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How to kill a million people

November 15, 2014 Leave a comment

Power tends to corrupt. Absolute power tends to corrupt absolutely. – Lord Acton

Power kills. Absolute power kills absolutely. – RJ Rummel

Do you want to know what a sociopath looks like? Think of George W. Bush. Think of all the people he knew were killed due to his policies. Do you think he cared? Did you see him joking about finding weapons of mass destruction in front of the White House Correspondents Dinner in 2004? Do you think he had pangs of guilt later that night? I don’t think so. Sociopaths are people with no conscience. Many of those who have lost their consciences kill them over time by committing, ordering, approving or otherwise knowingly facilitate murder.

bush rumsfeld cheney Obama_laughing

Psychopathy and sociopathy (in particular the so-called dark triad of narcissism, Machivellianism and sociopathy) broadly refer to the condition of having little or no conscience, no guilt, no feeling of responsibility, no ability to feel sympathy for others. Sociopaths lie, cheat, manipulate, intimidate, use violence for their own benefit and do not feel as though they have done something wrong. Some of them occupy positions of power in big business, politics, the bureaucracy and security agencies. Do you think that matters?

Are people born without consciences? Some might be, but environmental factors play a major role. Do you think we could reduce or eliminate some of the incentives to put aside one’s conscience? How might we do that?

Well, how did George take on the characteristics of a sociopath? Was he born that way? Possibly. Did his parents and his upbringing contribute? Probably somehow. But people in power usually kill their consciences over long periods. Few people are dropped into positions of considerable power. They climb to them over time. When Little George was still at university, he connected with other powerful people. He spent years in top positions in oil businesses. Did these roles teach him to control his conscience? When running for Governor of Texas he said he approved lowering the age of the death penalty to 14. If he was a full-blown sociopath by then (which he may have been), he could have signed the death warrants of a million 14-year-olds with no pangs of conscience. But even if he wasn’t yet, he had already begun to chip away at his conscience. He could simply tell himself killing teenagers was for the best for Texas, for “society” or for God and remain emotionally detached from any violence.

One reason soldiers commit suicide is because they can’t live with the guilt of killing people. George W. didn’t see a drop of anyone’s blood. He did the killing with strokes of the pen. His job was to shake hands and give speeches, not think. His PR people cultivated a highly likable image that made sense to enough voters. What are politicians but actors? He knew he would be rewarded for doing what other powerful people wanted him to do. If he ever felt ill at ease, he could always tell himself it’s all right, this is for the good either of others or of myself. But any excuse would do.

The more things they do they might otherwise have felt guilty about, the more cuts people make to their consciences. Soon, they simply don’t care about anyone but themselves. Now, consider how many millions of people around the world have power over us, from bureaucrats who can deny us permits and visas, to taxmen seizing what we worked for, to soldiers occupying our countries, to politicians who make it all official. This is the state, people. This is why your world has been so messed up for so long. They weren’t all born to be bad. This system sucked out their consciences like a leech. Its agents go through a process of learning to control any feelings of guilt by finding reasons to justify their decisions.

Actually, all of us justify hurtful actions sometimes. If we tell ourselves we did the right thing, we are more likely to do it again and with less guilt. But not all of us benefit from doing things that make us feel guilty or repressing that guilt. I can lie, but I might lose the trust of those I rely on. I might steal, but I might face all kinds of social penalties if I do, including jail. Having power means not needing to take responsibility. Indeed, unless there is a sufficiently large scandal and perhaps scapegoating (in a democracy) or rebellion, those in power are rewarded with more money and power. The most powerful in today’s world wield their power through the state.

The state is an instrument of concentrated force. The small minority who control the state can use it to build consensus for their plans or simply impose them without asking, but ultimately the choice is theirs. As long as the state and its precursors (pharaohs, kings, popes, and so on) have existed they have been a means of theft, whether by overt plunder, such as ransacking a town or enslaving people, defensive violence such as protecting large estates acquired by overt plunder, or covert plunder, such as taxation or economic policies. Working with the state, including trying to change it from within, inevitably means following the orders of those at the top of the pyramid to plunder the people.

Power feeds all the elements of the dark triad. The admiration and awe that come with power feed narcissism. As expert manipulators and ruthless competitors, Machiavellians benefit most from a competitive system. And sociopaths make decisions on impulse and take no responsibility for any harm they cause. The state’s monopoly on force shields all these people from consequences.

Any of us could walk the path to these disorders. We are not immune to knowingly hurting others for our own benefit, or in the name of some idea whose implications we do not understand but which we invoke to ourselves for the sake of assuaging our consciences. People have trouble resisting taking power over others when it is offered to them, or when they condition themselves to believe it is right. Concentrating and institutionalising power incentivises sociopathic behaviour. If we considered everyone equal and thus not deserving of power over others we could achieve a free society with far less violence and suffering.

The war on the native

July 16, 2013 1 comment

The nation state is a very new invention. It originated in Europe in war and conquest, as armies conquered some tribes and massacred others. It has expanded and grown and continues to do so to this day. The state was forged in war to subdue others. This basic form remains constant, though the scope of the state has grown, along with expectations about what it can and should do.

The nation was shaped by other processes. Benedict Anderson famously explains that print capitalism was the strongest driver of the forming of the nation and nationalism, as it spread a common language within the borders of the state that did not exist prior to conquest. Since then, the idea of a common culture has taken hold and the nation grows more certain of itself. The advance of media technology in the twentieth century continued this trend. Anderson called nations “imagined communities”, because they were huge groups of people who would never meet with a communitarian identity.

From a different angle, Ernest Gellner writes,

nationalism is, essentially, the general imposition of a high culture on society, where previously low cultures had taken up the lives of the majority, and in some cases of the totality, of the population. It means that generalised diffusion of a school-mediated, academy-supervised idiom, codified for the requirements of reasonably precise bureaucratic and technological communication. It is the establishment of an anonymous, impersonal society, with mutually substitutable atomised individuals, held together above all by a shared culture of this kind, in place of a previous complex structure of local groups, sustained by folk cultures reproduced locally and idiosyncratically by the micro-groups themselves.

In 1648, the Treaty of Westphalia, which ended the 30-Years War (yes, the history of the state is of chaos; it is hard to think one’s idea of “anarchy” could be as bad), effectively baptized the nation state. State borders grew stronger. It was assumed among states that sovereignty, meaning the mutual acceptance of the other’s monopoly on crime within its boundaries, was to be respected. Of course, the urge to use an army at one’s disposal is too great, and the fighting continued until the number of states in Europe shrank and the power of each one to kill grew.

Around 1789, the idea that the state should represent the people, preserve liberty, equality, fraternity, or other revolutionary slogans, caught on. National education systems were erected, inculcating everyone in the logic of the state and the primordiality of the nation. The nation state became timeless, obvious and unassailable. The nation state expanded beyond its borders, as European empires built big ships and conquered the globe. To reach their goals, they killed whomever they had to kill, on any continent they felt like taking.

Ultimately, what the empires left their conquered peoples with was the nation state. The nation state has broken down old social structures and erected new ones. It groups millions of disparate people and assumes they can be represented by a ruling class. It assumes rule by a ruling class is preferable to whatever it has destroyed. It has institutionalised theft and slavery. It has militarised the criminals and disarmed their victims. And even though it legally covers every inch of land in the world, its power over the people within those lines continues to expand. One result of modern state expansion is a war on the native.

Indigenous people all around the world have been persecuted since the inception of the state. They have been forcibly moved so they could be taxed or so the powerful could gain access to land and other resources. They have been killed when they have resisted. Many groups we have never heard of have been wiped out over the years. Others have been decimated and pacified and pushed onto “reservations”. In recent years, much of this wanton violence has been at the request of large extracting corporations. Such corporations, oil and gas concerns, for example, function almost as the right arm of the modern state. The state is a vehicle for accumulating power; the corporation is the most powerful modern tool for accumulating wealth. Heads of state and corporations work together to extract wealth and repress those who challenge them.

Under the nation-state system, the real owner of all land (and thus resources on that land) within the borders of the state is the state. Some states afford a measure of land or property ownership to those not connected to the state, but not many. Even Canada has seen a number of oil spills on supposedly-private land in recent months. Perhaps the people living on the poisoned land will be compensated. But the fact that someone else could ruin their land and they will need to petition the state for restitution is evidence they did not own the land to begin with. Moreover, secession is an option for free members of a federation, but not for citizens of the modern nation state.

Kayapó people being "evacuated"

Kayapó people being “evacuated”

A number of indigenous groups in the Amazon, such as the Kayapó, above, have protested the state’s plan for the Belo Monte Dam. This dam promises to flood a large area of land, dry up other land around the river, devastate parts of the rainforest and hurt fish stocks. Tens of thousands of people in the Xingu River basin are in danger. The locals have protested since the initial proposal of the dam in the 1980s and their demands have been ignored. They are now being attacked and moved. The dam will be built. The people with deep, spiritual ties to this land never had any recourse because those in power did not recognise their claim to the land. The state treats those it can use as tools and those it cannot as waste.

Similarly, in Indonesia, conflict is growing as large corporations have been tearing down forests and erecting palm oil plantations. Henry Saragih, founder of the Indonesian Peasant Union says

The presence of palm oil plantations has spawned a new poverty and is triggering a crisis of landlessness and hunger. Human rights violations keep occurring around natural resources in the country and intimidation, forced evictions and torture are common. There are thousands of cases that have not surfaced. Many remain hidden, especially by local authorities.

Naturally, no one is ever consulted or compensated when their habitat is stolen from them. Local security forces protect foreign corporations. The beneficiaries of globalisation and economic growth do not need to pay its prices.

Unsurprisingly, some people have resisted with violence. Under modern state parlance, they are called terrorists and insurgents. People who once farmed land in much of India until they were kicked off have formed a loose movement known as the Naxalites, led by Maoist intellectuals. Companies such as South Korea’s Posco Steel have appropriated other people’s land for their own purposes, with the help of local police. A peaceful anti-Posco movement has arisen, but protests have gone nowhere. Politicians are under pressure from the companies they have already promised to let build and the villagers who will lose their land; they make more money off the corporations so they just repress the villagers. The Naxalites oppose the advance of the state, and have killed civilians and security forces alike.

The Red Corridor, where Naxals are known to operate

The Red Corridor, where Naxals are known to operate

India’s prime minister, Manmohan Singh, has called the Naxalites “left-wing extremism” and “the single biggest internal-security challenge ever faced by our country”. Bolstered by the advent of 9/11 and the War on Terror, the Indian government has arrested and killed thousands of Naxalites and their supporters in order to maintain its monopoly on crime. On the violence committed by both sides, Arundhati Roy opines

I think you’ve got to look at every death as a terrible tragedy. In a system, in a war that’s been pushed on the people and that unfortunately is becoming a war of the rich against the poor, in which rich put forward the poorest of the poor to fight the poor, [security forces] are terrible victims but they are not just victims of the Maoists. They are victims of a system of structural violence that is taking place.

In some places the Naxalites enjoy popular support. As with other violent, persecuted groups, however, some Naxalites have used violence against unarmed locals, and have been less popular. As with the War on Drugs and countless other cases of aggression, violence begets violence.

At the same time, the Indian government has pursued a hearts-and-minds campaign of offering “development”, such as roads and schools. The simultaneous application of force and the promise of economic incentives has been praised by the Economist and others of similar persuasion. Vandana Shiva, on the other hand, believes “If the government continues its land wars in the heart of India’s bread basket, there will be no chance for peace.” This strategy is bound to fail as it does not address the roots of the problem. Indeed, it has failed. The people are not interested in being absorbed by the nation state. Explains BD Sharma, “[f]or them, development means exploitation.” This should not be surprising. The nation state views incorporation into its ambit a step up, from barbarism to civilisation. The discourse assumes a model of progress from life outside the state, thought of as unhealthy, backward and hostile to life as part of the state, meaning education, health and higher culture. It defends displacing people from their ancestral homes with its offer of schools, hospitals and integration into the wider economy. But the state always achieves its goals with violence.

James C. Scott’s The Art of Not Being Governed explains the logic of the state and escape from it through the case of the highland people of Southeast Asia. The evidence is strong that many or all of the people living in the mountainous region recently dubbed Zomia are there because some time over the past thousand years or so they have chosen the life of barbarity over forcible incorporation into the state. One of a number of groups Scott considers is the Karen.

Zomia

Many of those we now call the Karen consciously fled the predatory state to escape appropriation of their land and agriculture, forced relocation or slave labour. The Burmese military government has attempted to subdue and incorporate the Karen. They fought back for many years, but eventually, technology caught up and the last major Karen base was destroyed in 1995. The people continue to hold out, however, in small groups. The Burmese military continues to wage its campaign against them. It burns down fields and lays mines there. Soldiers fighting Karen guerrillas, conscripted and paid a pittance, take whatever they want from villages on the front lines, and end up terrorising their inhabitants. Like other persecuted groups of Zomia, the Karen have adopted flexible agricultural techniques, mobility, shifting ethnic identities and social structures that split easily over political, social or religious issues. But the state advances and the Karen get easier to destroy. Scott believes it is only a matter of time before the people of Zomia become tax-paying subjects of the state once again.

Nigeria has also seen terrorism as natives of the Niger Delta have defended themselves against oil companies. The campaign to defeat the locals long enough to extract oil and dump waste has involved police and military, who have done their best to turn ethnic groups against each other. As a result of two decades of conflict, the entire region has militarised. Royal Dutch Shell was implicated in the murder of activist Ken Saro-Wiwa. As with other corporate malfeasance punished by a monopolist court system, it cost a trifle and enabled the firm to return to business as usual. Shell is not the only company working the area, as Chevron and Nigeria’s national petroleum company are involved as well. The struggle for freedom from the state in the Niger Delta is not over.

Is there hope in democracy? Under Rafael Correa, the government of Ecuador sued Chevron for billions for the destruction of the environment of thousands of people. Of course, a few billion is a drop in the bucket for such a firm, but at least a symbolic victory is possible. Says Andrew Miller of Amazon Watch, Chevron

left hundreds of toxic waste pits. It dumped billions of gallons of toxic waste. And really, the whole time that this trial has been going on over the course of 18 years, the communities continue to live with that legacy, and they continue to suffer the impacts, the health impacts, the cultural impacts, the environmental impacts of that destruction. And so, this is an important day for the communities. It’s just one step; it’s not a victory. But it is very crucial for them. It’s also an important day for the broader struggle for corporate accountability around the world, for broader struggles for environmental justice and human rights.

Perhaps. Will it set a precedent? An example for other indigenous people? The damage has been done. The environment has been wrecked. And it might just leave the same people open to abuse from Petroecuador, which has caused its share of oil spills. And other Andean people are even less fortunate. (See here and here.) The people have been forced to work through state structures, further integrating them into the nation state, and have been lucky enough finally to have someone in the state who will fight for them. None of these things will last if their sovereignty, over their land and their labour, is not recognised.

It is important that we learn the history of both states and nations. On the history of the state, I recommend Franz Oppenheimer’s The State, James C. Scott’s The Art of Not Being Governed, Hans-Hermann Hoppe’s Democracy: the God that Failed, Martin van Creveld’s The Rise and Decline of the State and Bruce D. Porter’s War and the Rise of the State. For more on the nation, Benedict Anderson’s Imagined Communities, Ernest Gellner’s Nation’s and Nationalism and Eric Hobsbawm’s Nations and Nationalism since 1780 are basics of the canon.

Regulation

March 18, 2013 5 comments

“Corporate capitalists don’t want free markets. They want dependable profits, and their surest route is to crush the competition by controlling the government.” – RFK, Jr.

It is often claimed in “progressive” and “liberal” circles that we need more regulation to curb the influence and power of big business. This belief is based largely on a misconception as to the origin, purpose and result of regulations.

During the period between the end of the American Civil War and roughly the 1890s, business in the US tried to cartelise but found it could not. In general, cartels can only control a market when force is introduced. During this period, every attempt to form a cartel and raise prices led to new competitors that realised they could undercut the cartels. In response, big business began lobbying the government to pass laws “in the public interest” (as all laws are claimed to be) that would enable them to keep competitors out. It worked. (Find a large amount of research on the subject here.)

Today, regulations and other laws protecting business include corporate personhood, accounting standards, safety standards, environmental standards and intellectual property. In addition, there are subsidies (“corporate welfare”), amounting to perhaps $98b a year, selective tax breaks and contracting. In each of these categories, government and industry have made a variety of laws enabling large firms to eliminate competition. As such, they are a kind of tax taken from consumers who would pay lower prices and entrepreneurs who would be able to make their livings doing what they want. The tax is given to business owners who would be forced to lower prices or improve services in a free market. The Small Business Administration in 2005 estimated the total cost of these regulations at $1.1 trillion.

free market government regulation

Accounting standards are widely considered necessary to prove a firm is not cooking the books. But in the absence of state regulation, concerned investors would find a way to insure against this possibility with audits. An example of the enormous and unnecessary complication of accounting standards is the Sarbanes-Oxley Act, passed in the wake of the Enron accounting scandal and failure. The Act made accounting more complicated. Implementing it costs a firm millions of dollars. Millions of dollars is pocket change for a big corporation, but prohibitively expensive for new and small businesses that could otherwise rival them. As a result, fewer businesses are created, and wealth and power are concentrated in the larger firms. We now have a complex tax code that could not be implemented by less than a team of accountants. The same is true of the legal code. The modern legal code was designed so that teams of high-priced lawyers can get away with murder and people without money see no justice.

Sarbanes-Oxley is, of course, but one law in a sea of other laws. Those who say the 2008 financial crash was caused by a lack of regulation may do well to realise there were thousands of lines of financial regulations already. They often cite the repeal of parts of the Glass-Steagal Act as the only incidence of deregulation they can think of, but this change did nothing to enable banks to make bad loans. A look at the facts indicates very clearly that regulation was the main cause of the bubble that caused the massive destruction of wealth for all but those whose ties to the state got them trillion-dollar bailouts.

Negative externalities, which seem to be the reason people beg the government to get involved in the market, are easily externalised in a statist society. The same big corporations pollute and break the law repeatedly. They are sued by the government, they pay the government, which means it gets another legal donation from an interest group, and then they are allowed to continue business as usual. The lawsuits are a bone thrown to voters and the corporations shake them off like lice. But they give the appearance that justice has been done. The corporations nonetheless retain all the benefits they get from the state in the form of legal personhood, subsidies, tax loopholes, intellectual property and regulatory barriers to competition. The state does not protect us against negative externalities.

Intellectual property enables firms to monopolise virtually anything they create. Consider the effects of IP laws in the pharmaceutical industry. Kevin Carson explains that drug patents are unnecessary to recoup expenses and develop the most effective drugs.

First of all, there has been a dramatic shift away from fundamentally new kinds of blockbuster drugs, because it’s much more cost-effective to put money into tweaking the formulas of drugs whose patents are about to expire just enough to qualify for repatenting them—so-called ‘me, too drugs.’ Second, a great deal of the basic research on which drug development is based is carried out at government expense in publicly-funded universities. Around half of the overall cost of drug R&D is taxpayer-funded. And in the United States, under the terms of legislation passed in the 1980s, the patents on drugs developed entirely at taxpayer expense are given away—free of charge—to the drug companies that produce and market them. Third, most of the actual R&D cost for developing drugs comes, not from testing the version of a drug actually marketed, but from securing patent lockdown on all the other major possible variants.

Generic drugs do not get developed, or get banned as soon as they are, because they are competition. The poor people who need them most do not get them. Intellectual property, Carson concludes, is murder.

corporatism regulation big business free market

We can divine the purpose of regulation from its results. We now have giant, multinational corporations straddling the Earth, with no government willing or able to oppose them, with the exception of a few populist, anti-imperialist holdouts. Large corporations’ alliance with the state has enabled the two to control natural resources and all manner of other markets. Consumers thus have fewer choices and higher prices than in a market freed from regulation. But freedom is always preferable to laws and regulations imposed by the state. Freedom allows economies and the arts to flourish. It means scientific advances and technological innovation. And it forces responsibility on those able to handle it while still allowing for us to help each other.

The solution to the control of markets by cartels is to free them. That would make customers the true regulators. If they decry a firm’s practices, they can stop buying from it and start buying from its competitor. If you abhor business, you are free to start and join one of the thousands of cooperatives in the world or simply produce and give to your neighbours. But demanding more regulation to prevent big-business malfeasance is akin to shooting oneself in the head to cure one’s headache.

Are you a control freak or a pervert? The state is hiring!

December 7, 2012 Leave a comment

The state’s monopoly on crime over a given territory makes it necessary to eliminate its agents’ responsibility for their individual crimes. How often we have seen police take the stands to defend brutality and then get let off with a slap on the wrist. The state thus incentivises all manner of anti-social behaviour. Here are some examples.

Politicians’ main task is to steal one person’s money and give it to someone else. Sometimes they steal overtly, such as through taxation, and give it away just as overtly, as with bank bailouts. Sometimes the theft is far quieter or concealed as benevolence, as when they pass laws favourable to a few corporations that help them control markets by force, while telling everyone the laws are necessary measures in the fight against whatever the public is anxious about.

Politicians bill law legislation

Politicians want to garner votes for the next election, which is done by a) handing things out to interest groups and b) spending money to appear to get things done. A number of well-connected people can give them cushy jobs with huge salaries when they retire from serving the public (which goes for bureaucrats, too). Their job is, in fact, to represent those people, the elite, and make the public think they are serving everyone. They are chosen because they are so good at it.

The military engages in war, destroying homes, lives and ecosystems. No one holds the military accountable for its crimes, except occasionally when grunts are tried for crimes their superior officers encouraged, or the pressure of war made inevitable. In fact, not only is the military not made to pay for the damage it causes; people are led to believe it actually protects them from all the bloodthirsty foreigners who cannot wait to kill them. This lie makes the next war, or the perpetual struggle against evil, easier. (The state’s incentive to lie is so obvious I will not go into it here.)

Police investigation

Police have all kinds of distorted incentives. Their jobs consist in large measure of harassing, bullying, beating, kidnapping, spying and stealing. Many of them want to control people, which may be why they became police, or they may have acquired a thirst for it as they went about their duties. The War on Drugs has enabled them to break into people’s homes, steal money and drugs, and gun those people down. Even when the people had no drugs at all, the police do not get in trouble. Why not? Because the police did not find the police guilty.

The police in the US have begun to spy on people. The irrational fear of terrorism, encouraged by politicians, law enforcement and the media, all of which have something to gain, has legitimised spying on marginal groups. Muslims have been targeted in particular, as have activists. It is widely known (and statistically obvious) that police stop, frisk and frame racial minorities in huge numbers. Thus, the state legitimises racism—and gives it a gun.

TSA children terrorists

Lastly, TSA agents can do nearly whatever they want to your body. It is unsurprising to hear women say they feel disproportionately targeted by airport security, or to see children being felt up by people with badges. Laws that permit eliminating the rights of the many and the responsibility of the few has given perverts and pedophiles a great career path.

I am not accusing all TSA agents of being perverts, just like I am not accusing all police of racism. I am accusing the state of incentivising and legitimising these activities, and stealing from taxpayers to fund them. Find fuller explanations of the state’s crimes and how to end them in my book, available here.

The causes of the mortgage crisis

October 16, 2012 5 comments

I have written elsewhere (here and in chapter 30 of my upcoming book) on this subject but here is a post committed solely to dispelling the myth “the free market” caused the crash of financial markets in 2008. I hear the lies repeated every day, even by my political economy professor: the reason the banks made such risky bets was there was no regulation and no oversight of the sector. The truth is, regulation was rampant.

Let us start with the Federal Reserve. The Fed is hardly ever mentioned as a cause of the crisis. Artificially-low interest rates (1%) encouraged artificially-high risk taking for certain sectors, including construction and lending to people who could not afford to buy homes. Fed policy increased the supply of money (look out for inflation) with the result that more dollars were created between 2000 and 2007 than had been created in the rest of the history of the United States. (It has done so again in the years since.) House prices rose.

They rose the most in California, where various laws made it impossible to develop the land, creating artificial scarcity and driving up home prices. But they rose in other localities too, in most cases because of similar restrictive building laws. 90% of the land in Nevada is owned by the federal government, so instead of a free market, the availability of land for building depends on the government’s approval of each use of it. Less than 10% of the land in the US is actually developed, but under the guise of preserving nature (a handout to environmentalists), the government protected land near residential areas and thus raised the price of it. As a result, many places saw a housing boom artificially brought on by government, whereas other places saw no boom at all. Thomas Sowell explains.

A fundamental misconception of the housing market existed both during the boom and after the bust. That misconception was that the free market failed to produce affordable housing, and that government intervention was therefore necessary in order to enable ordinary people to find a place to live that was within their means. Yet, the hard evidence points in the opposite direction. It has been precisely where there was massive government intervention, in the form of severe building restrictions, that housing prices skyrocketed. Where the market was more or less left alone, places like Houston and Dallas, for example, housing prices took a smaller share of family income than in the past. (The Housing Boom and Bust, 24)

The booms that did result, however, were, like many local problems, misperceived by an officious federal government as a national problem, requiring national-level intervention.

Easy access to housing began under the Clinton administration. Fannie Mae and Freddie Mac, government-backed but publicly-traded corporations that would be bailed out if necessary (a formula for moral hazard if ever there was one) also pushed to expand mortgage loans to people with bad credit under Bill Clinton. Bill Clinton’s Secretary of Housing and Urban Development, Andrew Cuomo

made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis…. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded ‘kickbacks’ to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why.

(Here are three more people to blame, in case you are interested.)

Democratic Congresspeople were reluctant to demand any oversight of Fannie, a campaign contributor. Fannie and Freddie guaranteed loans to people who were bad credit risks. These government-sponsored enterprises held about $5 trillion in mortgages. The Fed lent money to the banks at near 0% interest because, well, it could create money without hurting the people making the decision to do so.

At least as important regarding the subprime mortgage meltdown is the fact that owning homes had become the political cause du jour. Not everyone has to own a house to live; but if people are given houses, whether or not they can afford the mortgages, they might vote for the people who made it possible. The desire to introduce coercion into a market is always for the benefit of the coercer. Sometimes it benefits the constituent, and sometimes it leads to one of the most costly financial crashes in history. The Community Reinvestment Act (CRA) was meant to eliminate racial inequality in availability of credit. If banks did not lend to minorities in high enough numbers to satisfy the authorities, they could be crushed by lawsuits. (Remember, poor people were already being stung by local land use restrictions that raised housing prices. The CRA would enable them to get credit for something they might have been able to afford in a free market.) Instead of leaving interest rates to the market, politicians found it politically expedient to help minorities buy homes. It makes sense: if one can finally buy a home, one’s standard of living appears to have risen, and rising living standards get politicians reelected. Lending standards loosened.

Bear Stearns said the mortgages were sound. The three rating agencies (a state-protected oligopoly), you remember, the ones that said the mortgage-backed securities were great when they were garbage, served to reinforce the popular lending-to-everyone policies. Tax codes encouraged overinvestment in housing. To blame lack of government oversight for the crash is to get things backwards. The banks did what the government wanted them to do: hand out more and riskier loans. Those who talk of deregulation as a cause of the crisis fail to point to a single episode of deregulation, aside from the repeal of one clause of the Glass-Steagal act, which did nothing to enable banks to make bad loans. To say the banking sector was deregulated is to ignore or misunderstand the many regulations in place that helped cause the crisis.

One study finds that federal outlays for banking regulation—the laws big banks supposedly fear so much—increased from $190m in 1960 to $1.9b in 2000 and $2.3b in 2008. The US has 115 regulatory agencies. Funding to the Securities and Exchange Commission under George W. increased sizeably, with the result that its staff increased by one quarter. The number of rules businesses needed to follow rose. There may be an ideal regulatory agency or system, but it has nothing to do with what what the agencies actually do. These ones did what the politicians wanted: encouraged banks to make home loans to people who could not afford them, and solved a problem that did not exist, namely a nationwide lack of affordable housing. The result was disaster. Either government cannot be trusted to oversee corporations because it has been corrupted by them, or else it cannot be trusted because it is so incompetent. Either the fox is guarding the henhouse or the headless rooster is. More layers of regulations added to the existing system are not likely to help the public.

Moreover, it may be a mistake to call the crash a failure of regulation. Again, the corporations did what the government told them to, and people responded to incentives that monetary and lending policies created. Whenever we consider a policy a failure, we need to question whether it is indeed a failure or whether the goals and eventual outcomes went just as planned. After all, the crisis has ended up further enriching the rich, through bailouts and stimulus.

The securities and investment industry contributed $53m to congressional and presidential campaigns in 2008. (They have not slowed down since then.) Then, they stood back with their hands out and received more than a trillion dollars for their generosity. The bailout bill was defeated at first, but legislators, in their inimitable way, searched for a new way to pass the bill. They got more Congresspeople on board by sprinkling horsetraded favours in with the bailout money. (Something similar happened when Ronald Reagan bailed out big banks in 1983.) Special interests got what they wanted, legislators got what they wanted—win-win!

The argument the government made at the time was that these firms were “too big to fail”. In other words, their failure would mean the collapse of many more firms and the economy itself; therefore, they might need to be rescued. But the fate of Lehman Brothers, with more than $600b in assets, is instructive. It seemed too big to fail; yet, when it did fail, its assets that were worth preserving were bought by other firms. Keeping firms on life support discourages investment, encourages wild risk taking and drains money from those firms who are, in fact, productive and allocates it to those who have proven they are not. Promising to bail out failed firms created the moral hazard that enabled this crash.

Along came a large (more than 400-page) bailout bill, which anyone who opposed or even wanted to debate would be labeled as wanting the economy to fail. The government now owned hundreds of billions in bad debt, which meant instead of letting the companies pay for their own foolish bets, the taxpayers would. The case of the 2008 crisis and the recession was one of socialism for the rich. And democrats, who think that they have choices, were presented with two presidential candidates who agreed on the bailout and stimulus bills.

I am not an economist, but I do recommend the book Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse by Thomas E. Woods. Obviously, one book is not definitive, and all books I have read on this subject make good points. This one cogently argues the government’s role in the debacle was enormous. Its author is from the Austrian school of economics. The Austrian school predicted the crash (not to mention those of 1929 and 2000) based on evidence and basic economic principles. Either way, it is obvious that “the free market” and lack of regulation did not exist to cause this crisis. It was caused by the alliance of big business and big government, of a political system that rewards liars and thieves.

Many people, Occupy Wall Street protesters most vocally, blame the corporations for the crash. But corporations were doing what the government told them to. They blame corporations for accepting the bailout money. But if someone had trillions of dollars to give you, would you say no? That money only existed because it had been stolen from taxpayers in the first place.

And though some people—those who watch the news—think things are getting better, they are not. There will be no economic recovery, as the ruling class has already stolen it.

Iraqi oil and global power

January 8, 2012 3 comments

The oil is flowing again in Iraq. Iraq’s oil ministry hopes 4.5m barrels per day will be extracted by 2013. Even if production falls short of this goal, it will bring in considerable revenue to those who own it. Where will that money go?

First, it will go to oil companies, executives and shareholders in particular.  Not only do large oil firms, which function largely as the right-arm of the modern state, benefit directly from the forced opening up of the resources of weaker states; they also benefit from the higher prices that result from the instability in the newly-“liberated” nation. Let us see which firms have acquired the largest stakes.

The usual suspects, such as Royal Dutch Shell, ExxonMobil and BP, have won the usual concessions. Mixed in with them, though, are the China National Petroleum Corporation, Japan Petroleum Exploration Co., the Korea Gas Corp, Malaysia’s Petronas, Turkish Petroleum International and Russia’s Lukoil and Gazprom. Iraq’s oil is being auctioned off to the powerful people who might otherwise have had the power to block future war. Now that they profit from it, they are likely to support it more willingly in future.

Some Iraqis will make money from it as well. Those in the government, plus the rich and powerful connected to the government, will likely profit heavily. Corruption and inequality will increase. Some of the people who do not benefit from oil revenues will demand some of it. Rather than give it up, the new rulers of Iraq will spend it to repress the Iraqi people. If history is any guide, that repression will lead to protests, religious extremism and terrorism.

Iraq is not very democratic, as a mere glance at the violence of Iraqi politics makes clear. Democracy does not, in any case, mean justice or equality. It does not guarantee that voters will have any control over the oil or see any revenue from it “trickle down”. One might say it would be fair to give that oil to the Iraqi people, particularly the millions that lost loved ones over the past twenty years due to sanctions and invasions. Those having babies with birth defects could probably use the cash, too. But then, fairness is not something the powerful tend to bestow on the world.

The spreading around of Iraq’s oil to the global power elite will have the effect of making similar aggression against weak but resource-rich states worldwide easier. When Russian and Chinese oil firms profit from the newly-acquired oil fields, they will support more such interventions. Of course, they will protest, but only in public. We have seen the uprising against Gaddafi turned into an excuse to invade another OPEC member. The multilateral nature of the intervention grants it the veneer of legitimacy while the plunderers make off with the booty.

Taxpayers from powerful countries are paying for invasions of weak countries and the killing and torture of resisters so that the world’s power elite can become more powerful. Expect less democracy, more terrorism and more “humanitarian intervention” everywhere as a result.

Secrecy

October 7, 2011 Leave a comment

Secrecy makes for thrilling movies but unaccountable government. The unimpeded exercise of power requires that those over whom power is exerted do not know the truth. If they want to be our masters, there is some information they must control first. They want you to believe they are good people who win wars for freedom, that their policies make everything better, that they are uncorruptible supermen, and the more information we have, the more clearly we can see this is a lie. Free flowing information is the only safeguard against tyranny. We only ever find out about these secrets thanks to a few intrepid reporters and brave whistleblowers. The scandals keep coming, from the Pentagon Papers to Watergate to Iran-Contra and now Bradley Manning, who is being held in solitary confinement without charge under order of a president who came into office promising transparency.

Why do you think they do not want you to know what they are doing? Ostensibly, during wartime at least (which has become all the time), it is to prevent the enemy from finding out the secrets that could compromise national security. But who is the government’s enemy? Anyone who disagrees with their policies. That is why governments around the world have conducted a war on journalists. If journalists are being killed and arrested, how will we have any protection against propaganda?

There is no reason governments have to keep what they do secret from you except to maintain power. Not only does power corrupt but it is proportionally more dangerous when we are uninformed. When people’s backs are turned, power becomes a major force of corruption, and the powerful can do whatever they want.

Governments control trillions of dollars of money they stole from taxpayers, and creates trillions more in fiat money, which acts as a tax that lowers the value of the money everyone already has. What do they do with that money? Over the past few years, the New York Fed has quietly bailed out large banks all over the world to the tune of about $16t. We never knew about it until an audit of the Fed took place this year. This type of secret remains secret because its revelation could mean serious anger on the streets. This is not a call for more and better auditing. It is a call for the elimination of one group’s ability to extort money through taxes and give it to the already-privileged.

Here are some more things that we were not allowed to know about. Former senior US National Security Agency official Thomas Andrews Drake blew the whistle on his agency’s violation of the fourth amendment with the billion-dollar Trailblazer intelligence-gathering project. Of course, like Bradley Manning, like Daniel Ellsberg 40 years ago, Drake was prosecuted. American soldiers nearly got away with killing Afghan civilians for fun because their crimes were covered up. The death of football player Pat Tillman in Iraq was also covered up, originally said to have occurred “in the line of devastating enemy fire”, until it was revealed that he was killed by friendly fire. Were people actually surprised that a government covered up an unpopular event? The entire war, like all wars, was a lie. Why believe anything the government ever says?

Then there are the Wikileaks files. When the document dump began, one heard many voices speaking vaguely in support of Wikileaks, but I wondered if they had an understanding of what it all meant. Here is why everyone who is not in the government should support Wikileaks and its spinoffs.

Governments are self-important. They believe that their knowledge is superior to that of us little people, that they are wiser and in a position to decide for the rest of us. As such, they are right to take our money, impose their will on us, regulate every aspect of our lives and send us overseas to kill people who had the misfortune of being born in the wrong country. They need secrecy because if other people had the same knowledge, they would learn how poorly government policies actually function, despite the authorities’ supposedly superior wisdom. Now governments are being exposed, and people are finding out.

Statists from all corners have attacked Wikileaks with such cliched accusations as exposing troops to danger. (Viz. Iran-Contra criminal Oliver North: “This is an act of terrorism.“) However, they would presumably be in less danger if they had remained at Fort Worth. If anyone has put them in danger, it is those who voted for and approved of sending them overseas in the first place, and those who lie to keep them there. Naturally, having enemies requires secrecy; but since the enemies are just contrived, all the secrecy had accomplished was to eliminate accountability for the liars who had claimed otherwise.

Joel Hirst of the Council on Foreign Relations attempted to put things in perspective.

For those who applaud Mr. Assange and his particular version of cyber-terrorism, I would ask them how they feel about the rupture of other codes established to govern our relations in society. How would they like to see reports of treatment for their male-pattern baldness in downloadable format; or the details of their divorce settlements in an online database — displayed in vivid technicolor across the worldwide web. While this information may appear benign, and may be explained by cyber-thieves as an attempt to increase transparency, it will likely be viewed by the victims as damagingly intrusive. This is also true in the world of international diplomacy.

Unfortunately, Mr Hirst has missed the point. The treatment of my male-pattern baldness is purely a private matter. The actions and beliefs of influential public servants and the disastrous results of wars fought with our money by our friends in our names are not. To those who attacked Wikileaks and the act of whistleblowing, let me make clear the position you took. You are in favour of covering up and hiding from the public

-the repeated urging of the despotic (and with relation to the US government, influential) House of Saud and other Middle Eastern governments to start a war between the US and Iran;

-the US’s ally Saudi Arabia’s funding of al Qaeda, the Taliban and Lashkar-e-Taiba;

-the detention of prisoners in Guantanamo Bay prison for no reason (see here and here);

-the extent of the corruption of the Afghan government, which US, Canadian and other foreign taxpayers are funding;

-the intentional killing of reporters by helicopter in Iraq;

-an accurate picture of the disastrous wars in Afghanistan and Iraq, including the extent of civilian casualties, such as the shooting in the head of Iraqi children and other things that should have the people who funded them up in arms;

-and perhaps most disturbing of all, that US government contractor DynCorp threw a party at which children were prostituted (see also here), meaning that US taxpayers paid for sex with minors.

But Wikileaks is just one anti-secrecy activist group. Any whistleblowers who uncover the secrets that keep us from realising how corrupt our masters are deserve praise and protection. Instead, they get called terrorists and get imprisoned. (Governments will do anything to pinch these guys, from trumped-up rape charges on Julian Assange to God knows what Bradley Manning is charged with. Why? Because powerful people want to cover up their sins and protect their interests and will break the constitution to do so. Strong, accountable government? Don’t make me laugh.

Does the leaking of confidential documents erode public trust in government? It is now clear that there was no basis for such trust to begin with. Wikileaks has exposed not only the loose tongues of a few diplomats but the bankruptcy of statist arguments for secrecy. Wikileaks brought us, in stark relief, a more accurate picture of government wheeling and dealing than we were getting from the mass media; or as Slavoj Žižek notes, the Wikileaks document dump revealed that the emperor truly had no clothes.

Another whistleblower I like is BlogDelNarco.com. Mexican media outlets are highly concentrated, and as such they are in bed with the government. They tend not to report the gruesome but highly informative images from the Mexican drug war. But a fearless blogger is feeding the huge market for the truth.

The pundits at the top of the security apparatus of the US government spent countless hours devising contingency plans for every possible step the Soviet Union could have made. An air of paranoia and groupthink has influenced most national security decisions made in Washington since WW2, which is why the central planners of the US military believed first in the “bomber gap”, that the USSR had far more bombers than the US did (when it didn’t), and then the “missile gap”, that the USSR had vast quantities of nuclear missiles that it could deploy preemptively to knock out US capabilities (when it didn’t).

They spent billions on intelligence services and did not predict the detonation of a Soviet atom bomb; the Korean War and China’s entry into it; the failure of the Bay of Pigs invasion; the size and determination of the Viet Cong; the fall of the Soviet Union; the breakup of Yugoslavia; of course 9/11, (though admittedly there is a mountain of evidence they knew something was going to happen and did nothing); the Arab world’s reaction to the invasion of Iraq (though that one may have been outsourced to the think tanks); and several intelligence agencies told the world Saddam Hussein had a whole bunch of missiles that did not exist. Sure, it is not fair to expect anyone to predict such black swans. But then, what are intelligence agencies for?

Perhaps they are to make work for spies. An enormous quantity of intelligence has been gathered since 9/11. Because of its sheer volume, only 10% of it has even been analysed. The spies are a bureaucracy and as such, they are an entrenched pressure group. In his excellent book The Limits of Power, Andrew Bacevich explains the role of national security services (eg. the CIA). “Over the course of their existence, these entities have done far more harm than good…. [I]nstitutions nominally subordinate to executive authority pursue their own agendas, and will privilege their own purposes over whoever happens to occupy the White House.” Presidents frequently disregard what the security agencies tell them. But they tell the public the security apparatus is necessary because it provides legitimacy for “political arrangements that are a source of status, influence and considerable wealth.”

In the end, government secrecy is little more than immunity for the mafia that poses as your superiors. There is no reason why government knowledge is better than yours, or why governments should impose their will on you. Now that ordinary people have the chance, thanks to anonymous whistleblowers and Wikileaks, to spy on their governments, they may have a better idea of how secrecy destroys accountability. If democrats truly want accountable government, they should embrace Wikileaks. The good news is that most governments have mostly lost their monopoly on information. The Wikileaks dumps, the spread of cell phone cameras and attacks by anonymous hackers have seen to that. Embrace openness and deny the government its monopoly on information.