YDS: The Clare Spark Blog

January 25, 2016

Is the US Constitution “godless”?

flag-cross-elephantI had always assumed that economist and social theorist Friedrich Hayek was interchangeable in his philosophy with Milton Friedman, until I reread Hayek’s The Constitution of Liberty (1969) in which he gave all honor to the English antecedents of the Founders, consigning the French philosophe input to the disreputable rationalist tradition and the horrid French Revolution that it spawned.

It was not until I read a trade book The Godless Revolution: A Moral Defense of the Secular State (by Isaac Kramnick and R. Laurence Moore, Norton, 2005) that I understood the longstanding gap between defenders of the Christian Commonwealth idea (exemplified by Hayek and his admired predecessors Edmund Burke and Lord Acton) and those Jeffersonians who defended religious pluralism/the secular state.

Kramnick and Moore’s book is a full throated attack on the “religious Right” from the New Deal left-liberal side of the political spectrum, and takes its place as a major tool in the culture wars. To be fair, the authors take care not to be confused with atheists; religion should take its place in public policy debates, as long as theocracy is not advocated, but it is clear where their morality lies: in Big Government programs, including environmentalism and other compassionate legislation, such as feminist abortion rights, and the single payer health plan. They acknowledge that Jefferson’s minimalist state was suited for an agrarian society, but assume that the Industrial Revolution initiated a new system of morality. (They might have mentioned those who transformed Jefferson’s negative state to a positive state, a.k.a. Big Government, historian Carl Becker’s input is MIA.)

Their book is a boilerplate left liberal argument: dropping the name of Milton Friedman, the advocate of free markets, but ignoring his theme of upward mobility made possible by laissez-faire economics. (See http://clarespark.com/2015/12/29/milton-friedmans-capitalism-and-freedom-1962/.)

Their heroes include John Locke, Jefferson, FDR, JFK, and the Clintons; their villains are such as James Dobson, Ralph Reed, Lyndon Johnson (!, who went too far? or was it Viet Nam?) and George W. Bush who ostensibly made his conversion from scapegrace to piety the major theme of his 2004 campaign. (Which is odd, because the authors clearly want to convert the readers from laissez-faire economics to the positive, hyper-moral state.)

As proper pluralists, they frown on public displays of the Ten Commandments, for the first four laws are too Jewish; i.e., not inclusive.


April 24, 2015

Multiculturalism vs. [Yid] Red spies: which agitates the Right?

atheist-logicThis blog was inspired by the failure of Fox’s Outnumbered 4-24-15 to explain cases of censorship of the popular movie American Sniper ( the topic was repeated on The Five). They became agitated over the threat to free speech, when they could have identified why college administrators were bowing to the will of a small cadre of Islamist protesters at the University of Maryland; these administrators defending multiculturalism at all costs. One wonders why this “moderate” but right-leaning network is so weak on political theory, for it is obvious that “tolerance” versus “Islamophobia” is crucial to job retention in the hipper universities, public or private. (To be sure, unfree speech is the outcome of censorship in the name of diversity, but multiculturalism deters free speech insofar as it encourages essentialist cultural nationalism: see http://clarespark.com/2011/03/28/index-to-multiculturalism-blogs/.)

How to explain this failure of vision? Scholars, television writers, and journalists seeking right-wing readers and eyeballs know that it enhances their reputations to pretend that there remains an atheistic red menace threatening (Christian) America. Even the latest episode of Scandal played the KGB card, resuscitating the Cold War. One wonders why, given the declining membership in the CPUSA since the Hitler-Stalin Pact of 1939, carefully delineated by historians/political scientists Harvey Klehr, John Earl Haynes, and Alexander Vassiliev in Spies: The Rise and Fall of the KGB in America (Yale UP, 2009).

(Perhaps it is lingering antisemitism, for “the Jews” were ‘”disproportionately” represented in the Old Left, and “populism”—antagonistic to “finance capital,” remains popular on both left and right. Even Lenin may be seen as a populist, for he was notoriously influenced by the antisemitic journalist J. A. Hobson. See http://clarespark.com/2009/09/18/bad-sex-in-the-new-york-times/.)


Whether or not my suspicions are correct, it is obvious that conservatives frequently confuse left-liberals and communists, frequently conflating them as “totalitarians” and, gulp, progressives—as if the US Constitution, despite its capitulations to Southern slaveholders, was not the vanguard of political thought at the time of its framing, with such as Hamilton and Jefferson not avatars of social and economic progress, despite their differences.

This entire website has been preoccupied with tracing the “roots” of multiculturalism to the German Romantic reaction to the “materialism” of science and Enlightenment as understood in 18th Century France. (See http://clarespark.com/2010/07/20/german-romantic-predecessors-to-multiculturalism/, and http://clarespark.com/2010/10/18/the-dialectic-of-multiculturalism-helvetius-herder-fichte/. The second link suggests Herder’s antisemitism, not noted in the historical commentary on his contribution to the notion of national character/groupiness.)

It is a grotesque misreading of history to think that the old Reds were not anti-racists, hot for “proletarian internationalism” as opposed to (proto-fascist) “nationalism,” and its associated (Gentile) “melting pot.” Indeed, that was the attraction that helped recruit working class immigrant Jews to the Communists, and family ties made a difference to their (liberal) descendants.

It is pointless to go on fingering “the multicultural moderate men” for their covert racism disguised in their rooted (as opposed to rootless) cosmopolitanism, documented throughout my website. And Fox News Channel employees, no less than those of the Wall Street Journal, are above all, oblivious to the history of the Left, and only moderately opposed to the nearly pervasive (often latent) antisemitism that blinds them. For instance, after all the decades I spent around the Left, no one, repeat, no one ever mentioned Saul Alinsky (born a Jew). His significance and influence are figments of certain conservative imaginations.


October 11, 2013

What do liberals want?

power1This question was asked by Roger L. Simon 10-10-13, on Facebook, perhaps flummoxed by the conduct of Congressional Democrats and POTUS. I will try to answer that question, but in no particular order.

First though we must distinguish between anticommunist social democrats and those hard Leftists who have joined the progressive movement and who may formulate many of its political and cultural positions. This separation is not easy to determine, as even the communist historian Eric Hobsbawm wrote like a social democrat in his last books. These are Popular Front tactics, and “liberals” today are more likely to be the “moderate conservatives” of yesterday, or, as I call them, “corporatist liberals.” (See http://clarespark.com/2009/08/09/what-is-a-corporatist-liberal-and-why-should-they-frighten-us/. This is the only link to prior blogs that  I will include in my overview of today’s pseudo-liberals.)

The POTUS appointment of Janet Yellin suggests Keynesian economics will rule the Fed. Even Maynard Keynes would not have approved of the promiscuous use of his demand-stimulus measures today; it was intended for the Great Depression, and many countries indulged in the bureaucratic collectivism that he sponsored during the 1930s. But Lord Keynes was a conservative economist, a point lost on today’s journalists, especially Paul Krugman.

To answer Roger L. Simon most directly, liberals advocate “social justice” through the welfare state. Since American history is a horror story as “liberals” tell it through their command of the textbook industry and school curricula, reparations are in order. Hence the preferential treatment for Green corporations, affirmative action, and separatist cultural studies departments, including “whiteness studies.”

The term cultural studies requires unpacking: Liberals abhor “the melting pot” that ostensibly turned out lookalike robots fashioned by Fordism, but advocate the furtively racialist notion of multiculturalism and the hyphenated American. The intent is to defame classical liberalism as racist, while promoting their racialist discourse as emancipating. Cultural relativism (distorted beyond recognition from its Enlightenment intent) has dissolved empiricism and science along with universally comprehended facts and cultural syncretism.

In practice Liberals have lengthened the Popular Front against Republicans. The Communist Party of the 1930s first abhorred the “social fascists” of the New Deal, but then adopted the Comintern–generated Popular Front against fascism, circa 1934-35. As late as the end of the red decade, CP writers (especially Stalinists) were blaming big business for Nazism, thus appealing to the strong (often anti-Semitic) populism and isolationism that characterized the US after the Great War. Oddly, movement conservatives sympathetic to small business are often equally anti-elitist, giving much needed ammunition to the failed Democratic Party that swears allegiance to the New Deal and the welfare state. Bereft of sound economic arguments (the New Deal failed), many liberals pursue social/cultural issues with as much zeal as movement conservatives. For instance, Democratic pols nail the Right’s supposed “war on women,” and put great energy into abortion rights, gay marriage, and “secularism.” It is my own suspicion that aggressive atheists are either agents provocateurs or convinced leftists seeing all religion as the opiate of the masses.

Many liberals don’t mind Jonah Goldberg’s best-seller Liberal Fascism. But his tirade against “the nanny state” conflates paternalism with maternalism, and in effect makes American Progressives the inspiration for European fascism. This was a mistake on Goldberg’s part, as a few academics noted, but who pays attention to these characters nowadays? The final effect is to make real American proto-fascism invisible.

Fascists opposed the labor movement and the Soviet experiment, and the forms fascism took in Europe were distinctive and historically specific. They were all movements of the Right, even though Hitler and Mussolini shared a populist past above all opposed to “laissez-faire capitalism,” and those aspects of modernity that emancipated the imagination and gave voting rights and free public education to the dreaded lower orders.

What corporatist liberals do NOT want, besides communism: Since the liberal base is composed of incoherent constituencies with widely differing demands, they cannot form a rational set of ameliorative changes. They are trapped in time, beholden to discredited ideas such as Wilsonian internationalism and the organicist rhetoric of the political family/nation.

The ideologies I have described are tackled in depth throughout this website and understood by many authors on the right, and I can only wonder why PJM’s ex- CEO Roger Simon is ever at a loss to explain “what liberals want.” Women may not know what they want in all cases, but as a writer himself, Simon must know that his opponents want to obliterate the very notion of the individual and to substitute collectivist categories for how we think of our unique, irreplaceable selves and the world. The “liberal” “will to power” (often discussed on the internet) is not power for its own sake, but “power” for well-meant, but finally utopian, objectives, as ”…experience hath shewn, that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny…..” (Thomas Jefferson, http://press-pubs.uchicago.edu/founders/documents/v1ch18s11.html) .


December 3, 2012

Index to blogs on Lincoln, Sumner, Reconstruction

Lincoln, March 1865

Lincoln, March 1865


http://clarespark.com/2009/10/05/charles-sumner-moderate-conservative-on-lifelong-learning/. (Sumner’s advanced views and links with Captain Ahab)



http://clarespark.com/2011/09/29/the-abraham-lincoln-conundrum/. (on attempts to link Lincoln with FDR and other moderates)


http://clarespark.com/2012/01/03/the-race-card/. (on negative views of Charles Sumner)



December 1, 2012

Petit-bourgeois radicalism and Obama

Black Jesus poster

Black Jesus poster

A spirited discussion broke out on my Facebook page over a recent article in the New York Times characterizing Thomas Jefferson as a “monster.” (http://tinyurl.com/d6cnc3o.) During the course of the discussion, I decried hatchet jobs in general, pointing out that there was usually a lurking target that was not obvious to the reader. For instance, in the case of Jefferson and slavery, the historian author (Paul Finkelman) might be solely interested in Jefferson’s racism and moral failures regarding slaveholding, or there might be a larger agenda:  namely the post-60s campaign to regard the Founding Fathers and the framing of the Constitution as morally tainted, with subsequent Americans battening off their ill-gotten gains. (See http://clarespark.com/2011/10/30/collectivism-in-the-history-establishment/. )

As I have written frequently, for leftists and left-leaning corporatist liberals alike, America is seen as essentially racist, sexist, imperialist, and anti-environment. In other words, we not only fail to historicize the individual and intellectually diverse Founders in their 18th century context, we are reiterating the most virulent Soviet and even Nazi propaganda. (In the latter case, it was held that Jews controlled the US, pushing it to such atrocities as the extermination of the Aryan-like indigenous “Indians,” or, during WW2 and more recently, Nazis and their sympathizers argued that Americans were fighting what was in effect a war that solely benefited “the Jews.”)

Since the election that re-elected the first black president, I have seen much gloom emanating from Romney supporters. I myself have suggested that there is something proto-fascist about the current direction of our country, while others declare that POTUS is a straight out Communist/Third Worlder, seeking to destroy America, aiming at its very foundations as a capitalist, free market society.

Both these pessimistic, if plausible, views are speculative, but perhaps we can get more precise if we understand the rationale behind “petit-bourgeois” radicalism (populism), both as it has existed in “middle class” America, and as an explanation for Hitler’s base in the so-called Mittelstand (i.e. the lower middle-class in Germany, dominating the working class and resentful of the haute bourgeoisie). For after WW2, liberal journalists and academics seized upon the petit-bourgeoisie as responsible for Hitler’s rise to power, stressing their mobbish susceptibility to propaganda and the class resentments that Hitler exploited so effectively. Unfortunately, they ignored the conservative nationalists who put him in power, and even worse, structural continuities with Weimar social democracy and Bismarckian strategies against the rising German Left. Instead, they depicted Hitler as crazy and/or as a failed artist/thug, and explained his popularity as the effectiveness of images and propaganda in general. (This was the legacy of German Idealism that held images to constitute “reality,” a view that ignored institutions and other structural and cultural factors.)

Young James H. Cone

Young James H. Cone

During the period of my life starting in 1969 at Pacifica Radio and on through getting my doctorate (1983-1993) and then shopping my expanded dissertation (1993-1999), I watched the direction of the civil rights movement/the women’s movement that had stirred me out of somnolence during the 1960s. What stunned me was the success of upwardly mobile persons of color and women in climbing the ladders of academe, the media, and to some extent, in business and the professions. What I was not prepared for was the failure of the integrationist project in favor of cultural nationalism and even black supremacy as urged by such theologians as James Cone and his allies in the Chicago Democratic machine. (See http://en.wikipedia.org/wiki/James_Hal_Cone.) I was even more startled to see that black nationalism had pretty much taken over the civil rights movement by the mid-1960s (see http://clarespark.com/2009/10/31/the-offing-of-martin-luther-king-jr-and-ralph-bunche/, or http://clarespark.com/2012/11/09/race-and-the-problem-of-inclusion/.)

The Way We Live Now

The Way We Live Now

What does this have to do with Obama’s character and motives, open or hidden? We might do better to see him as an ambitious petit-bourgeois radical, i.e., a populist, rather than as either a fascist-in-waiting or a communist. Like his wealthy liberal supporters, he protects his own reputation by attacking [Republican] elites as the originators of “inequality,” while he satisfies his minority constituencies by increasing public sector employment and supporting teachers unions who promulgate the anti-American history curriculum described above. The aim is to instill liberal guilt and hence unquestioning support of the first black president, even as he moves toward dictatorship and reverses prior economic positions that gained him support as a “moderate.”

But keep in mind that although Marxist-Leninism supposedly focuses on the working class as the agent of revolutionary socialism, there is a strong populist appeal to this ideology, for instance in the demonization of “finance capital.” (See http://clarespark.com/2012/08/05/hating-finance-capital/.)  For more on populism see http://clarespark.com/2009/12/16/perceptions-of-the-enemy-the-left-looks-at-the-right-and-vice-versa/. And right-wing populism was undoubtedly the decisive factor in Hitler’s rise to power and to popular support for his entire regime.  I remain worried about the transition from populism/progressivism to full-throated dictatorship, call it what you will.

September 21, 2012

Milton, Mason, Melville on Free Speech

[ Part two of this blog can be found here: http://clarespark.com/2012/09/22/materialist-history-and-the-idea-of-progress/]

This blog is about the intellectual history of the First Amendment, and is meant to establish a longer lineage than is asserted by many conservatives, who look to George Mason, Jefferson, and Madison as the most significant proponents of freedom of expression. What is ignored in this claim is the always contested nature of free speech, even within its most ardent progenitors. Also overlooked are the material interests of Southern slaveholders whose doctrine of State’s Rights was threatened by the abolitionist and/or antislavery arguments of such Federalists as Alexander Hamilton and John Jay.

For instance, George Mason (1725-1792), the famous Antifederalist, wanted slaves as property to be protected, although he opposed the extension of slavery and the importation of further slaves. During the 1830s, when slavery was defended as a positive good, Southerners forbade not only the education of slaves, but stopped the importation of Northern abolitionist arguments through the mails. It is obvious that material interests in slave property trumped any desire for universal freedom of expression in the slaveholding states.

Go back several centuries to Milton’s famous polemic Areopagitica (1644). In my book on the revival of Herman Melville’s reputation in the 20th century, I devoted an entire chapter to Milton and Melville’s ambivalent relations to puritanism, as expressed in Milton’s Paradise Lost. The poet’s relationship to his character Satan (often taken to be the mouthpiece of Milton in his most radical mood) has generated a “Milton industry” of even greater size and consequence than the “Melville industry.” Conservatives, moderates, and radicals alike, appropriate the life and art of these authors as their ideologies demand. What each party suppresses is the ambivalence of either Milton or Melville—an ambivalence that we may find within ourselves as we save our own hides from the bullies we encounter at every stage of life. This is an issue that educators fail to address, no matter how well-meaning their efforts may be at reforming the current system of public education. (See http://clarespark.com/2012/09/19/bullies/.)

What follows is a short collage followed by some comments that begin chapter 4 of my book. I lay out the obvious influence of Milton’s great tract upon Herman Melville, feeding his passionate desire to see and describe “things as they are.” For Melville, struggling with inner censors, was “the mind its own place?”

Gustave Dore Satan

[From Areopagitica:] I deny not, but that it is of greatest concernment in the Church and Commonwealth, to have a vigilant eye on how Bookes demeane themselves as well as men; and thereafter to confine, imprison, and do sharpest justice on them as malefactors: For books are not absolutely dead things, but doe contain a potencie of life in them to be as active as that soule whose progeny they are; nay they do preserve as in a violl the purest efficacie and extraction of that living intellect that bred them. I know they are lively, and as vigorously productive, as those fabulous Dragon’s teeth; and being sown up and down, may chance to spring up armed men. And yet on the other hand unless wariness be us’d, as good almost kill a Man as kill a good Book; who kills a Man kills a reasonable creature, Gods Image; but hee who destroyes a good Booke, kills reason itself, kills the Image of God, as it were in the eye.

[Melville to Evert Duyckinck, 1849, regretting his negative critique of Francis Parkman:] Hereafter I shall no more stab at a book (in print I mean) than I would stab at a man.[i]

[From “Baby Budd”:] Claggart hesitated not an instant. Deliberately advancing within short range of the sailor, he spoke. Without emphasis and in a tone more musical than ever, he delivered the accusation point-blank into his eyes.[ii]

Seventeenth-century radical puritans and scientists produced many of the innovations we associate with the intellectual foundations of democracy: along with the partial legitimation of dissent and libertarian ideas in some strands of Reformation thought, the scientific revolution fortified older political theories of popular sovereignty and constitutional government. The explosion of printing made subversive ideas broadly available to a growing and confident middle-class reading public eager to be emancipated from arbitrary authority. Milton published Areopagitica in 1644; it is perhaps the most eloquent statement ever conceived on behalf of intellectual freedom; it thrills to the puritan marrow of my bones. But that appeal to the censor was framed during the English Civil War soon after the Independents, reacting to new assertions of popular sovereignty, had put down rebels to their Left in the City of London, stifling vox populi (the voice of the people) in favor of vox salutaris (the voice of public safety).[iii] After the Restoration Sir Henry Vane was beheaded, and the bodies of the chief regicides, Cromwell, Ireton and Bradshaw, were exhumed and hanged as an example to would-be republicans. All overtly radical thoughts were chased back to the Tartarean realms from which the Titans had emerged. Milton, who had been named as secretary of foreign languages in 1649, was taken into custody then freed, perhaps by the intercessions of Andrew Marvell and Sir William Davenant or because the restored regime concluded that the blind poet, though formerly an official of the commonwealth and ardent defender of the regicides, was now harmless. [end, book excerpt]

Surveys taken by liberal journalists present a troubling picture of American attitudes toward freedom of speech. (See http://www.ajr.org/Article.asp?id=2621.) As we contemplate the direction of the current administration, attributing blame for the jihadists uprisings on a video of dubious origin (as opposed to terrorism only weakly resisted), we should be aware that the freedom of speech libertarians desire is not universally supported, not even in our “free republic.”

In my next blog, I will compare those accounts of the 1960s written within a religious framework, versus my own accounts of 20th century social movements as written by a materialist historian (myself). The subject highlighted will be a populism that has never been vanquished, and that retains all its baneful, irrationalist influence on our politics.

[i]  2. Melville to Evert Duyckinck, 12/14/49, N/N Corr., 148-149.

                [ii]  3. Herman Melville, “Baby Budd, Sailor,” quoted in Freeman, Melville’s Billy Budd, 317. In “Billy Budd,” Claggart’s glance is linked to an “asylum physician” and to the mesmerizing Rabbi in Clarel.

       [iii]  4. See Robert Brenner, Merchants and Revolution (Princeton: Princeton Univ. Press, 1993). On Davenant and Milton see http://www.oxfordtimes.co.uk/lifestyle/history/8927697.How_a_friendship_saved_John_Milton_s_life/.

April 26, 2012

Responding to neo-isolationists

Illustrated: Theo Van Gogh, assassinated filmmaker, as seen in Amsterdam Museum slide show

What follows is a guest blog by Phillip Smyth,  journalist and researcher. His work has appeared in The American Spectator, The Daily Caller, Haaretz, Middle East Review of International Affairs, and PJ Media.

Phillip Smyth

Lately, the terms “noninterventionism” and “isolationism” have been thrown around like a baby seal between two rambunctious orcas. The roots of these two terms finding their way back into American political discourse have much to do with the rise and spread of Republican presidential candidate Ron Paul and his quasi-libertarian ideology.

Often, Paul’s foreign policy is termed “noninterventionism”— A policy that encourages free trade but also encourages the U.S. to abandon military engagements, bases, and engage in a policy of noninterference with any foreign state’s affairs.

However, noninterventionism is little more than a rehashing of isolationist principles. Instead of the promised prosperity and peace, the policy would result in little more than further problems for the United States.

Over a small period of time, I’ve noticed that those followers of what could be termed, neo-isolationism have developed a number of arguments defending their views. They range from the benefits of their strategy for trade, reasons why their ideological belief is not isolationism, attempts to connect “noninterventionism” with America’s founding fathers, together with a revisionist view, supportive of neo-isolationism when dealing with enemies we face today. It’s my hope that through this writing some of these neo-isolationist’s myths will be dispelled.

Isolationism By Any Other Name

Noninterventionism actually finds its roots in libertarian ideology—Namely the work of John Stuart Mill and latter day anarchists operating under the banner of libertarianism–called anarcho-capitalists. Far from being, in the words of Ron Paul, “The Original American Foreign Policy”, this form of isolationism was simply an anarcho-capitalist ideological concept rebranded as “noninterventionism”.

Serving as the ideological godfather for anarcho-capitalist thought, Murray Rothbard was–even before Ron Paul stood on the political stage–an ardent advocate for isolationism. In terms of influence, Rothbard was the most important element in developing the contemporary push for isolationism-as-noninterventionism in the United States.

Rothbard’s influence was particularly heavy on Ron Paul and the set of ideologues that would later come to push neo-isolationism. Rothbard described Paul as, “that rare American, and still rarer politician, who deeply understands and battles for the principles of liberty.” In an obituary Paul wrote for the late Rothbard, Paul felt that, “With his death, all who cherish individual rights and oppose the welfare -warfare state, are  the  poorer…one of the most fascinating human beings I’ve ever met…[A] down-to-earth genius.”

Even today, Paul is proud of his protégé status vis a vis Rothard; hanging  Rothbard’s photograph on his congressional office’s wall and posting quotes from him on his official congressional website.

In 1959 Rothbard wrote an unpublished piece for the National Review entitled, “For A New Isolationism”. In the piece Rothbard proudly proclaims the need for the United States to re-adopt isolationism (especially in military and foreign affairs) but still trade with friend and foe alike:

The basis of all trade is benefit to both parties. There is no need for the traders to like each other for each to gain by the trade. There is no reason, therefore, why the Communists, even if in charge of most of the world, would not be willing to trade with us, just as they are willing and eager to trade now.

Rothbard expanded on this further in a 1973 interview:

“[Isolationism is] [i]n other words, complete abstinence from any kind of American military intervention and political and economic intervention… abstinence from government intervention. It was the idea of isolationism. The sneer against isolationism always was that isolationists were parochial, narrow-minded characters who don’t know that there is a world out there and want to hide their heads in the sand. In fact it’s the opposite – the true principle of isolationism is that the government should be isolated, the government should do nothing abroad and people who trade, interchange, and engage in voluntary travel, migration, and so forth should be allowed to peacefully do so. The idea is to isolate the government, not to isolate the country.

By the early 1980s, Rothbard started placing isolationism in quotes and instead utilized the term “noninterventionism”. Even Rothbard’s wiki-entry for the Ludwig von Mises Institute (the primary think-tank for anarcho-capitalists) sidelines his fervent isolationism, placing it under the header of “noninterventionism”. This tactic was followed up by a number of articles by his ideological allies attempting to disassociate isolationism from noninterventionism. Nevertheless, despite the change of terminology, the main ideas originally set forth by Rothbard were retained.

In essence, Rothbardian isolationism is the same exact policy Ron Paul and other so-called “noninterventionists” propose; A policy of “free trade with all” but sans any form of foreign engagement. Paul states:

Noninterventionism is not isolationism. Nonintervention simply means America does not interfere militarily, financially, or covertly in the internal affairs of other nations. It does not mean that we isolate ourselves; on the contrary, our founders advocated open trade, travel, communication, and diplomacy with other nations.”

The Founder’s Interventionism

For many neo-isolationists, they believe that America must “return” to a “noninterventionist” foreign policy. Only then will the United States be free from attack, confusing overseas engagements, and see a new prosperity.

Yet, this belief is predicated on a mistaken belief that America’s founding fathers only practiced this foreign policy. Normally, these assertions are backed-up by cherry-picked quotations by the founders.  Perennial favorites include a line from George Washington’s farewell address, “It is our true policy to steer clear of permanent alliance with any portion of the foreign world” and another line from Thomas Jefferson’s 1801 inaugural, “Peace, commerce, and honest friendship with all nations-entangling alliances with none.”

Writing for The Future of Freedom Foundation, neo-isolationist Gregory Bresiger noted when, “Thomas Jefferson, took office in 1801, he, too, paid homage to Washington’s foreign-policy advice. Jefferson, despite his differences with the Federalists, promised no ‘entangling alliances.’ Isolationism, or non-interventionism, was, for a short time, the established policy of the United States.”

However, Bresiger’s view, along with those of his ideological allies, is largely a myth.

George Washington was hardly a noninterventionist. During the Revolution, Washington and the Continental Congress attempted to incorporate Canada into the United States. When French Canadians didn’t respond to congressional invitations to join the thirteen colonies, Washington opted to militarily conquer the entity.[1]

As president, speaking to his understanding of protecting what were considered American interests (e.g. fear of wide scale slave revolts in the United States), Washington “advanced France $726 million in debt payments and sold arms to the planters” in the French colony of Saint Dominigue (Haiti) in 1791.  Both Jefferson and Alexander Hamilton supported the decision to “interfere” in what many a neo-isolationist would consider a French problem.

In 1823, Founding father James Monroe along with John Quincy Adams, son of founding father and second president John Adams, conceived of The Monroe Doctrine. The Doctrine restricted European powers from influencing or attempting to recolonize either North or South America. To the doctrinaire neo-isolationist, America setting policy for, or extending a security umbrella to South America would be unthinkable.

Thomas Jefferson’s war against Barbary pirates in North Africa is another regularly cited example regarding the anti-isolationism of the founding fathers. Of course, the attack against the Barbary pirates subverted the recognized Ottoman authority over these states, thus breaking a cardinal rule of “nonintervention” for many a neo-isolationist. It also involved America entering into an alliance with Sweden.

However, the additional gritty details of how this war was executed and the very “interventionist” nature of the campaign against the pirates, is often forgotten. Not only did Jefferson go against adopting the isolationist position, he instead opted for a tactic many would ascribe to modern-day leaders: A military coup to gain a strategic ally. Historian John Carter notes Jefferson’s “interventionist” approach:

“…in the summer of 1801 James Cathcart, the U.S. consul to Tripoli, presented Secretary of State James Madison with a proposal to attempt to overthrow the Pasha’s government. As Cathcart explained, his plan called for enlisting the assistance of the Pasha’s older brother and rival for political power, Hamet Karamanli. Hamet was living in exile in the neighboring Barbary State of Tunisia. Cathcart proposed that an American military effort could be masked by Hamet’s participation to appear to be merely a local political uprising. If the action succeeded in replacing the Pasha with his brother, then America would gain an important ally in the Mediterranean region. Cathcart had already instructed the American consul at Tunis, an adventurer named William Eaton, to explore the depth of Hamet Karamanli’s political ambition for the throne of Tripoli as well as to make an assessment of the sort of resources that might be necessary to mount a coup…the administration paid Hamet a stipend of $2000 in 1802…In the end Jefferson settled on a two track diplomatic initiative that employed both a limited use of American naval force in the region and Cathcart’s covert plan for a coup to put Hamet Karamali on the throne.”[2]

Now juxtapose Jefferson’s (and the Seventh U.S. Congress’s) 1801 strategy with comments by Ron Paul about current situations.

Regarding Egypt’s Hosni Mubarak, an American ally hardly “installed” by Washington, but supported for the sake of regional stability and furthering American interests:

[T]hey’re [the Egyptian people] upset with us for propping up that puppet dictator for all those years. Now to add insult to injury, where do you think the money went? To Swiss bank account, that family, the Mubarak family had $40, 50, 60 billion–nobody knows–stashed away in other countries, other areas of your money and that is true.

In relation to the U.S. War in Afghanistan and the 1953 British and American organized coup in Iran:

We already hear plans to install and guarantee the next government of Afghanistan…nation building is quite another. Some of our trouble in the Middle East started years ago when our CIA put the Shah in charge of Iran.

If anything, it would seem that the neo-isolationists are actually out of step with the pragmatic, interest-based, and at times “interventionist” foreign policy established by the founding fathers.

Isolationism & America’s Interests

Pulling American forces out of our numerous overseas bases and engagements is another policy goal for neo-isolationists. Many of these isolationists speculate that if the United States suddenly pulled its forces back from every foreign base and slashed defense budget costs, the global engine of trade would not only keep running, but would actually be kicked into high gear. [3]

However, this ignores historical and contemporary reality. In an piece covering the importance of a strong American military and need for power projection to protect American trade interests, Marion Smith notes, “Their [the neo-isolationists] mistake lies in thinking that commerce and security are separate issues. Nothing could be more at odds with the experience of American statecraft.”

Many neo-isolationists believe American influence on other powers is illegitimate. Yet with the removal of American forces to project power over key players, one of the great checks on stability and conflict would actually be removed.

Take the case of Israel countering Iran’s nuclear program. In the words of Ron Paul, if Israel attacked Iran, “That’s their business, but they should suffer the consequences.” The same concept could be applied to any military action by any state. It’s not America’s business, we should continue trading with both parties, and all will be well.

The fact of the matter is that in our globalized environment with its vast interconnections, it’s not simply “their business”.  Regional actors’ actions would have a direct effect on the U.S. Simply consider the variety of American interests in the Middle East, namely oil. Needless to say, the U.S. is a country reliant on cheap oil and a disruption would be quite costly.

Michael C. Lynch of Strategic Energy and Economic Research, told the NY Times, “If we get some kind of explosion — like an Israeli attack or some local Iranian revolutionary guard decides to take matters in his own hands and attacks a tanker — than we’d see oil prices push up 20 to 25 percent higher and another 50 cents a gallon at the pump”.

The price of oil and gas in the U.S. is often driven by speculation. With the possibility of increased regional war and terrorism, the risk would only grow.  Imagine what a Persian Gulf security vacuum would look like without the American security umbrella, how an empowered OPEC oil cartel might toy with international oil prices, or what emboldened irredentist entities might attempt in the Persian Gulf’s strategic waterways. Certainly, free-trade abroad and economic prosperity at home would be directly altered.

An even bigger question is which powers would take over the U.S. role? Oil starved China? Would there be a litany of small navies often battling one another for hegemony? Anarchic conditions may also exist to the detriment of international trade. One only needs to review how Somali pirates (regularly checked by U.S. and other fleets) plague trade routes.

Many neo-isolationists believe American influence on other powers is illegitimate. Yet with the removal of American forces to project power over key players, one of the great checks on stability and conflict would actually be removed.

Neo-Isolationists & Jihad

Intertwined with the issue of pulling out American forces from many global engagements, is our war against radical Islamism in Afghanistan and across the globe. As witnessed among the Sunni jihadists of al Qaida and the Shia Islamist theocratic regime in Iran, there is no denying that the numerous forms of messianic Islamism exist as coherent ideologies. What is more, is the jihadist worldview, one that it is locked in an existential battle against the United States and the West.[4]

Often, neo-isolationists will pin blame on Islamist attacks against the West by stating they were due to Western occupation. Rothbardian and Ron Paul backer, Professor Walter Block went so far as to say, “Terrorists do not put us in the cross hairs because we have rock music, mini-skirts and freedom.”

Yet time and time again, through Islamist discourse, it can be seen that concerns over military occupation(s) hardly encompass the entire picture. Disgust with Western lifestyles, freedoms, and the denial by many of those living in the West of accepting Islam served as extremely potent motivations for conflict.

In the words of Iranian president Mahmoud Ahmadinejad, “So long as the American empire based in the White House has not been overthrown, we have work to do.”

In fact, the very policy of unilateral withdrawal simply emboldens our Islamist enemies. Osama bin Laden himself cited the examples of the U.S. pullout from Beirut (due to a Hizballah bomb attack in 1983) and the Somali “Black Hawk Down” incident of 1993 as proof that Americans were cowardly and needed to be attacked more.

When America pulled its Marines out of Lebanon following the bombing by the Iranian backed Shia Islamist Hizballah, a spate of additional bombings, hijackings, and kidnappings of Westerners and Western targets ensued.

In 2004, Dutch filmmaker Theo Van Gogh wasn’t assassinated in retaliation for Western occupation, but for “insulting Islam”. Danish cartoonists who depicted pictures of Mohammed with a bomb fashioned to his head were threatened with death. This also resulted in radical Islamists targeting Denmark.  In 2008 Ayman al-Zawahiri, then the number two in al-Qaeda threatened Denmark:

“Denmark has done her utmost to demonstrate her hostility towards the Muslims by repeatedly dishonouring our Prophet, may Allah bless him and grant him salvation. I admonish and incite every Muslim who is able to do so to cause damage to Denmark in order to show your support for our Prophet, may Allah bless him and grant him salvation, and to defend his esteemed honour. We prefer to live underground [i.e. dead] rather than accepting the limited response of boycotting Danish dairy products and goods.”

One month after the statement, a car bomb exploded outside of Denmark’s embassy in Islamabad, Pakistan. Eight were killed.

Essentially, the simple and very libertarian exercise of freedom of speech prompted the attacks. These individuals and the very societal norms they embraced were seen as threats by Islamists.


[1]See: Gustave Lanctôt, Canada & the American Revolution, 1774-1783, (Cambridge, Harvard University Press, 1967).

[2] John J. Carter, Covert Operations As A Tool of Presidential Foreign Policy In American History From 1800 To 1920: Foreign Policy In The Shadows, (New York, The Edwin Mellen Press, 2000), P.23.

[3] Ron Paul, The Revolution: A Manifesto, (New York,Grand Central Publishing, 2008), pp. 56-57.

[4] My own article for the Daily Caller has other examples. See: http://dailycaller.com/2011/02/21/ron-pauls-poor-policy-and-poorer-defenders/

December 10, 2011

Claude Bowers: racist Dem pol

Claude Bowers

[For a related blog see http://clarespark.com/2012/06/16/the-social-history-racket/. More irrationalism in our political culture.]

This blog is about Democratic Party fundamentalism as expressed by the populist journalist Claude Bowers, keynote speaker at the Democratic Convention of 1928. The Democratic essentials had already been revealed in Obama’s speech at Osawatomie, Kansas on December 8, 2011, but I had never heard of Bowers, a Hoosier journalist, politician, and later ambassador to Spain and Chile, before reading about his role in the ascendance of Jeffersonianism and the concurrent stigmatizing of Alexander Hamilton in the early 20th century. (My source was Stephen F. Knott’s Alexander Hamilton and the Persistence of Myth.) Since Knott had mentioned Bowers’ memoir and his racist elevation of Andrew Johnson in the bestselling Tragic Era (1929),* and since I had never heard of him before, I consulted his memoir. I was not prepared for this inside story of Democratic politics, nor the starring role that this autodidact had played in publicizing not only the Jefferson-Jackson contribution to populist ideology, but in delegitimating such Radical Republicans as Thaddeus Stevens and the whole Reconstruction [gang]. This hatred would be transferred to “the money power” and the ostensible Republican “oligarchy” that had viciously exploited the suffering masses, masses whom Bowers was calling to arms, as indeed Obama had done in his New-New Nationalism peroration.

The first thing I noticed in the Bowers memoir was his excitement in vivid Irish oratory and the theater of politics, also by the Leader principle, for his book is full of hero-worship and the language of military battle, replete with violent metaphors. Then I came upon his speech, delivered to the most powerful Democratic partisans during the election year 1928, and the word protofascist came to mind. So I am copying out his own transcription of the rules for fighting Democrats that are in many ways, indistinguishable from the rhetoric of communists, fascists, and the most militant of social democrats (including POTUS). (This speech was meant to unify a dangerously splintered Party, divided about such issues as evolution and Al Smith’s Catholicism, but also fatally defeatist, in Bowers’s view. In his memoir, he places his speech to the Jackson Day Banquet of 1928 after a description of a pleasant meeting with FDR, at that time an adviser to Al  Smith. This is not his keynote address at the 1928 convention: that one sharply divided Hamiltonian Republicans from Lincoln Republicans, thus annexing Lincoln to the politics and policies of Thomas Jefferson and Andrew Jackson, and consigning the Hamiltonians to hell/the “penitentiary.” Bowers viewed his accomplishment as banishing forever the false notion that party differences were merely about patronage, as opposed to [class struggle].)

[Claude Bowers, as reprinted in My Life (Simon and Schuster, 1962):]

“[Referring to Andrew Jackson as exemplary Jeffersonian democrat:] He was too wise to enter a conflict with enemies, spies and traitors in the rear.

He had no patience with the timid or the time server, and the ordered the Miss Nancys and the Sister Sues back with the scullions and the cooks to make way for two-fisted fighting men upon the firing line.

His strategy of battle was to center on a single issue, brush all extraneous matters out of the line of march, and, the strategy determined, close debate and concentrate on victory.

Imagine, if you can, an Iago insinuating himself into Jackson’s camp to propose the division of the party on evolution or the theory of relativity and living to report progress to the enemy that sent him.

He never fought with ping-pong sticks—he gave his men battle axes and artillery.

He never soft-pedaled his approach to conflict—he rode to battle waving a warrior’s sword and shouting commands, and he rode at the head of the column.

He never inquired whether a policy would be good for the North, South, East, or West, for he knew if it were really good it would be good for the masses of the people everywhere.

He fought the common enemy; he waged no civil wars.

Under his courageous leadership, the jingle of the golden coin could not intimidate the army that he led, and the enemy barricades could not stop it, and the machinations of the enemy could not divide it, and thus he moved to inevitable and immortal victories for popular government and the economic rights of man.

And how did he do it? By giving the people a fundamental issue that had a meaning at every fireside in every home in the country. He pointed to the entrenchments of monopoly [i.e, the National Bank, CS] and he said, “We will take that.” He called attention to the increasing arrogance of class rule, and he asked the masses to follow him to battle for the restoration of a government of equal rights for all and special privileges for none.


[Bowers, cont.] But someone asks what Jefferson and Jackson have to do with present-day problems and conditions; and the answer is that there is scarcely a domestic issue that Jefferson thought for and Jackson fought for and Wilson wrought for that is not a vital living issue at this hour.

If the party that these men stood for stands today where these men stood, for equal rights for all and special privileges for none—there is an issue.

If it stands where these men stood, against monopoly and autocracy in government and industry—there is an issue.

If it stands where these men placed it, for the rule of the majority and the greatest good to the greatest number—there is an issue.

If it believes, as these men did, that the debaucher of the ballot box and the hucksters in high places who sell the nation’s birthright to line their pockets belong to the penitentiary and nowhere else—there is an issue.

And to put it all in one sentence: If it stands where these men stood, for democracy and against the oligarchy of a privileged class—there, there is an issue that can mobilize the people and make them march with waving banners and the will to victory in their hearts.” (pp. 178-180) [End, Bowers excerpt]

[Clare’s comment:] Earlier in the text, Bowers mentioned Jefferson’s beloved household servant, too reticent, perhaps, to name the servant as a slave. So much for Jeffersonian or Jacksonian democracy, models that are supposed to speak to us today, red banners waving. Obviously, the entire gold-jingling, huckster-ridden Republican party should be hunted down and jailed. So much for popular sovereignty: we don’t need any. The Leader and the masses are joined at the hip.

*The Tragic Era is notorious in the annals of apologetics for white supremacy. It was favorably reviewed by William E. Dodd (see my remarks on Dodd’s Southern agrarianism in http://clarespark.com/2011/08/14/review-in-the-garden-of-beasts-by-erik-larson/ . Peter Novick in That Noble Dream, p.231, states that Bowers’s achievement in discrediting the Republican Party in the South was awarded with the ambassadorship to Spain. Novick doesn’t mention that it was FDR’s appointment that sent Bowers off to a Spain he romanticized in his autobiography.

November 5, 2010

Hamburger’s Separation of Church and State

Philip Hamburger, Professor of Law, Columbia U. Law School

Before reading this blog, I ask the reader to examine two separate accounts of Philip Hamburger’s book.

http://query.nytimes.com/gst/fullpage.html?res=9B02E6D61131F935A35754C0A9649C8B63 (Peter Steinfels reviews Hamburger, 2002 in NYT.)

http://www.law.columbia.edu/media_inquiries/news_events/2007/December07/hamb_profile.  (Columbia Law School describes the controversy over Hamburger’s book., December 2007 issue of Columbia Law School Magazine.)

[My blog:]    In the conclusion to his 492 page study, Separation of Church and State, the author instructively contrasts two clashing visions of “liberty” (though not in terms that a libertarian would recognize). These paragraphs would seem to identify him as a neutral party to the culture wars (traditionalism versus secularism) that have inflamed the republic longer than we might think. I quote his paragraphs, then lay out the strange associations and claims that this Harvard-published book maintains.

[Hamburger, p. 485:]…[Summarizing Tocqueville] By inculcating morals, by encouraging mutual love and forgiveness, and by directing ambitions toward another world, religion could diminish injurious behavior, dissension, and distrust. Accordingly, it could reduce the necessity of civil coercion—a necessity that might otherwise lead a people to desire harsh or even tyrannical government. Religion could also establish a lasting foundation in public opinion for the various rights that seemed particularly vulnerable to fluctuations in popular sentiments. It thereby could temper the selfish passions and oppression to which republics were all too prone. Thus religion—specifically the Christianity inherited and shared by a community—seemed essential for the preservation of liberty.

[Hamburger, cont., p.485:]    Increasingly , however, this perspective coexisted with another, very different point of view, drawn from European experiences and fears—a perspective that survives most prominently in the writings of Thomas Jefferson. Together with expanding numbers of other Americans, Jefferson feared that clergymen, creeds, and therefore most churches undermined the inclination and ability of individuals to think for themselves. He worried that individuals would defer to their church’s clergy and creed in a way that would render them subservient to a hierarchy and would deprive them of intellectual independence. In such ways, the clerical and creedal religion of most churches appeared to threaten the individual equality and mental freedom that Jefferson increasingly understood to be essential for the citizens of a republic.

[Clare:] One might think from these excerpts from the chapter entitled “Conclusions” that the author had actually set up throughout his lengthy text discussions of Toqueville and Jefferson. But he had not. Rather, he created a genealogy for “American identity” that conflated his secularists with Roger Williams (unconscionably insulted and dismissed in the brief pages on his pathbreaking religion and politics); with Republican Jefferson’s political ambitions in the campaign of 1800 (in which he determined to defeat statist Federalists); with viciously anti-Catholic, anti-working class Protestants who forced compulsory free public education down our throats; with Know-Nothings, “Liberals,”“nativists,” “freethinkers”, “white supremacists,” “individualists,” and  “Americanists”; with Reform Jews, including Felix Frankfurter (!); with Unitarians; and most breakthtakingly, with the Ku Klux Klan, spending endless pages on the tricky Klansman SCOTUS Hugo Black and his fiery crosses (crosses that the author linked to the Statue of Liberty).

I try not to be paranoid, but this wild and undisciplined book could be a through-the-looking-glass rewrite of Disraeli’s novel Lothair (1870), in which the author describes an elaborate [ultramontane] Catholic plot to lure the fabulously wealthy hero (Lothair) away from Anglicanism, a conspiracy to restore the Pope as the supreme authority in Britain (along with his confiscated lands) that fails in the end. In Hamburger’s drama, however, the (undifferentiated) Catholics are the victims of (undifferentiated) Protestants and their white-sheeted knights.

Nowhere does the author examine whether or not the “secularists” had any reason to fear authoritarian religion as an obstacle to intellectual independence. Nowhere does he examine the propaganda churned out by elites since antiquity that declared the people incapable of the self-control and community spirit of their betters. Nowhere does he lay out the case law that addressed the (non-existent or illegitimate) separation of church and state. But what is most shocking is that in both of the reviews and summaries of the controversy linked above, what I have written about the iconographic program of this book is utterly absent, like Roger Williams himself, who was the true originator of the notion that church and state should and must be separated, that faith was an entirely private matter of individual conscience. (Herman Melville said the same in a marginal comment in Goethe’s autobiography, and also echoed Williams’s respect for native Americans and his questioning of what was to become the conquest theory of property.)

Another lacuna in the text is the vexed question of the taxation of Church property. As Keith Thomas wrote long ago in his Religion and the Decline of Magic (1971), one reason for the witch-hunts in seventeenth century England might have been this confusion: Who was responsible for charity and the protection of the poor and disabled? Was it to be the state or the church? And to bring Thomas’s  question up to date, if churches, public schools, universities, and non-commercial media are to be ideological weapons of one narrow politics—the crazy-making statist politics of “moderation” (a.k.a. round-the-clock “compromise”)– should taxpayers be asked to support them? Or should they compete in the marketplace of ideas? Hamburger never uses that expression, and I doubt that any Harvard UP editor suggested it to him. The major university presses are firmly committed to self-sacrifice, duty and service to the “community” above creativity and innovation. The “self” has been erased and “laissez-faire capitalism” reduced to a dirty conception.

(For a related blog, see http://clarespark.com/2009/07/04/unfinished-revolutions-and-contested-notions-of-identity/. ) Also http://clarespark.com/2009/11/22/on-literariness-and-the-ethical-state/. It will be clear that Hamburger is an advocate of the “living Constitution” that enhances the “positive state”–i.e., the ethical state. Cf. Mussolini’s Fascism.

August 30, 2010

Growth or Redistribution? excerpt from Third Point LLC letter to investors 8/27/10

 [To my readers: I am neither an economist nor an economic historian, so I thought that this collage and analysis of where our country is headed under the Obama administration, remarkable for its clarity and forthrightness, would be a welcome addition to the website. I thank Dan Loeb for giving me permission to quote from his letter, the full content of which can be accessed on the internet. Also see the front page of the Business section of the New York Times today, August 31, 2010: http://dealbook.blogs.nytimes.com/2010/08/31/sorkin-why-wall-st-is-deserting-obama/?scp=1&sq=Daniel%20Loeb&st=cse]

Daniel S. Loeb

All, too, will bear in mind this sacred principle, that though the will of the majority is in all cases to prevail, that will to be rightful must be reasonable; that the minority possess their equal rights, which equal law must protect, and to violate would be oppression.

– Thomas Jefferson, First Inaugural Address, 1801

 A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned – this is the sum of good government.

– Thomas Jefferson, Writings, 1743-1826

 I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of the people.

– Thomas Jefferson, Letter to Thomas Cooper, 1802

 One of the traditional methods of imposing statism or socialism on a people has been by way of medicine. It’s very easy to disguise a medical program as a humanitarian project. Most people are a little reluctant to oppose anything that suggests medical care for people who possibly can’t afford it.

– Ronald Reagan, http://www.youtube.com/watch?v=fRdLpem-AAs, 1961

 You know, there’s a lot of talk in this country about the federal deficit. But I think we should talk more about our empathy deficit – the ability to put ourselves in someone else’s shoes; to see the world through the eyes of those who are different from us – the child who’s hungry, the steelworker who’s been laid-off, the family who lost the entire life they built together when the storm came to town. When you think like this – when you choose to broaden your ambit of concern and empathize with the plight of others, whether they are close friends or distant strangers – it becomes harder not to act; harder not to help.

– Barack Obama, Xavier University Commencement Speech, 2006

 It is that fundamental belief, I am my brother’s keeper, I am my sister’s keeper that makes this country work. It’s what allows us to pursue our individual dreams and yet still come together as one American family. E pluribus unum. Out of many, one.

– Barack Obama, Democratic National Convention Speech, 2004

 I think when you spread the wealth around it’s good for everybody.

–Barack Obama’s Comments to Joe “the Plumber” Wurzelbacher, 2008

The secret of US success is neither Wall Street nor Silicon Valley, but its long-surviving rule of law and the system behind it… American system is said to be “designed by genius and for the operation of the stupid.”

– General Liu Yazhou, Phoenix Magazine, August 2010  

Review and Outlook

As we entered the second quarter of 2010, many measures of confidence and economic activity were showing consistent improvement, leading us to increase our exposures in select undervalued companies which we thought would benefit from a favorable economic environment. Most pundits initially attributed the subsequent turn in the markets and investor sentiment to the Greek crisis, concern over the Euro, the Oil Spill in the Gulf, and vague rumors concerning faltering Chinese growth. However, it is apparent to us that the turning point in both investor and consumer confidence came on April 16th, with the filing of the government’s suit against Goldman Sachs over its mortgage CDO activities. This politically-laced lawsuit was a tipping point for shaky investor confidence against an increasingly worrisome landscape of new laws and proposed regulations that are perceived by many market participants to promote “redistribution” rather than growth, and are contrary to free market ideals.

As every student of American history knows, this country’s core founding principles included non-punitive taxation, Constitutionally-guaranteed protections against persecution of the minority, and an inexorable right of self-determination. Washington has taken actions over the past months like the Goldman suit that seem designed to fracture the populace by pulling capital and power from the hands of some and putting it in the hands of others.

 For example, a well-intentioned government program gone awry is the new CARD Act that restricts banks from repricing interest rates on borrowers who fail to meet their revolving credit obligations. The effect of this legal prohibition has been to force the banks to raise the interest rate paid by all borrowers, to compensate for losses they are now being forced to take on delinquent borrowers. The effect is a redistribution of wealth from people who pay their debts on time to those who do not.

 Laws and regulations such as these justifiably raise questions about this government’s commitment to free-market capitalism and the articulated rule of law. Arguably unconstitutional Bills of Attainder, such as the special “Enterprise Tax” proposed to be levied on hedge fund managers and other managers of private partnerships who wish to sell their management companies (ostensibly in order to extend unemployment benefits beyond the current 99 weeks) send a vivid message that this Administration is operating from a playbook quite different from the one we are used to as American business people; a thought that chills all participants in these free markets.

 On the other hand, it is not hard to understand the source of the popular distrust in capitalism today. Many people see the collapse of the sub-prime markets, along with the failure and subsequent rescue of many banks, as failures of capitalism rather than a result of a vile stew of inept management, unaccountable boards of directors, and overmatched regulators not just asleep, but comatose, at the proverbial switch. When we hear the chorus of former executives and regulators exclaim that the crisis was “impossible to see coming”, while at the same time walking away with millions or going on to greater levels of responsibility in government, it is both puzzling and demoralizing. It is easy to see why so many people have concluded that the entire system is rigged.  

This crisis of trust in our system is not limited to inept executives in regulated financial institutions who bury their shareholders and then walk away with ill-gotten sacks of loot. Having analyzed hundreds of proxy statements from the outside and having had the “pleasure” of sitting on several corporate boards, giving me a chance to walk the sausage factory floor, I have personally witnessed the incompetence of many boards of directors. One can only conclude that the incentive systems put in place for directors reward luck and station more than they do talent, skill or creation of shareholder value.

 Not all boards are bad, of course. Private equity firms have a terrific model of appointing energetic members of their firms and outside experts to oversee the affairs of the companies they govern. They tend to have real “skin in the game”, spend days reviewing strategy and other matters, and have their own staffs to analyze numbers produced by the company. Board fees tend to be irrelevant to the members of such firms as they are keenly focused on strategies to deleverage and to create long/medium term shareholder value. Even some public companies have similarly engaged corporate boards.

 However, many of the boards we have come across are populated by individuals who rely on the stipends they receive from numerous corporate boards and thus appear motivated primarily to ensure continuing board fees, first-class air travel and accommodations, and a steady diet of free corned beef sandwiches until they reach their mandatory retirement age. We are therefore encouraged by the recently finalized proxy rules, which will ease the nomination and election of directors by shareholders.

 All of the above leads us to conclude that America faces not only a crisis of confidence among consumers unwilling to spend and businesspeople unwilling to invest, but also a crisis of leadership. So long as our leaders tell us that we must trust them to regulate and redistribute our way back to prosperity, we will not break out of this economic quagmire. One can hope only that this Administration, composed of brilliant academics that have had experience in creating the very regulation and overseeing the very institutions that have failed, has learned from its mistakes and will set us down the right path. Perhaps our leaders will awaken to the fact that free market capitalism is the best system to allocate resources and create innovation, growth and jobs. Perhaps they will see the folly of generating greater deficits by “investing” in programs that lead to corruption and distortions of the system.

Next Page »

The Rubric Theme. Create a free website or blog at WordPress.com.


Get every new post delivered to your Inbox.

Join 492 other followers