right monarchy in history. The attempt to limit the state, if it has any result, tends to result in an additional layer of complexity which weakens it and makes it more inefficient. This inefficiency gives it both the need and the excuse to expand.

So we may ask: why does the post office suck? Not because it is sovereign, but because it is not financially responsible. Its freedom to be wasteful and inefficient is what gives it that familiar Aeroflot feel. (The bankrupt airlines, such as United, feel more like Aeroflot every year.) When we postulate a sovereign authority which is financially responsible, like a Patchwork realm, we have no reason to expect it to display these pathologies of government. In particular, we cannot expect it to waste resources in order to pointlessly annoy its residents, a form of inefficiency in which democratic regimes seem to positively revel.

The sight of a financially responsible sovereign, even the thought-experiment of one, is a good lesson for libertarians, because it reminds us what a healthy government actually is. Today’s democratic megastates are to healthy sovereigns as liver cancer is to liver. If you find liver cells invading every other organ and crushing them all into goo, it is only natural to think that the cure might be a drug that was lethal to liver cells. But you actually need a liver. You need to kill the cancer, not the liver.

The Confusion of Monarchy with Tyranny

Thursday, November 20th, 2008

One of the most common errors in understanding the premodern era, Mencius Moldbug notes, is the confusion of monarchy with tyranny:

Nothing like Stalinism, for example, is recorded in the history of the European aristocratic era. Why? Because Stalin had to murder to stay in power. Anyone, certainly any of the Old Bolsheviks, could have taken his place. The killing machine took on a life of its own. The tyrant, the mafia boss, stands at the apex of a pyramid of power, each block in which is a person who hopes to someday kill the boss and take his job. In a tyranny, murder and madness become part of the fabric of the State. In a monarchy, however, the succession is clear, and if by some accident of law and fate there are multiple candidates, they are at least each others’ relatives. This rules out neither murder nor madness, but they are the exception and not the rule.

Both an Atheist and a Believer in Divine-Right Monarchy

Wednesday, November 19th, 2008

Mencius Moldbug half-jokes that he is both an atheist and a believer in divine-right monarchy, citing Sir Robert Filmer‘s Patriarcha. before explaining his own less-theocratic take:

But an atheist, such as myself, has a simpler way of getting to the same result. Really, what Filmer is saying, is: if you want stable government, accept the status quo as the verdict of history. There is no reason at all to inquire as to why the Bourbons are the Kings of France. The rule is arbitrary. Nonetheless, it is to the benefit of all that this arbitrary rule exists, because obedience to the rightful king is a Schelling point of nonviolent agreement. And better yet, there is no way for a political force to steer the outcome of succession — at least, nothing comparable to the role of the educational authorities in a democracy.

Cure Juvenile Delinquency in the Slums

Sunday, November 16th, 2008

When anyone tries to use the phrase “reality-based community” on you, Mencius Moldbug suggests, point him at this:

All Exit, No Voice

Saturday, November 15th, 2008

Mencius Moldbug present an alternative to democracy, something he calls the Patchwork:

The basic idea of Patchwork is that, as the crappy governments we inherited from history are smashed, they should be replaced by a global spiderweb of tens, even hundreds, of thousands of sovereign and independent mini-countries, each governed by its own joint-stock corporation without regard to the residents’ opinions. If residents don’t like their government, they can and should move. The design is all “exit,” no “voice.”

(I’m not aware of any specific writer that has proposed exactly this, but it is certainly not an original or interesting idea in and of itself. I’ve certainly read about six zillion science-fiction books in which this is the general state of the future. The devil, however, is in the details. We will go into the details.)

The essential inspiration for Patchwork is the observation that the periods in which human civilization has flowered are the periods in which it has been most politically divided. Ancient Greece, medieval Italy, Europe until 1914, China in the Spring and Autumn Period, and so on. Burckhardt once observed that Europe was safe so long as she was not unified, and now that she is we can see exactly what he meant.

Anglo-American Interregnum

Friday, November 14th, 2008

Mencius Moldbug likes to play the arch-conservative, and he quips that the last few centuries of democracy will one day be called “something cool,” like the Anglo-American Interregnum:

Said Interregnum, which we are of course still in, has been a period of global monotonic decline in official authority. As in the late Roman period, declining official authority, declining personal morality, and increasing public bureaucracy are observed in synchrony. This is not in any way a coincidence.

We’re all communists now

Monday, November 10th, 2008

We’re all communists now, Mencius Moldbug notes:

The normal American voter, today, is a communist. She is not a revolutionary communist. She is a status-quo communist. She thinks of America as a commune: a big Brook Farm, with Washington as mother and/or father, caring, sharing, providing, educating, punishing and guiding. She has stretched the mental modules which in a traditional human society would apply to her extended family, to cover the entire continent and probably the planet as well. Maybe she wants gays to be able to marry and maybe she doesn’t. Maybe she thinks taxes are too low, or too high. But that’s about the limit of her political imagination.

There is nothing surprising in this. Always and everywhere, communism is the last stage of democracy. What’s surprising is that it took 144 years for the New Deal to happen. This can be attributed to good fortune and bad organization. But happen it did, and it won’t un-happen.

Perhaps this is a tragedy. But it has its upside, which is that the US has somehow managed to pass from classical liberalism to sclerotic state socialism without stopping at Stalin. Or at Billy Ayers. The Lord looks after fools, drunkards, and the United States.

In case you doubt that Billy Ayers is evil

Sunday, November 9th, 2008

In case you doubt that Billy Ayers is evil, Mencius Moldbug provides some evidence that he is truly evil:

In case you doubt that Billy Ayers is evil, I humbly submit this little reminiscence, which is almost brutally symbolic. Is America the trembling coed to be deflowered, under pain of racism, by Billy’s black roommate? Or is that a little heavy? It might be a little heavy, but there is also this story. If mass murder isn’t evil, I don’t know what is. Watch the video — it’s very convincing. And finally, you can read Billy’s little manifesto, Prairie Fire, which he and his friends so thoughtfully dedicated to Sirhan Sirhan. Prairie Fire practically oozes political murder. Nor, of course, did the man fail to practice what he preached.

And in case you doubt that Barack Obama, Ayers’ “neighbor” whose “kids went to the same school” (twenty years apart), is closely connected with Ayers, allow me to point out two things. One is this well-argued case, by a labor lawyer of all people, that Ayers and Obama probably had a mentor-protege relationship.

The other is the indisputable fact, which somehow managed to escape the notice of even Fox News, that Obama worked out of Ayers’ office. (To anyone who knows anything about the nonprofit world, the relationship between Obama’s Annenberg Challenge and Ayers’ Small Schools Workshop is obvious — the AC was a creature of the SSW, which was surely willing to spawn a shell organization for any big grant it reeled in. And for any Obamabots who may still be reading, yes, it was also able to find a token “Republican” or two to decorate the board.)

Exactly how is President-elect Obama connected to evil?

Saturday, November 8th, 2008

Exactly how is President-elect Obama connected to evil? Mencius Moldbug explains:

Well, first, um, he’s, um, how can I put this — a communist. With a small ‘c,’ as his friend Billy Ayers so nicely puts it.

I’m not even going to start to belabor this point. Arguing that Barack Obama is not a communist is like arguing that Mitt Romney is not a Mormon. Barack Obama is a communist by birth, breeding, education, and profession. His grandparents were communists, his parents were communists, his teachers were communists, his friends are communists, his colleagues are communists, he’s a communist. Duh.

In case you hadn’t noticed, the current euphemism for “communist” is “progressive.” This is not even a new usage. My father’s parents always called themselves “progressives,” for instance. In fact they were CPUSA members. (Before Grandma fell down the stairs at Juilliard and smashed her frontal lobe, one of the last messages she imparted to me was that Frank Rich writes a really great column.) “Progressive” is also all over the place in my ’80s Soviet Life magazines. And La Wik helpfully informs us that the Congressional Progressive Caucus is (a) the largest voting bloc of Democrats in the House, and (b) the affiliation of the Speaker. And now, of course, the President. Summary: the Cold War is over. Communism won.

The small ‘c’ is well-taken, of course. Obama’s faction is the disorganized, SDS, “Maoist,” or “New Left” wing of American communism. Ie, not the organized, CPUSA, “Stalinist” or “Old Left” wing — which both my grandparents and Obama’s first mentor Frank Marshall Davis were in, whose decline I think was as much cause as effect of the Soviet collapse, and whose remnants were really more for Hillary. And certainly not the defunct Trotskyite wing, whose carcass so weirdly morphed into “neoconservatism.”

The New Left once had a catchy name. It called itself the Movement. (Not to be confused with the clique of poets that gave us Philip Larkin and Thom Gunn.) The label is out of style, but perhaps it should be revived. The election of President Obama is the ceremonial culmination of the Movement’s march to power, and it’s only slightly less surprising than the sunrise. The likes of Billy Ayers were always the elite of their generation. Even as kids, they hardly lost a battle. Now they’re in their gray-headed patriarchal prime. Why shouldn’t they run the world?

Yes, folks, it’s true: we’re all communists now. Lawd a mercy. Did I mention that in the lives of those now living, communists murdered something like 100 million people? Now why did I have to mention that? Why is it that Schindler’s List got 37 Oscars, but Katyn can’t find a distributor?

A Misesian explanation of the bank crisis

Friday, November 7th, 2008

Mencius Moldbug tries to provide a Misesian explanation of the bank crisisMisesian as in Ludwig von Mises — but a commenter named Michael S. gives a much more thorough explanation of what happened — although not a Misesian one:

I can assure you that banks pay a great deal of attention to the duration both of loans and of deposits and apply sophisticated methods of analysis to balance them. A failure to do so is not the reason for the current financial crisis. There are a great many commercial banks that have not been directly affected by it, and are indirectly affected only because of the financial stresses placed on their customers arising from sources outside the commercial banking system.

The collapse began in the secondary mortgage market, which was for all practical purposes created by Fannie Mae. Fannie Mae (the Federal National Mortgage Association) was created in 1938 as one of FDR’s New Deal Agencies. In 1968, during the Johnson administration, it was spun off the Federal government as a “GSE” (government sponsored enterprise) in order to get its debt off the Federal balance sheet. Shortly thereafter, Freddie Mac (the Federal Home Loan Mortgage Corporation) was created by Congress to compete with Fannie Mae, so that Fannie would not have an effective monopoly. Between them, Fannie Mae and Freddie Mac hold or have guaranteed over 50% of the residential mortgages in the United States.

Many of these mortgages were and are badly undercollateralized and were made to borrowers of doubtful creditworthiness. The GSEs accepted loans of up to 97% of appraised value. Loan originators made their money from origination fees and had little incentive to underwrite their mortgages soundly since they stood to lose nothing if the loans went bad. Furthermore, appraisers learned that they had to be generous in their appraisals in order to do business with the store-front mortgage brokers. An appraiser we use at my bank told us that he could not get work from such operations because his appraisals were too cautious. Thus, not only were the loans undercollateralized at 97% of appraised value, but the appraised values were unrealistically high.

Fannie Mae and Freddie Mac did not operate under the same rules regarding their lending practices and capital-to-assets ratios as do commercial banks. In addition, under HUD supervision, the GSEs were told how to allocate loans. In 1992, Congress pushed them to increase their purchases of mortgages going to low-income borrowers. For 1996 they were given an explicit target — 42% of their loans had to go to borrowers with incomes below the median in their geographic area. In 2000 this target was increased to 50% and in 2005 to 52%. But politically mandated credit allocation did not stop there. For 1996, HUD specified that 12% of the GSEs’ mortgage purchases be ‘special affordable’ loans to borrowers having incomes less than 60% of the median in their areas. This target was increased to 20% in 2000, to 22% in 2005, and to 28% in 2008.

Fannie and Freddie obtained the funds for these loans not by soliciting deposits from the public, as commercial banks do, but by selling bonds, backed by the mortgages they bought — mortgages we now know, and which we should have known all along, were largely unsound. Why didn’t we? First, because a buyer of such investment securities does not and cannot examine each of the mortgages by which they were backed with the same level of scrutiny that he might investigate an individual borrower applying to him for a loan. He instead relies on bond rating agencies like Moody or Standard & Poor to evaluate the obligation. He further looks to bond insurance companies for guarantees of payment. Second, the bond buyer, like the rating agency and the insurance company acting as guarantor, assumes that- whether or not it be explicitly provided by contract — that a GSE has the implicit backing of the U.S. government. As we now know the U.S. government has been called upon in that role, and has accepted it.

The Federal Reserve’s manipulation of interest rates brought about the first wave of defaults, as customers who had borrowed on 5-year adjustable-rate mortgages with balloon payments at the end of their term found they had to re-finance their remaining balances at rates 2–3 percentage points higher than they had paid for their first 5 years. It may not seem like a great rise in rates, but when applied to a mortgage on a 25- or 30-year amortization schedule, such an adustment can nearly double the monthly payment. Since it is not the price of the house but the monthly payment that really dictates whether a buyer can afford it, many of these houses went on the market when their owners could no longer meet their monthly payments. As more houses came on the market than had willing buyers, the prices at which they could clear the market fell. Now many of them were worth less than the outstanding mortgages on them, which had been made at excessive loan-to-value ratios to begin with. The result was a cascading fall in the price of housing, akin to the fall in the price of stocks in 1929, when people who had bought them on margin could not meet their margin calls. In both cases, the bubble was inflated by easy money and excessive leverage, and punctured by a reversal of the easy-money policy. As housing prices fell, mortgages began to go into default; as mortgages began to go into default, mortgage-backed securities began to fall in value.

Investment banks were affected more profoundly by the collapse in the secondary mortgage maket than were commercial banks, because investment banks were more highly leveraged. Those commercial banks that were affected were, not so much because they had bad loans on their books, as because they owned securities that had fallen so badly in value that when marked-to-market they devastated their balance sheets. Bad investments or loans are charged first to loan-loss reserves, then to current earnings, and finally to stockholders’ equity. It does not take many such charge-offs to burn through most or all of a bank’s capital, leaving nothing to support its deposits.

What is most sad and perplexing about this situation is that politicians — not least of them Barack Obama — have presented it to the public as the result of ‘deregulation,’ and the public has largely swallowed their explanation. Yet it is hard to see how bank deregulation, properly so called, has anything to do with it. The principal bank deregulation that has taken place in the past fifteen years was the relaxation of restrictions on interstate branching in 1993 or ’94, and the Gramm-Leach-Bliley act of 1999, which eliminated some of the barriers set up by the Glass-Steagall act between investment and commercial banking. As an owner of an independent community bank neither of these actions was particularly favorable to me, yet I can’t find particular fault with their effects under present circumstances. Interstate branching has probably strengthened commercial banking more than it has weakened it; the soundness of Wells Fargo and U.S. Bancorporation provide examples. Gramm-Leach-Bliley has permitted J.P. Morgan Chase to acquire Bear Stearns, and Bank of America to acquire Merrill Lynch. These former investment banks will now be subject to the stricter reserve requirements of their acquirers, which is all to the good.

The collapse of housing and the secondary mortgage market stemmed not from ‘deregulation’ but from the political allocation of credit through Fannie Mae and Freddie Mac. Now, under the Paulson plan, which has forced the country’s largest banks to accept senior capital investment from the Federal government (and all of the conditions attached to it) whether they want or need it or not, we shall see more, rather than less, politicized allocation of credit.

Alexander Hamilton’s project of a national Bank of the United States horrified Thomas Jefferson and his followers, because they foresaw that political allocation of credit would lead to favoritism, consolidation, monopoly, special privilege, jobbery, patronage, and theft by taxation. The First and Second Banks — the latter killed by Andrew Jackson — did not last long enough to yield the expected results, but in Fannie Mae and Freddie Mac we have seen the fulfillment of these predictions. Yet do you suppose that the voters of Connecticut will ever call Christopher Dodd to account, or those of Massachusetts do likewise of Barney Frank? I don’t. Like beaten dogs they will return to slobber and fawn over the hands that abused them. The worst irony is that these people claim to represent the party of Jefferson and Jackson, while exemplifying everything those historical figures feared and detested.

LOLFED

Thursday, October 16th, 2008

I just discovered LOLFED — via Mencius Moldbug — where they give the Fed the lolcat treatment.

Finance is interested in you

Tuesday, September 30th, 2008

You may not be interested in finance, to paraphrase Trotsky, but finance is interested in you, Mencius Moldbug notes:

1. We do not have a free-market financial system.

2. We have never had a free-market financial system.

3. Leaving the financial system to “work things out on its own” will not produce a free-market financial system. It will produce a smoking heap of rubble.

4. Paulson’s bailout is, if anything, far too weak. Our financial system is part of the government. The proper first step is to stop lying about this. This means nationalizing the banks. This is not an expansion of government, but a recognition of its actual size. It is not an expenditure, but a revision of accounting to reflect reality.

5. A free-market financial system would be way cool. More important, it would be extremely stable. But the only way to create one is to build it right from the start. If you have a car and you want a motorcycle, sell your car and buy a motorcycle. Don’t decide to call your car a “four-wheeled motorcycle,” and don’t think unscrewing two of the wheels will solve the problem.

6. Therefore, the government should close down the financial system we have now and replace it with one that doesn’t suck. What is the probability that this will happen? Zero. But at least you know.