Thursday, January 8, 2009

Galbraith's Dialectic

"Its interesting to read this essay from early 2006 today in the light of what we have seen in the intervening period. A number of people who might have dismissed this out of hand back then might see a little more truth behind the rhetoric today. ... Why are some people so reluctant to believe that sociopaths and narcissists can use the power of the pen to prey on people? Because they are well spoken and organized? We could contend that these are the most dangerous of the emotionally warped with a need to acquire, dominate and control, because they are smarter and more calculating than the impulse murderers, burglars, rapistsm thieves, and pedophiles. ... Some of the scariest people we have ever met were articulate and pathologically driven borderline psychopaths with a need to acquire political and economic power. It is the focus of their illness that makes them powerful. ... The Constitution is a restraint that works both ways, against the predations of the powerful, but also as a shield against would-be Robespierres with their reigns of terror", my emphasis, Jesse, 26 December 2008,

Jesse, you ignored your Hegel, thesis, antithesis, synthesis! Now I will excerpt and explain James Galbraith's (JG) 2006 article using Hegel's dialectic.

"The doctrines of the 'law and economics' movement, now ascendent in our courts, hold that if people are rational, if markets can be 'contested,' if memory is good and information adequate, then firms will adhere on their own to norms of honorable conduct. ... It's a strange vision, and if we weren't governed by people like John Roberts and Sam Alito, who pretend to believe it, it would scarcely be worth our attention. ... Dollars command the world's goods, rupees do not; membership in the dollar economy makes every working American, to some degree, complicit in the capitalist class. ... The predatory class is not the whole of the wealthy; it may be opposed by many others of similar wealth. But it is the defining feature, the leading force. And its agents are in full control of the government under which we live. ... They include the misanthropes who led the campaign to abolish the estate tax. ... For in a predatory regime, nothing is done for public purposes. Indeed, the men in charge do not recognize that 'public purposes' exist. ... The predatory-prey model explains some things that other models cannot: in particular, cycles of prosperity and depression. ... The predatory model can also help us understand why many rich people have come to hate the Bush administration. For predation is the enemy of honest business. In a world in which the winners are all connected, it's not only the prey who lose out. It's everyone who hasn't licked the appropriate boots. Predatory regimes are like protection rackets: powerful and feared, but neither loved nor respected. They do not enjoy a broad political base. ... Predators compete not by following the rules but by breaking them. They take the business-school view of law: Rules are not designed to guide behavior but laid down to define the limits of unpunished conduct. ... Black was the lawyer/whistle-blower in the Savings and Loan and Keating Five scandals; he later took a degree in criminology. His theory of 'control fraud' addresses the situation in which the leader of an organization uses his company as a 'weapon' of fraud and a 'shield' against prosecution--a situation with which law and economics cannot cope. ... For instance, law and economics argues that top accounting firms will protect their own reputations by ferreting out fraud in their clients. ... How can the political system reform itself? ... How can we get modern economic predation back under control, restoring the possibilities not only for progressive social action but also--just as important--for honest private activity? Until we can answer those questions, the predators will run wild", my emphasis.

JG, what "straw man" law and economics (L&E) movement are you talking about? I've read at least ten of Richard Posner's books and think I know at least as much about it as you. "Ascendent in our courts", huh? At best you, JG, are an ignoramus, at worst a fraud. You remind me of your father, John Galbraith, (1908-2006), Harvard economics professor and admitted socialist. You learned something from him. I agree, Roberts and Alito are intellectual frauds. However they don't claim to decide cases using "L&E" or anything other than, "if it's good for big business, it's good". Nothing forces China, India, Russia or any other country to accept dollars. Do you recollect, Charles DeGaulle under the tutalage of Jacques Rueff, led to the 1968 dollar devaluation? A big 1967 discussion topic was "dollar imperialism". Do you remember? In 1967 Jean-Jacques Servan-Schreiber (JJSS) wrote The American Challenge. Do you remember it? I do, reading it in 1967. Did your father discuss JJSS's book in any of his Harvard classes? You are four months my junior. Any country can go to gold at any time. "Complicit in the capitalist class", how interesting. Are all capitalists criminals? I agree, in my experience only a small percentage of the wealthy are predators. Yes, they control Uncle Sam. I have written of the "Bloodless Coup" many times. I oppose the estate tax. I have a vested interest in keeping it, i.e., to sell estate planning services. So? Plank three of the Communist Manifesto advocated an end to inheritance rights. Are you, JG a Communist? If the shoe fits, wear it. I use the Austrian business cycle to explain booms and busts. Yes, "predation is the enemy of honest business". So? "Appropriate boots". Now we are getting somewhere, see my Leon Trotsky quote, my 20 October 2008 post. Criminal conduct. Humm, see my 25 April 2008 post. I articulated the "control fraud" concept in 1984, Black may have done it earlier, I do not know. I too, saw the S&L crisis first-hand. "Cannot cope", is JG nuts? L&E says this is what happens. The answer: raise penalties for, and the likelihood of, being caught. JG creates straw men. JG's "top accounting firm" argument is a sham. What "top" accounting firms do is: discount their expected net client fees at an appropriate rate. They subtract from this the present value of the expected lawsuit payout. If the result is positive, they produce a workpaper rationalizing why white is black. When did I first say this? Drumroll please, approximately Thanksgiving 1976, 32 years ago! Now JG exposes himself, "progressive social action". What does JG want? Honest business or to replace our current predators with others which will use predation for JG approved purposes? JG, you apparently fooled Jesse, not me. JG's Hegelian synthesis is between today's predators and JG's preferred beneficiaries of "progressive social action". JG wants predators to redirect more loot to JG's intended beneficiaries. It's the bourgeoise that was Marx and Lenin's enemy. So too, JG's.

I think of JJSS's book and how I read the same arguments with respect to China today, that I read with respect to France and Germany in 1967. In 1967 I did not know the arguments were fallacious. 1967's world lived under Bretton Woods (BW) and we knew BW would be with us forever. In 1971 Nixon closed the "gold window". So much for what we knew. Similarly, China will pull the plug on the dollar sooner or later.

No comments: