Nothing can outperform a democracy coupled with a well regulated, genuinely competitive free market economy. Each word in the preceding statement matters for it to be true. When Karl Marx was promoting communism, and when Hitler was promoting fascism, both thought capitalism was dead and could never survive. They wrongly believed it would be replaced by communism, socialism or fascism. While they were aware of the vulnerabilities of capitalism, they failed to understand that certain changes could be made to make it work, and to turn it into the most powerful and dynamic economic engine in history. Understanding and continuing to implement these changes is essential to protect our system, because very few of us want the alternatives of socialism, communism or fascism.
Two analogies are powerful in illustrating the problem and the lessons: a steam engine and a theory of sports. Also illuminating is the story of the tragedy of the commons.
A steam engine that is well regulated and well maintained can perform an enormous amount of constructive work for a very long time. However, if we remove the governor the deregulated steam engine will immediately and rapidly accelerate to the point of self destruction. It will fail catastrophically, leaving behind a useless pile of twisted junk. The same is true for a capitalist economy, where if unregulated, it will endure wildly destructive boom and bust cycles and engage in destructive excesses. Yet, we are asked by some to drink their ideological cool-aide calling for removal of governance, unregulated free markets, and low to no taxes. When we fall victim to this radical thinking, remove the regulators, overly privatize and tie the hands of governance, the economy quickly engages in wild speculative excesses, fails to self regulate, and self destructs, leaving us with a pile of economic junk.
For competitive sports to work, for fans to want to watch, and for players to want to play there are certain essentials. The playing fields must be level. All the teams must agree to play by the same sets of rules. Those rules must be fairly, strictly and vigorously enforced by officials who can do their jobs without undue influence or hindrance. The teams must be reasonably evenly matched, with no one team so powerful that it can dominate and manipulate the game. Remove all this based on self control, self policing, and letting the market place sort it all out, and the result is an all out war, won by the biggest and nastiest, with little opportunity for success by most fans and most players. When we regulate business and the economy with proper anti-trust enforcement, effective regulation, protection from predatory and anti-competitive monopolistic tendencies, then this well regulated free market economy works well. Like in sports, take the level field, the rules, the officials, the balanced teams away, and we get utter chaos and failure.
Most of us have been taught about the "tragedy of the commons." This is the situation that occurs where a pasture is held in common, and a group of sheepherders share its use and benefits, but no one is responsible for, motivated to, or can afford to care for it. Absent proper governance, taxes and fees, and enforcement of that governance, each sheepherder is motivated to put as many sheep on it as possible, resulting in the utter destruction of the pasture, to the detriment of all. Except in the smallest of clans, with wise leadership and discipline, self regulation fails. This illustrates why we need effective governance to protect our commons and our common interests.
We have found a very effective balance of the principals illustrated above. It always requires attention and fine tuning. We've grown to have certain contempt for the lessons and practices above that have been the keys to growing the most powerful economy in the history of the world, with the biggest and wealthiest middle class, and professional class ever. We have done what Marx and Hitler said could not be done.
To summarize the lessons we've learned about making capitalism work:
We learned how to effectively regulate the free market to protect citizens from the ruthless excesses that otherwise destroy it.
We learned to harness its power to our national common good through a taxation and regulatory system.
We learned that certain common responsibilities are best undertaken by government. Roads, airways, defense, education, international affairs, trade regulation, uniformity of law, to give some examples.
We learned how to put laws and regulations in place to set the rules of the game, to prevent and curb ruthlessness, recklessness and conspiracies that destroy and remove the opportunities for enterprise and ingenuity.
We learned how to slow down the economy, shave off the excessive peaks, and moderate inflation when the economy tries to over accelerate by taxing and saving a surplus, and reducing government infrastructure and enterprises.
We learned that by doing the above, we are able to speed the economy up during those times when it wants to slow down too much, by spending that surplus in order to create demand and create jobs. This reduces the depth and duration of the slow down.
We learned to strike an effective balance between the private and public sectors that has created the strongest middle class in the history of the planet.
So, when we do these things my opening statement is true, but when we don't, we jeopardize the entire system.
Failing to think about the above, 8 years ago we elected ideologically zealous leaders committed to attacking and undoing the very policies that are essential to our system functioning well. We embarked on a road that undermines our democratic free market system. Predictably our economy has suffered the same dreadful fate as the deregulated steam engine.
So here we are, again left to relearn these same painful lessons, painstakingly put the controls and governance back in place, and pick up the wreckage. The perpetrators point elsewhere. None voluntarily take responsibility for their actions or the consequences of listening to them. Some pretend not to have been a part of it, and attempt to change their positions as effortlessly as changing a shirt.
The economy is complex, but not that complex. These principals are not beyond the grasp of ordinary citizens. We need to think for ourselves. We need to question what we are told and decide whether it is true and supported by facts and history, or just ideological emotional rhetoric. When it is the latter we need to reject it as the useless nonsense it is. We must insist that the economy be managed based on sound economic principal’s not ideological zealotry.
Let's not turn our backs on these well learned lessons, and be forced to suffer the catastrophic consequences and painfully learn them again. Let's develop the courage, wisdom, and confidence to understand and act in our own best interest.
So, instead of ideological, emotional slogans, here are fact based arguments.
Fact: John McCain was one of the Keating 5. The Keating 5 were Senators and Representatives who directly helped bring about the S&L crises by removing regulation and by interfering with regulators of the S&L's. After extensive hearings McCain and the other 4 were formally censured for their behavior. McCain's actions amounted to deregulating the steam engine, helping destroy it. Did he learn from this anything about the essential lessons of making capitalism work?
Fact: John McCain returned to promoting a zealous ideological deregulation agenda with the Bush administration. He again participated in undermining one of these vital lessons about making capitalism work, resulting in the current economic distress, for the same reasons.
Fact: John McCain supported and continues to support tax cuts on the very rich. When this was first done, it ignored one of the essential lessons learned about making capitalism work, by failing to tax to slow the boom and create a surplus and lower inflationary risks. This would have generated the rainy day surpluses we need today for this economic downturn.
Fact: McCain advocates cutting government spending at the Federal and State levels if he takes office despite the fact that we are now in a serious recession. He couples this with keeping taxes high on the middle class while extending the tax cut for the rich. How does this make our system work? This will worsen, not help us achieve one of the vital lessons to make capitalism work, which is the importance of deficit spending during a recession. Failing to do so is the formula to drive the economy from recession into depression.
Fact: McCain claims he will create jobs by cutting taxes for the rich. Pouring the Nation’s precious capital into tax cuts for the rich and into creation of bank equity for their balance sheets does not create any jobs. The lessons we’ve learned about making capitalism work include the need for financially healthy middle and professional classes. It is precisely their demand for goods and services that creates market opportunities, prompts businesses to react to meet that demand, and motivates businesses to obtain and employ capital in order to put people to work meeting those demands. Banks already have plenty of funds available right now, and at a very low cost. They are making very few loans, and those are at very high rates. Banks are afraid of losses and they understand the real economic risks in the economy right now. They are not going to make loans until they see signs that reliable market demand exists so their borrowers can expect to repay the loans. So all this money poured in at the top of the economy can do little to create jobs or solve these problems. A viable solution must directly address job creation and protection in ways that put people to work. Their incomes will create the essential demand for goods and services in the marketplace that businesses will go after, and those opportunities is what will get banks to lend at a reasonable pace with good rates. This illustrates why public sector spending is vital to soften a downturn, because that spending directly creates good paying jobs when nothing else will do so. It keeps people working and paying their debts and their bills. It creates demand that causes the economy to spiral upwards instead of spiraling downward. Direct job creation by the government ended the Great Depression, not pumping money into banks. McCain's policy is precisely backwards, violates these principals of what makes capitalism work and it will decrease jobs.
When one thinks through how our economy really works, how jobs are really created, and what we know we must do to responsibly manage the economy and protect its vulnerabilities Obama is the candidate pointing to economic policies that take us in the right direction. It is ironic that it is the supposed advocates of free market capitalism who continue to advocate policies that are counterproductive and destructive to a well regulated, free market capitalistic system.
Paul Eisenberg
Copyright 2008
Saturday, October 25, 2008
The election
Joe Biden spoke today of the need to think beyond this election and to exercise more care in what we say. He suggested we begin to behave in ways that will leave us free to re-unite the country after the election. I agree. The angry ideological rage coupled with childish name calling attacks drown out a rational discussion of vitally important issues. Reading the blog comments reminds me of referring the fights of our children when they were 3. It is not accidental that we find ourselves here. There are reasons for it, and there are effective antidotes for it.
We ordinary citizens can end this if we choose to. For most of my adult life I have been observing myself and other people to understand how otherwise rational people can behave so foolishly. Learning from the work of brain researchers, behavior specialists, and organizational consultants, and making my own observations I have reached some empowering conclusions that I believe are worth sharing.
All humans, except a few rare sociopaths, are hard wired as innately social creatures. We possess instinctive skills and intuition that allow us to use subtle clues to categorize, judge, sort, divide and aggregate the world around us. We define family, clan and nation to create groups of "us" and "them." And we can change the scale and mix of these groupings and the alliances that come with them very quickly. These skills were essential for survival, allowing us to compete, protect, cooperate, flee, fight or freeze in a physically hostile world. These same skills in today's complex social structure quickly get us into deep trouble. We also possess an intellectual capacity to think and analyze, abstract, project and plan. For reasons of survival these intellectual skills can be quickly suppressed by our emotions. In a hostile physical environment, sitting and thinking at the wrong time could get one killed. Under high stress our powerful emotions shut down our intellect. Emotion then overrides thought. Emotion and instinct force us to quickly select from three options: fight, flee or freeze. In today's world, the fourth option, think, is the most difficult to access when we need it most, when we are under duress. It is true that occasionally situations of extreme physical duress requiring fight, flight or freeze still confront us, but most of today's stress is situational, requiring access to our best intellect, our education, the use of our informed intuition... But, that is not how we are wired. Thinking under intense stress is not our natural first reaction. So, we have to learn how to do this, and learn how to resist the instinctive impulses and reflexes that often lead us in exactly the wrong direction, making us want to attack, run or become immobile.
Those who fail to learn these skills remain vulnerable to easy exploitation by those who understand our native inner workings and who have perfected cynical skills that allow them to effectively exploit and manipulate us in both the marketplace and at the polls.
I've watched myself and others, absent a conscious effort to do otherwise, decide what is right and what is wrong, who is good and who is bad, which political party to trust, which sports team to cheer, which company is good and which is bad, based on these initial instinctive definitions of "us" and "them." Hitler understood that he needed to first get people to use these emotional reflexes to define his targeted enemies as "them, different and distinct from "us" in order to get people to do the evil things he asked of them. Politicians and their advisers know that if they can get us to make this kind of deep reflexive commitment against "them" and "their party," that virtually no facts, no behavior, no evil deeds will get us to abandon that emotional commitment and change sides. They know we will henceforth use our intellect to rationalize that reflexive emotional decision, rather than use our intellect to think, and make the best decision in the first place. The weaker the rational case they can argue, the more they are drawn to exploit these techniques and tactics.
If you still doubt this I suggest you simply observe as dispassionately as possible for a while. Watch your own behavior and patterns with a conscious intent to learn. Notice how our emotional loyalties alter the way we use our intellect, blind us the most blatant actions, make us reject clear facts and ignore events. Read the blogs, and think about what is being written with this concept in mind, and suddenly you will fully understand the words being written, the vile attacks, the irrational childlike back and forth name calling. Notice how w e readily dismiss serious and criminal behaviors by people once we have decided that they are one of "us" while we demand the most intense and even disproportional responses for minor transgressions of those we have decided are one of "them." The political party that cannot formulate its policies and programs into a cohesive and compelling logical case will spend its resources trying to stimulate our negative emotions, trying to get us to make that "us" versus "them" emotional decision, working hard to deepen and reinforce it.
But once you become aware of these ways that we react, and begin to experience your own vulnerabilities, you can immediately start thinking, and start sorting out the wise thinkers and thoughtful moral leaders from the rest. You can see clearly those who are investing their angry energy into rationalizing their emotional commitments, instead of thinking about them. You can see how they become trapped, rigid, and seem unable to back up, unable to see the facts clearly. You can see how they are not able to think their way to a better position. You will watch as they keep only those facts that support their emotional commitment, and reject all that don't. You will usually find this accompanied by the clear symptom, which is angry, almost irrational rage. Be honest. We all do it We all have done it. And, we are all capable of growing and learning a different way.
Ignorance of, and susceptibility to manipulation of these most powerful vulnerabilities are dangerous to a functioning democracy and will stand in the way of creating a unified Nation. The most amoral and Machiavellian political advisers understand this thoroughly and know how to exploit it effectively for economic and political gain. Do you want to be one of the manipulated or not?
Many years ago my dear friend and former partner contemplated running for Mayor of his small town. I attended a seminar presented by a group of senior Republican Party consultants fresh from a successful presidential election campaign. These advisers were brought in at great expense to advise us about how to conduct local elections to get "the right people" into office. After the expected pragmatic recommendations they began to advocate that we each devise careful and intense dirty tricks programs to help our candidates win. They said it was important to keep this plan secret at a high level in the organization so it would not backfire. Then they gave us examples of what seemed like childish and foolish stunts, such as "ordering 20 pizzas to be delivered by the local pizza shop to your opponent's campaign headquarters. Do this often." They said that when the pizza deliveryman was stiffed on his tip, and the restaurant lost money on the order, a deep subconscious negative association would occur, linking your opponent's name to this negative experience. Your opponent would become a "them" to everyone at the pizza company. "Do it a lot," they said. Everyone affected will vote against your opponent, and they won't be able to explain why. They'll 'just have a feeling'." These consultants concluded by saying "you don't have to like it, just do it because you need to win. After all, it's 'us or them' isn't it?"
The only time I saw these consultants speechless was when I rose in the audience of about 500 and asked them point blank how they slept at night. I pointed out that they were committing crimes, displaying contempt for the intelligence of the American voter and creating a kind of cynicism that would eventually destroy the foundations of American democracy. When I said we'd rather lose on the merits of our issues than win on lies, tricks and immorality, the entire audience rose as one and applauded. They felt and understood at a deep gut level what I was saying. Many thanked me because they felt, but could not articulate an inner agony over what they were being told. Afterward three of these consultants approached me to tell me how naive I was, and that only wining matters, because you had to elect your candidate for them to good. I replied that any candidate, who succumbed to this despicable behavior to get elected, would continue to succumb once in office, surrounded with jackals like them. They were not amused. They obviously have continued to perfect their craft, but I learned some powerful lessons as well.
How do we keep ourselves from becoming the victims of such amoral jackals? First we must learn to recognize when it is happening to us. We must catch ourselves when we start operating on emotion instead of thought. We must observe our own thoughts and emotional processes. Listen carefully the next time your subconscious says "I'm not sure what to do with the message I'm hearing right now until I learn if it is coming from one of "us" or from one of the "them." If you cannot evaluate 5the message on its merits, and need to know its source, then you have probably taken a position based on the emotional "us" and "them" instead of your own thinking. When you catch it, stop and question. If you are like me, you will be shocked at how often this occurs, particularly during political season.
Once we learn how to catch ourselves, we have the opportunity to engage our intellect in accurate listening and real; analysis. A powerful tool is to ask these simple questions and try to answer them honestly: "Is that true?" "How do I really know whether that is true or not?" "What is the real significance of it being true or false?"
When I hear a politician say "Cutting taxes on the rich will create jobs. I will cut taxes on the rich. Vote for me to create jobs" I immediately ask if that is true. I have a pretty good life experience to think about that statement. As a real estate developer for 35 years I know very well that it is pander, and it is not true. That is not how jobs are created. I've created thousands of them and never that way. The truth is that in the absence of demand for products and services, when the rich get tax cuts they either pay down debt, or recapitalize, or replace expensive debt with cheaper debt. They don't go create jobs. I can test this truth even more directly. I ask what would happen if I walked into a board room and said "hey, there's a tax cut and some money available so let's go create some jobs" I know with certainty that I would be laughed out of the room. So, I know that this statement is untrue, and the action I'm being asked to take will not likely create jobs. Having actually thought about it when I hear my good friends repeat this statement without questioning it, I can initiate a discussion with them, in a respectful and unheated way. Because I have not just gotten sucked into the emotional reflexive decision, my associates and I can then have a meaningful discussion in which we all grow and learn from each other. What a novel and constructive experience. It is exactly what we all need to learn to do.
So, think clearly about where we are and how got here. Decide to protect yourself from the ugly forces attempting to manipulate you. Understand Joe Biden's warning and start thinking about we will re-unite our Nation.
Paul Eisenberg
copyright 2008
We ordinary citizens can end this if we choose to. For most of my adult life I have been observing myself and other people to understand how otherwise rational people can behave so foolishly. Learning from the work of brain researchers, behavior specialists, and organizational consultants, and making my own observations I have reached some empowering conclusions that I believe are worth sharing.
All humans, except a few rare sociopaths, are hard wired as innately social creatures. We possess instinctive skills and intuition that allow us to use subtle clues to categorize, judge, sort, divide and aggregate the world around us. We define family, clan and nation to create groups of "us" and "them." And we can change the scale and mix of these groupings and the alliances that come with them very quickly. These skills were essential for survival, allowing us to compete, protect, cooperate, flee, fight or freeze in a physically hostile world. These same skills in today's complex social structure quickly get us into deep trouble. We also possess an intellectual capacity to think and analyze, abstract, project and plan. For reasons of survival these intellectual skills can be quickly suppressed by our emotions. In a hostile physical environment, sitting and thinking at the wrong time could get one killed. Under high stress our powerful emotions shut down our intellect. Emotion then overrides thought. Emotion and instinct force us to quickly select from three options: fight, flee or freeze. In today's world, the fourth option, think, is the most difficult to access when we need it most, when we are under duress. It is true that occasionally situations of extreme physical duress requiring fight, flight or freeze still confront us, but most of today's stress is situational, requiring access to our best intellect, our education, the use of our informed intuition... But, that is not how we are wired. Thinking under intense stress is not our natural first reaction. So, we have to learn how to do this, and learn how to resist the instinctive impulses and reflexes that often lead us in exactly the wrong direction, making us want to attack, run or become immobile.
Those who fail to learn these skills remain vulnerable to easy exploitation by those who understand our native inner workings and who have perfected cynical skills that allow them to effectively exploit and manipulate us in both the marketplace and at the polls.
I've watched myself and others, absent a conscious effort to do otherwise, decide what is right and what is wrong, who is good and who is bad, which political party to trust, which sports team to cheer, which company is good and which is bad, based on these initial instinctive definitions of "us" and "them." Hitler understood that he needed to first get people to use these emotional reflexes to define his targeted enemies as "them, different and distinct from "us" in order to get people to do the evil things he asked of them. Politicians and their advisers know that if they can get us to make this kind of deep reflexive commitment against "them" and "their party," that virtually no facts, no behavior, no evil deeds will get us to abandon that emotional commitment and change sides. They know we will henceforth use our intellect to rationalize that reflexive emotional decision, rather than use our intellect to think, and make the best decision in the first place. The weaker the rational case they can argue, the more they are drawn to exploit these techniques and tactics.
If you still doubt this I suggest you simply observe as dispassionately as possible for a while. Watch your own behavior and patterns with a conscious intent to learn. Notice how our emotional loyalties alter the way we use our intellect, blind us the most blatant actions, make us reject clear facts and ignore events. Read the blogs, and think about what is being written with this concept in mind, and suddenly you will fully understand the words being written, the vile attacks, the irrational childlike back and forth name calling. Notice how w e readily dismiss serious and criminal behaviors by people once we have decided that they are one of "us" while we demand the most intense and even disproportional responses for minor transgressions of those we have decided are one of "them." The political party that cannot formulate its policies and programs into a cohesive and compelling logical case will spend its resources trying to stimulate our negative emotions, trying to get us to make that "us" versus "them" emotional decision, working hard to deepen and reinforce it.
But once you become aware of these ways that we react, and begin to experience your own vulnerabilities, you can immediately start thinking, and start sorting out the wise thinkers and thoughtful moral leaders from the rest. You can see clearly those who are investing their angry energy into rationalizing their emotional commitments, instead of thinking about them. You can see how they become trapped, rigid, and seem unable to back up, unable to see the facts clearly. You can see how they are not able to think their way to a better position. You will watch as they keep only those facts that support their emotional commitment, and reject all that don't. You will usually find this accompanied by the clear symptom, which is angry, almost irrational rage. Be honest. We all do it We all have done it. And, we are all capable of growing and learning a different way.
Ignorance of, and susceptibility to manipulation of these most powerful vulnerabilities are dangerous to a functioning democracy and will stand in the way of creating a unified Nation. The most amoral and Machiavellian political advisers understand this thoroughly and know how to exploit it effectively for economic and political gain. Do you want to be one of the manipulated or not?
Many years ago my dear friend and former partner contemplated running for Mayor of his small town. I attended a seminar presented by a group of senior Republican Party consultants fresh from a successful presidential election campaign. These advisers were brought in at great expense to advise us about how to conduct local elections to get "the right people" into office. After the expected pragmatic recommendations they began to advocate that we each devise careful and intense dirty tricks programs to help our candidates win. They said it was important to keep this plan secret at a high level in the organization so it would not backfire. Then they gave us examples of what seemed like childish and foolish stunts, such as "ordering 20 pizzas to be delivered by the local pizza shop to your opponent's campaign headquarters. Do this often." They said that when the pizza deliveryman was stiffed on his tip, and the restaurant lost money on the order, a deep subconscious negative association would occur, linking your opponent's name to this negative experience. Your opponent would become a "them" to everyone at the pizza company. "Do it a lot," they said. Everyone affected will vote against your opponent, and they won't be able to explain why. They'll 'just have a feeling'." These consultants concluded by saying "you don't have to like it, just do it because you need to win. After all, it's 'us or them' isn't it?"
The only time I saw these consultants speechless was when I rose in the audience of about 500 and asked them point blank how they slept at night. I pointed out that they were committing crimes, displaying contempt for the intelligence of the American voter and creating a kind of cynicism that would eventually destroy the foundations of American democracy. When I said we'd rather lose on the merits of our issues than win on lies, tricks and immorality, the entire audience rose as one and applauded. They felt and understood at a deep gut level what I was saying. Many thanked me because they felt, but could not articulate an inner agony over what they were being told. Afterward three of these consultants approached me to tell me how naive I was, and that only wining matters, because you had to elect your candidate for them to good. I replied that any candidate, who succumbed to this despicable behavior to get elected, would continue to succumb once in office, surrounded with jackals like them. They were not amused. They obviously have continued to perfect their craft, but I learned some powerful lessons as well.
How do we keep ourselves from becoming the victims of such amoral jackals? First we must learn to recognize when it is happening to us. We must catch ourselves when we start operating on emotion instead of thought. We must observe our own thoughts and emotional processes. Listen carefully the next time your subconscious says "I'm not sure what to do with the message I'm hearing right now until I learn if it is coming from one of "us" or from one of the "them." If you cannot evaluate 5the message on its merits, and need to know its source, then you have probably taken a position based on the emotional "us" and "them" instead of your own thinking. When you catch it, stop and question. If you are like me, you will be shocked at how often this occurs, particularly during political season.
Once we learn how to catch ourselves, we have the opportunity to engage our intellect in accurate listening and real; analysis. A powerful tool is to ask these simple questions and try to answer them honestly: "Is that true?" "How do I really know whether that is true or not?" "What is the real significance of it being true or false?"
When I hear a politician say "Cutting taxes on the rich will create jobs. I will cut taxes on the rich. Vote for me to create jobs" I immediately ask if that is true. I have a pretty good life experience to think about that statement. As a real estate developer for 35 years I know very well that it is pander, and it is not true. That is not how jobs are created. I've created thousands of them and never that way. The truth is that in the absence of demand for products and services, when the rich get tax cuts they either pay down debt, or recapitalize, or replace expensive debt with cheaper debt. They don't go create jobs. I can test this truth even more directly. I ask what would happen if I walked into a board room and said "hey, there's a tax cut and some money available so let's go create some jobs" I know with certainty that I would be laughed out of the room. So, I know that this statement is untrue, and the action I'm being asked to take will not likely create jobs. Having actually thought about it when I hear my good friends repeat this statement without questioning it, I can initiate a discussion with them, in a respectful and unheated way. Because I have not just gotten sucked into the emotional reflexive decision, my associates and I can then have a meaningful discussion in which we all grow and learn from each other. What a novel and constructive experience. It is exactly what we all need to learn to do.
So, think clearly about where we are and how got here. Decide to protect yourself from the ugly forces attempting to manipulate you. Understand Joe Biden's warning and start thinking about we will re-unite our Nation.
Paul Eisenberg
copyright 2008
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