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January 09, 2005

Toward a Post Cold-War Political Economy

Anderson on Political Economy, Elizabeth Anderson: January 9, 2005

The Cold War was a necessary war.  But many of its battles were not.  On the intellectual front, it distorted our readings of leading figures in the history of political economy so as to recruit them to one side or another.  The classic case of this is scholarship on John Locke, who was eagerly recruited by the likes of Robert Nozick and others to the side of laissez-faire capitalism.  Academic Marxists such as C.B. MacPherson were more than happy to cede Locke to that side, so they could bash him.  Yet, as my last post argued, Locke was hardly the advocate of absolute property rights that Cold Warriors on both sides took him to be.  And as Don Herzog has argued on this blog, Adam Smith was no advocate of pure laissez faire either.  It's time to rethink the canon of political economy from a post-Cold War perspective, in which we don't feel forced to assign figures to one or another side of a war they did not participate in, and that is over for us, too.  Some scholars have made a start on this.  Jeremy Waldron's recent book on Locke, which stresses the Christian roots of his thought, is a step in the right direction.

Here's another legacy of the Cold War that should be discarded:  the convention of classifying the systems of economic organization on a continuous spectrum from left to right, with communism on the far left, then socialism, then the so-called "mixed" economies of Western Europe and North America, and, on the right, the laissez-faire capitalist minimal state, and on the far right, anarcho-capitalism.  We should know this spectrum is in trouble when we recollect that when fascism was still considered a serious alternative, or threat, it was represented as the far-right position.

There are many difficulties with this way of classifying economic alternatives.  For one, the extremes on both left and right are no longer credible options, if they ever were.  (On why anarcho-capitalism is not credible, I share Brad DeLong's views here.)  For another, it doesn't make much sense to represent the economies of Western Europe and North America as "mixtures" of two deeply incompatible and doomed systems.

The American Republic was once understood as a "mixed government," in that it incorporated elements of monarchy, aristocracy, and democracy in its President, Senate, and House, respectively.  Today we find the idea that the jobs of the Senate and House are to represent distinct class interests of society quaint and ridiculous.  A way of classifying regimes that once seemed to make sense in light of the other genuine alternatives available in the 18th century makes no sense at all, now that monarchy and aristocracy are thankfully dead, and our institutions have been democratized, through such reforms as the massive expansion of the franchise, the destruction of slavery, and direct election of Senators.  Good riddance to the idea of "mixed government."

It's time we got rid of the contemporary conceptual analogue to "mixed government"--namely, the idea of a "mixed economy."  We still tend to think that the economies of the advanced democracies in North America and Europe are "mixed" in some kind of combination of laissez-faire capitalism and socialism.  The idea got a lot of traction from the seeming viability of communism as an alternative mode of organizing an economy, plus a mythology of capitalism as at its most pure in its laissez-faire version.  It turned out the both the (far) left and the right had an interest in representing "true" capitalism as laissez-faire capitalism--the former, to stress the ill fates of those who get chewed up in a dog-eat-dog economy, the latter, to celebrate the freedom to be top dog in such a system.

Now that communism is thankfully dead, along with such lamentable economic ideas as centralized economic planning, state ownership of major industries, and comprehensive wage and price controls, which were tried by many "mixed" economies as well as communist regimes, we should start reflecting on the economy we have with a clearer eye.  The key features of the economy that amount to departures from laissez-faire are:

1. State provision of public goods, such as roads, public health programs, and schools.
2. Centralized banking.
3. Regulation of the environment, securities markets, food and drugs, auto safety, etc.
4. Social insurance, and, to a much smaller extent, "welfare."
5. Laws enabling labor unions (weak in the U.S., but much stronger in Europe).

We still have barriers to trade, to be sure, but the long-run trends here are definitely in the direction of reduction, even in the stubborn area of archaic agricultural subsidies, which should certainly be eliminated.  (Here right and left ought to enjoy real common ground.  The (libertarian) right hates them because they involve departures from free-market principles.  Some parts of the left (e.g., NGO's such as Oxfam), including myself, hate them because they impoverish poor countries that could improve their economies if they were free to export their agricultural products, textiles, and cheap manufactures to rich countries without barriers.  Alas, neither element of left or right is numerically dominant in domestic U.S. and European political institutions.  But the WTO may force the hands of the U.S. and Europe anyway:  chalk one up in favor of sovereignty-compromising global institutions.)

What I'm suggesting is that the kinds of departures from laissez-faire that it made sense to call "mixed," in the sense of borrowing elements from socialism/communism--things like centralized planning and state ownership of major industries--have either largely been eliminated or, like trade barriers, are on their way out, and none-too-soon.  The five that remain I support, but that's not the point of this post, and I won't argue that here.  My point is rather that these five should be seen as developments internal to the dynamics of democratic capitalism itself, rather than borrowings from fundamentally alien economic systems.  So it makes no sense to call economies that have them "mixed," as opposed to advanced variants of democratic capitalism.  Public provision of infrastructure and education, and sponsorship of science research, has long been a great engine of capitalist development.  Even if socialism and communism had never existed, it would have been necessary to invent centralized banking to moderate the effects of capitalism's business cycles.  (By contrast, socialists and communists had always hoped to eliminate business cycles through centralized planning.)  Regulation of private sector actions to reduce pollution, ensure public safety, etc. was brought to capitalism by popular demand.  (By contrast, communism never tried to repair its catastrophic environmental policies and its workplace safety record is disastrous, nor was  environmentalism ever much of a socialist issue until capitalist economies embraced it.)  Ditto for social insurance and independent labor unions, neither of which were part of the imaginary communist utopia, nor happy in the dreadful communist reality (recall the wretched state of health care in ex-communist Europe, and Solidarity in Poland).  Socialists and progressive liberals can take the historical credit (or blame, depending on your point of view) for some of these five.  But that's no more reason to call the five "socialist" than it is to call the Senate "aristocratic" because aristocrats designed it.  They are integral parts of advanced capitalist democracies.

Getting beyond the "mixed economy" would have three salutary consequences.  One would be to dethrone "laissez-faire" from its position as definitive of capitalism in a classificatory system that is supposed to be useful for empirical understanding.  (I hasten to add that I don't intend this to imply that laissez-faire capitalism is refuted as a normative ideal.)  Another would be to focus our attention on the varieties of capitalism that actually exist, and on the highly consequential choices we face among different versions of capitalism as we know it.  This would, third and most importantly, remove ideological cover from U.S.-sponsored attempts to impose on developing countries a particularly harsh version of capitalism (involving drastic restraints on public investment in human capital, public health, social insurance, and freedom to organize labor unions) that no advanced capitalist democracy has chosen for itself, on the premise that "capitalism" is the one viable path to development.

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It's official. Communism always results in failure, Socialism isn't much different, and F.A. Hayek and Milton Friedman were right. Even liberals agree (somewhat). [Read More]

Tracked on Jan 20, 2005 1:41:44 AM

Comments

Posted by: D.A. Ridgely

Ms. Anderson writes: “So it makes no sense to call economies that have [state provision of public goods, regulation of various markets, social ‘insurance,’ etc.] "mixed," as opposed to advanced variants of democratic capitalism.”

It does to the extent that mere title or ‘ownership,’ per se, is only peripherally and largely semantically the issue. The real issue is control. To the extent government provides goods and regulates markets it controls that portion of the economy, usually with sub-optimal results. (Note that one of the reasons the U.S. system of centralized banking, the Federal Reserve, works as well as it more or less does is that it is largely independent of the government.)

My “hidden agenda” radar always pings whenever the left recommends a change in terminology, but I agree with Ms Anderson’s third reason. I’m no fan of the IMF or World Bank. I would far prefer that nation-states get out of the development business, hasten that international free trade that she thinks is right around the corner and let capital (and even labor) flow freely. Underdeveloped nations would still have to begin their developing economies largely on labor intensive and natural resource enterprise and would not be able to afford the comparative luxuries of social benefits at first which developed nations have come only recently to expect, but they would stand a far better chance of succeeding if they could trade what they can produce in free markets.

Posted by: D.A. Ridgely | Jan 9, 2005 1:15:26 PM


Posted by: Mona

Elizabeth offers yet another provocative post and says: What I'm suggesting is that the kinds of departures from laissez-faire that it made sense to call "mixed," in the sense of borrowing elements from socialism/communism--things like centralized planning and state ownership of major industries--have either largely been eliminated or, like trade barriers, are on their way out, and none-too-soon. The five that remain I support, but that's not the point of this post, and I won't argue that here. My point is rather that these five should be seen as developments internal to the dynamics of democratic capitalism itself, rather than borrowings from fundamentally alien economic systems.

I would largely agree that it no longer makes sense to interpret post-Cold War economic debate in terms of socialism v. free markets. Socialism lost, quite definitively, and nearly everyone now sees that.

But socialism,i.e., the govt appropriation of the means of production or extensive command and control of same, is not the only way to muck up free markets and to thereby diminish or destroy their benefits; the new threat is coming from those whom Virginia Postrel denominates as "stasists," whom she contrasts with "dynamists" (the good guys). This dichotomy does not imply, and in fact has eroded, the political alliances that held during the Cold War; many on the right are fiercely anti-dynamist, and so, unfortunately are many on the left. (Alliances by such as Pat Buchanan and Ralph Nader are comprehensible only in light of the stasist v. dynamist debate. Ditto for the explosion of socially liberal bloggers all over the Internet who are technophiles and who adore markets, and who ardently demand that govt keep its hands off of e-commerce and e-everything, save for such as child porn.)

As Elizabeth accurately perceives, new alliances should form, and to a good degree they are. She's quite right.

Postrel makes the case better than I could, so I'll quote from her 1999 address to the Mont Pelerin Society and link to the rest:

We are not experiencing "creeping socialism." That is not the challenge we face. If you are used to fighting socialism, and have developed your arguments, tactics, and alliances accordingly, it's tempting to define any form of redistribution or regulation as creeping socialism and therefore to declare the expansion of any and all government programs to be socialism. But that sweeping definition leads to political and economic confusion: It destroys the ability to detect threats early, to form alliances and perceive enemies, and to hone arguments.

We must keep in mind what socialism is, and therefore what it is not. Socialism, creeping or galloping, is an ideological concept with a particular sense of what is important. What distinguishes socialism is its appeal to economic fairness. It declares that markets do not allocate wealth and power fairly, and that political processes will do a better job. Socialism is not simply about moving money from the powerless to the powerful--a goal as old as politics--but about flattening the distribution of income and wealth. Pork-barrel spending is not socialism. Farm subsidies are not socialism. "Corporate welfare" is not socialism. These programs are not ideological in nature. They are about competing interest groups.

Socialism is about claims of justice, and it is also about money: about wealth, income, physical and financial capital. It is an ideology based on allocating economic resources. It may try to achieve that goal by nationalizing assets, by command-and-control regulation, or by taxation and redistribution. But the goal is the same: to rearrange society's wealth, generally from the "haves" to the "have nots." Rearranging wealth (or income) is not the only possible ideological goal of economic regulation. It is merely the goal we have become accustomed to since the late 19th century.

Market processes do more than determine who winds up with which resources. That means that socialism is not the only conceivable ideology that might launch an attack on markets and, conversely, that anti-socialist conservatives are not the only possible allies for classical liberals in defense of economic freedom.

Markets have many characteristics. They serve and express the individual pursuit of happiness. They spread ideas. They foment change in the ways people live and work, and in what character traits are valued. They dissolve and recombine existing categories, from artistic genres to occupations. They encourage the constant search for improvements, and they subject new ideas to ruthless, unsentimental testing. Markets evolve through trial and error, experimentation and feedback. They are out of anyone's control, and their results are unpredictable. It is this dynamism of markets--their nature as open-ended, decentralized discovery processes--that attracts the greatest ideological opposition today.

The most potent challenge to markets today, and to liberal ideals more generally, is not about fairness. It is about stability and control--not as choice in our lives as individuals, but as a policy for society as a whole. It is the argument that markets are disruptive and chaotic, that they make the future unpredictable, and that they serve too many diverse values rather than "one best way." The most important challenge to markets today is not the ideology of socialism but the ideology of stasis, the notion that the good society is one of stability, predictability, and control. The role of the state, in this view, therefore, is not so much to reallocate wealth as it is to curb, direct, or end unpredictable market evolution.

Stasists object to markets because the decentralized evolution of market processes creates not just change but change of a particular sort. By serving the diverse desires of individuals and by rewarding the innovators who find popular improvements, markets constantly upset unitary notions of what the future should be like. Markets don't build a bridge to the future--a path from point A to point B across a scary abyss; they continually add nodes and pathways in a web of many different futures. Market processes make it impossible to make society as a whole adhere to a static ideal--whether that ideal is a traditional way of life, the status quo, or a planner's notion of the one best future.

Go here for the rest: (sorry, not sure how some of y'all are inserting hyperlinks): http://reason.com/9911/fe.vp.after.shtml

Posted by: Mona | Jan 9, 2005 1:28:56 PM


Posted by: Jim Hu

Mona,

use <a href="URL">link text</a> Like this.

Moderators may want to move this to the Housekeeping threads.

Posted by: Jim Hu | Jan 9, 2005 2:02:48 PM


Posted by: Mona

Thank you, Jim Hu! My ego is sufficiently intact to admit frustrating ignorance, so leaving that up may aid those fearful of exposing themselves. ;)

Posted by: Mona | Jan 9, 2005 2:36:50 PM


Posted by: frankly0

Postrel's remarks about "socialism" seem to miss the point about how modern "democratic capitalism" (to use Elizabeth Anderson's term here) really focuses its efforts.

How is, say, governmental support of such infrastructure as roads and education really intended as a hit on the "dynamism" of the larger market economy? How does environmental and labor regulation really do so? How does Social Security and Medicare, or would comprehensive public health?

One might argue that in each of these cases, some aspect of the market economy -- education or health care, for instance -- is being controlled, but those aspects are being controlled precisely because they have demonstrated, while being uncontrolled, that they failed to provide some minimal level of service to all members of our society.

Where, in all this, is there any attempt to prevent the emergence of very rich people or corporations, or to rein in their "dynamic" behavior? Was Bill Gates in any important way hampered by environmental regulation or labor regulation or Social Security or Medicare? Was Warren Buffet? Where's the lack of "dynamism", outside of those very areas where the market has demonstrably failed to provide an adequate solution for many of our citizens?

Postrel seems committed, as do many libertarians, to overgeneralization, because that is probably the only way they can make out an emotionally appealing argument. It sounds great to laud, in general, the dynamic wonders of the market, and it seems terrible to be against those wonders. But what Postrel can't do is defend adequately are the very specific problems that democratic capitalistic countries mean to address in their programs. She can't do so because those problems are the precise locations of the limitations of a market economy.

Posted by: frankly0 | Jan 9, 2005 3:08:40 PM


Posted by: Micha Ghertner

How does Anderson come off equating radical socialism and radical capitalism as tried and failed ideologies? By linking to some sarcastic nonsense posted by Brad DeLong a few months ago? Is this what constitutes a serious argument in Anderson's eyes?

Her last post excluded radical capitalists from the debate by calling us "bomb-throwing anarchists." In her current post, she has switched gears: no longer arguing for the state on moral grounds by defending the legitimacy of taxation, she now claims that the state is necessary to provide faux public goods likes education and health care, to centralize banking, and to regulate markets in lots of other ways. Of course, she ignores the huge amount of economic literature to the contrary - from Friedman, Becker, Stigler and others of the Chicago School, to Buchanan, Tullock, and others of the Public Choice "Virginia School," to Mises, Hayek, Rothbard, Kirzner, and others from the Austrian School, to various other economists who don't fit neatly into any of the above mentioned categories. None of these departures from laissez-faire are settled issues, and a significant number of contemporary economists disagree with Anderson's claims of necessity and desirability.

Whether she wants to call the system we currently live under a "mixed economy" or something else, fine. But she should be clear that the system she supports is certainly a departure from laissez faire capitalism and the free market. Perhaps she thinks those departures are necessary, desirable, and morally justified. But they remain departures nonetheless.

Lastly, it is certainly true that we don't have strong empirical support for how an advanced society would fare under a system of radical capitalism. That is unfortunate, but it is certainly better to have a lack of strong empirical support for one's preferred system than a heap of strong empirical evidence against, as we do for planned economies of all shapes and sizes.

Anthony de Jasay put it well in Justice and Its Surroundings, writing:

Throughout its history, humanity has permanently displayed a physical condition classified in ordinary language as "illness" or "disease." There has always been what Hume would call a "constant conjunction" between human life and illness.

The Hobbesian hypothesis that illness is a necessary condition of the human species has strong empirical support. It has never been falsified.

Throughout its history, humanity has permanently displayed a social condition classified in ordinary language as "the state" or "government." There has always been what Hume would have called a "constant conjunction" between human society and government.

The Hobbesian hypothesis that government is a necessary condition of social life has strong empirical support. It has never been falsified.

Arguments in favour of the prevention or eradication of disease are evidently misguided, and may be dangerous. They are often put forward by naive persons with little understanding of reality.

Arguments in favour of fostering society's capacity to evolve anarchic orders and live with less or no government are evidently misguided, and may be dangerous. They are often put forward by naive persons with little or no understanding of reality.

To reject radical political positions simply because they are radical, unpopular, or lack sufficient empirical support is to reject liberal democracy, abolition of slavery, and equal rights for women. After all, liberal democracy, abolition of slavery, and equal rights for women were all considered radical utopian daydreams at one point in history, as were many other progressive political visions which we now accept as commonplace and desirable.

Think about how crazy democracy must have seemed to people living under a monarchy, or how outlandish abolition was to those living with such a “peculiar” institution as slavery, or how absurd feminism would appear to a person born into an anachronistic patriarchy. If blogs had existed back then, I’m sure a majority of bloggers would have ridiculed those who advocated such radical proposals. This should give pause to those who believe that our current society is not in need of radical change, gradually achieved.

Posted by: Micha Ghertner | Jan 9, 2005 3:09:43 PM


Posted by: John T

Elizabeth, I too find myself getting a little nervous when liberals start the labels have to be changed or don't matter talk. For the most part they are fairly well used and understood. You say the right is represented by laissez-faire and anarcho-capitalists. I think not. There are plenty of coservatives who accept some of the policies you mention,perhaps to a lesser degree depending on the issue. For example,having heard all the con arguments it is still beyond me why we can't do more to encourage school choice. As to the mixed economy it's a reality. Public utilities,subsidies[remember ethanol] the glories of the FDA,the very spending and placement of state and federal tax dollars creates a "mix" that can't be ignored. And I could make the list longer. The developing countries,some of whom have been developing rather slowly for fifty years or so, could use a little more free enterprise[did you use that phrase Elizabeth?]. As to Nozick using Locke,why not. Doesn't everbody. The point being that Locke is something like Nietzsche. Everybody reaches in and grabs what they want,or what they think they understand. You may want to read ,unless you already have,Wilmoore Kendall's work on Locke. An eye opener. Regards

Posted by: John T | Jan 9, 2005 3:23:00 PM


Posted by: Micha Ghertner

frankly0,

One might argue that in each of these cases, some aspect of the market economy -- education or health care, for instance -- is being controlled, but those aspects are being controlled precisely because they have demonstrated, while being uncontrolled, that they failed to provide some minimal level of service to all members of our society.

This is an argument for the public provision of charity to help pay for health care and education. It is most certainly not an argument for the state monopolizing or heavily regulating the entire health care or schooling industries.

Where, in all this, is there any attempt to prevent the emergence of very rich people or corporations, or to rein in their "dynamic" behavior?

Why would we want there to be an attempt to prevent the emergence of very rich people? That's precisely what Postrel is arguing against - against statism, stability and control and in favor of dynamism, change, and progress - in short, creative destruction.

It's not often I find reason to quote anything Ayn Rand had to say, but when I read statements like yours, her words are spot on:

Every movement that seeks to enslave a country, every dictatorship or potential dictatorship, needs some minority group as a scapegoat which it can blame for the nation's troubles and use as a justification of its own demands for dictatorial powers. In Soviet Russia, the scapegoat was the bourgeoisie; in Nazi Germany, it was the Jewish people; in America, it is the businessmen.

Posted by: Micha Ghertner | Jan 9, 2005 3:23:07 PM


Posted by: frankly0

Micha,

Just a quick answer to this point:

Why would we want there to be an attempt to prevent the emergence of very rich people? That's precisely what Postrel is arguing against...

You misunderstand me here. My point is that Postrel, and other libertarians, are basically arguing that we need to be on the guard against the new "socialism" and "statism", which amounts to the view that we need to regulate the dynamism of capitalism and redistribute incomes.

I'm pointing out something pretty obvious, namely that democratic capitalistic countries such as the United States do NOT have as a goal anything that would prevent the emergence of a Bill Gates or a Warren Buffet. Yet this would seem to be the implication of Postrel's remarks.

Isn't the existence of Bill Gates and Warren Buffet pretty good evidence that the dynamism of capitalism is very robust in the US? Again, how has our support for public education and Social Security and Medicare, etc., stood in their way?

Posted by: frankly0 | Jan 9, 2005 3:41:06 PM


Posted by: Rob Kar

Wittgenstein once said that "the philosopher's disease is a one-sided diet of examples"--by which he meant to refer to the common practice of beginning with one or two paradigmatic intuitions about phenomena like meaning, or the right, and then building whole theories around them, without proper sensitivity to how our pre-theoretical intuitions change in a host of other cases. This impulse--he thought--was in all of us, and it can influence our attempts to understand political and economic legitimacy as well. Wittgenstein thought this made for bad philosophy. But what Liz Anderson's post further suggests, I think, is that when theories like this are built and used in part to define one method of social and economic organization in opposition to a dominant competitor, it can become that much more difficult to see real and important opportunities. We begin to define ourselves in accordance with distorted characterizations of our practices, and we begin to see deviations from the distortions as breaches of faith. Our lives are thus left distorted, much as the rebellious youth who has defined herself only in opposition to her upbringing is left with a caricature of a self rather than a highly individuated self.

In popular discourse about politics during the Cold War, both sides often latched onto simple cases around which to build their rhetoric. Laissez-faire economists often began with a picture of private property as a bundle of absolute rights to use, exclude others from use and to transfer, and a picture of contract as a realm of pure private orderings of our relations through reciprocal promise-makings by which we reveal our rational preferences. Thus the picture of the wholly unregulated market as a well-oiled engine for the production of social welfare and efficient states of the world--a picture backed up by clear moral intuitions about the sanctity of possession and promise. (Thus also the ideal of pure procedural justice.) Socialists, on the other hand, often began with equally vivid moral intuitions relating to fairness, equality, solidarity, and public-spiritedness. Around these intuitions they built theories banishing institutions like private property and allowing for centralized regulation and distribution of goods and services.

Fortunately, our practices have always been more nuanced than these caricatures would suggest. A detailed study of property law shows numerous deviations from the so-called paradigm of private property, in cases like those of adverse possession, zoning, nuance laws, takings, easements and public roads and highways. A detailed study of contract reveals numerous analogous deviations, in doctrines like those of voidness for public policy, unconscionability, duress, inacapacity, denials of specific performance for unfairness, and the like. While some of these aspects of our practices have been less pronounced during the height of laissez-faire ideology, there have always been deviations like these. And quite often they arise not from any ideology, but from judges facing concrete cases in which their intuitions (sometimes surprisingly!) flout any pre-existing ideological stance they may have had.

Our practices have, in other words, often been richer than our rhetoric, and they reveal commitments to principles that are not fully captured by laissez-faire economics. We no longer need to caricature ourselves to distinguish ourselves from communist regimes, and, hence, a better understanding of how ingredients of fairness pervade and perfect capitalist democracies and markets should--in my view--be thought of as part of the development and acknowledgment of our distintive heritage. I thus believe Liz Anderson is right: it's time to shed our old (and seriously tired) opposition point, time to free ourselves from its remaining grip. We should recognize that a commitment to fairness, in some guise, is not a betrayal of our system but an underappreciated ingredient that has been there all along, helping the system to flourish. And as we shed the contrary caricature and attempt to understand better how capitalist democractices work, we should thus ask without blinkers: how exactly do utility and fairness come together, both through markets and through regulation, in ways that are characteristic of flourishing capitalist democracies? In what ways might these practices be improved along both or either axes? And, yes, I believe that for those on the left, this will involve acknowledging the value of markets as well, rather than aiming to define the left in stark opposition to them.

Rob Kar
Loyola Law School, Los Angeles

Posted by: Rob Kar | Jan 9, 2005 3:45:45 PM


Posted by: Mona

Micha gets it right: This is an argument for the public provision of charity to help pay for health care and education. It is most certainly not an argument for the state monopolizing or heavily regulating the entire health care or schooling industries.

As is so often the case, franklyO and others seem ignorant regarding what it is that many libertarians actually argue, and unfamiliar with what their "best authorities" have offered. Hayek does not reject all govt expenditure on education or health care. But he waxes long and persuasively on the need to prevent the state from controlling and monopolizing, either de jure or de facto, most of the services for which it pays. (Like most libertarians, Hayek endorses a state monopoly on force, domestic or military.)

Dynamists oppose much regulation, either actual or proposed, and that is where they run up against Ms. Anderson or frankly0, who seem oblivious to the fact that that which the state pays for it too often ends up controlling and strangling. This is why Hayek (with some reservations) and Friedman prefer vouchers over a large public school system. They do not reject that we lack on interest in ensuring some degree of educational attainment among the citizenry, but they seek to minimize the regulatory harm resulting when one takes the King's coin. Hayek lived before the term was coined, but he was a dynamist, and did not oppose all government provision of funds for services of the sort Ms. Anderson or franklyo extol. (Hopefully others can address the health care matter, because I have to go live real life for much of the rest of the day. Certainly dynamist libertarians tend to be dubious of the "benefits" of the FDA.)

And like you, I seldom make recourse to Ayn Rand. But your use of her in reply to the tired claim that the state should be about preventing the existence of "very rich people" is apposite. Bill Gates got very rich, and here we all are having this fun, and the better for it.

Posted by: Mona | Jan 9, 2005 3:53:53 PM


Posted by: Jim Hu

frankly0

Postrel seems committed, as do many libertarians, to overgeneralization, because that is probably the only way they can make out an emotionally appealing argument. It sounds great to laud, in general, the dynamic wonders of the market, and it seems terrible to be against those wonders. But what Postrel can't do is defend adequately are the very specific problems that democratic capitalistic countries mean to address in their programs. She can't do so because those problems are the precise locations of the limitations of a market economy
I find it amusing that you criticize Virginia Postrel and other libertarians for overgeneralization by using an overgeneralization. Have you actually read Postrel's stuff? Are you attacking her critique of Bill Bennett and Pat Buchanan?

She wrote a whole book, the Future and its Enemies about how creative solutions to problems arise through entrepreneurial activity, and how this is often met with regulatory responses that are there more to protect the vested interests of the status quo than to address the failures of capitalism.

Posted by: Jim Hu | Jan 9, 2005 3:58:36 PM


Posted by: frankly0

And like you, I seldom make recourse to Ayn Rand. But your use of her in reply to the tired claim that the state should be about preventing the existence of "very rich people" is apposite. Bill Gates got very rich, and here we all are having this fun, and the better for it.

Talk about myths -- who, on the left, outside of some true moonbats, have ANY difficulty with existence of a Bill Gates or a Warren Buffet? Indeed, they are very much applauded by most people on the left in virtue of their remarkable achievements. That they themselves appear to think they are, if anything, undertaxed (certainly Buffet says so, and Bill Gates Sr says so) only adds to the admiration.

Posted by: frankly0 | Jan 9, 2005 4:04:34 PM


Posted by: frankly0

Jim Hu,

My remarks about Postrel were based on the passage that had been quoted. Certainly there her basic argument against "socialism" -- which, presumably, includes essentially all aspects of democratic capitalism that deviate from libertarian economies -- is that it is meant to restrict the "dynamism" of capitalism, and redistribute incomes. My point is that this is a vast overgeneralization, and that point stands. The real goal of democratic capitalism is to provide regulation and support in very specific areas, related to what is perceived as the public good. Not all these programs and legislation are necessarily optimal, and may require trial and error or even elimination to get right, but the intent here is falsely portrayed by Postrel.

Again, exhibits A and B here are Bill Gates and Warren Buffet, roundly admired by virtually everyone I know on the left.

Posted by: frankly0 | Jan 9, 2005 4:15:06 PM


Posted by: John T

FranklyO, I missed the applause of Bill Gates when he was taken to court by the Dept, of Justice case argued by Mr Boies. From which gallery did it emanate? As long as he pays lip service to the recieved verities and offers to assist Bill Clinton in his charitable endeavors he's alright but he must watch his step. As for Warren Buffet isn't he the guy who just out of the box as arnold's financial advisor called for a tax increase? We can guess why he's applauded in certain circles. Do they deliver newspapers in your neighberhood? Big business is incessantly lambasted at whatever opportunity Big Media can expoit. Mona and Micha, you should have recourse to Ayn Rand more often.

Posted by: John T | Jan 9, 2005 4:38:55 PM


Posted by: Don Herzog

I strongly oppose bashing business and businessmen. But if I were going to single out a "persecuted minority," in Rand's phrase, it sure wouldn't be businessmen. Not now, and, putting it mildly, not in 1962, when Rand first published this view.

Posted by: Don Herzog | Jan 9, 2005 4:49:18 PM


Posted by: frankly0

FranklyO, I missed the applause of Bill Gates when he was taken to court by the Dept, of Justice case argued by Mr Boies.

That issue had to do with whether or not Microsoft was a monopoly, and required some regulation because of it. My understanding is that even most "supply-side" economists admit that monopolies DO sometimes exist, and DO require special regulation when they do.

They may or may not agree that Microsoft is a monopoly, and may or may not agree about just how it should be regulated if it is.

One can greatly admire Bill Gates achievements and still think the Microsoft is a monopoly that needs regulation. That would certainly express my point of view, in any case.

Posted by: frankly0 | Jan 9, 2005 5:01:05 PM


Posted by: D.A. Ridgely

Hmmmmmm... Could it be Mr. Herzog provided that link so we'd remember that Alan Greenspan was an early Randite?

Nah, couldn't be.

Posted by: D.A. Ridgely | Jan 9, 2005 6:11:22 PM


Posted by: Don Herzog

No, it couldn't be, because we all knew that already.

Posted by: Don Herzog | Jan 9, 2005 6:12:36 PM


Posted by: Steven Horwitz

Elizabeth Anderson writes:

We still have barriers to trade, to be sure, but the long-run trends here are definitely in the direction of reduction, even in the stubborn area of archaic agricultural subsidies, which should certainly be eliminated. (Here right and left ought to enjoy real common ground. The (libertarian) right hates them because they involve departures from free-market principles. Some parts of the left (e.g., NGO's such as Oxfam), including myself, hate them because they impoverish poor countries that could improve their economies if they were free to export their agricultural products, textiles, and cheap manufactures to rich countries without barriers.

Sigh. In an entry that begs us to throw out old dichotomies, Liz invokes left-right to typical effect here. I'm a libertarian and I hate agricultural subsidies for exactly the same reason you do! Why draw the distinction between "free-market principles" and "impoverishing poor people?" Isn't it possible that libertarians dislike such subsidies AND like free-market principles BECAUSE the former hurt the poor and the latter help them? I know few libertarians who are committed to libertarian principles *regardless of the consequences*. (In fact, it's always a good thing to ask a libertarian if he/she would stick to his/her principles if it turned out they created poverty and war.) The dichotomy between "free-market principles" and "helping the poor" is a false one to libertarians and your argument is precisely the sort that raises libetarian hackles by implying that we don't care about the poor (or at least they're less important than our "principles.") Why not just say libertarians and the left agree that subsidies are bad for poor countries and be done with it?

Liz also writes:

Even if socialism and communism had never existed, it would have been necessary to invent centralized banking to moderate the effects of capitalism's business cycles.

Now here is an empirical-historical claim that is open to debate. For example:

1. Is it true that market economies lacking central banks were all subject to business cycles inherent to capitalism?

2. Is it possible that in market economies that did have such cycles but no central bank, that the cycles were caused by other forms of government intervention/regulation?

3. Is it true that central banks, and government involvement in money creation more generally, were begun explicitly to solve business cycles, and that no other explanation might be a better one?

I would argue that the answer to these are: no, yes, and no.

I would also argue that there is ample historical evidence to at least make this *an open question* and not the "given" that Liz takes it to be.

Just as one example... the US was subject to business cycles before the creation of the Fed. But in all of those periods, the production of money was significantly regulated by the state and/or federal government in other sorts of ways. One can construct a historical narrative that explains the post-Civil War, pre-Fed panics in the US as unintended consequences of various government regulations (in fact, I've done so in my first book and other papers, not to mention the work of numerous other, better, economists and historians). Similar historical work exists demonstrating the macro stability of central bank-less economies. And there is a whole body of work that explores, theoretically, whether or not an economy without a central bank could avoid recession, depression, inflation, deflation, etc.. As Mona and others have said, the literature is out there.

On the question of the origins of central banks, it would be interesting for the Left to inquire into this issue more deeply. What you might find is that a great deal of banking regulation, including and especially the creation of central banks, is rooted in the need for state revenue, particularly for fighting wars. Where the public was unwilling to lend or be taxed, grabbing the printing press (or more sophisticated versions of the same thing) proved to be an irresistable temptation for warring governments. It's not coincidental that the major changes in the US federal government's role in the banking system line up very very closely with times of war (1811-1816, 1863, 1913-14, 1971 for starters - 1933-34 is an outlier, but the Great Depression was certainly a revenue beast).

The link between central banking and militarization seems to me to be a place where libertarians and the left might have some common cause. But getting there means getting past the simple chalkboard story that capitalism has endemic cycles that all-knowing and public-spirited folks tried to solve with central banks. The historical story is a lot more complicated.

Posted by: Steven Horwitz | Jan 9, 2005 6:19:47 PM


Posted by: D.A. Ridgely

My mistake. I'd forgotten that I already knew it and therefore didn't have to remember.

A brief note on Gates and Buffet, while I'm bantering here at half-time. Gates has been a ruthlessly successful businessman since his early success, but that early success depended as much on fabulous stupidity by IBM as it did on his being so clever. In any case, Mona, we'd still have the internet without Gates and probably be enjoying it more if Microsoft hadn't become the market share leader with PC platforms.

Buffet is fascinating because he is so overwhelmingly conventional. His genius lies almost exclusively in patience and fundamental analysis. Moreover, as he would admit, he's never produced anything in his life except profits. I have no idea what his politics are, but if Buffet isn't a rock-ribbed Republican, he certainly is at least rock-ribbed.

As for their views on taxes, suffice it to say that high taxes are one more luxury the rich can afford better than the rest of us.

Posted by: D.A. Ridgely | Jan 9, 2005 6:26:03 PM


Posted by: Jonathan Wilde

We still have barriers to trade, to be sure, but the long-run trends here are definitely in the direction of reduction, even in the stubborn area of archaic agricultural subsidies, which should certainly be eliminated. (Here right and left ought to enjoy real common ground. The (libertarian) right hates them because they involve departures from free-market principles. Some parts of the left (e.g., NGO's such as Oxfam), including myself, hate them because they impoverish poor countries that could improve their economies if they were free to export their agricultural products, textiles, and cheap manufactures to rich countries without barriers.

Like Steven Horowitz, I see myself neither on the right nor the left, but I also favor true free trade for the same reasons as you - trade makes just about everyone (not just poor countries) better off. It raises the standard of living and advances civilization. I want those in poor countries to prosper; I want Americans to prosper. I'm not sure why you think libertarians belong on the "right". Many conservative politicians argue for protectionism and corporate welfare.

For the same reasons that I support free trade, I support free banking, federalism, ending tax writeoffs for employer provided healthcare, and complete and total abolition of the public school system. Everyone deserves better, especially the poor.

Posted by: Jonathan Wilde | Jan 9, 2005 7:12:19 PM


Posted by: Glen Raphael

Elizabeth: It's fine for Brad DeLong writing in his own blog (and John and Belle, writing in theirs) to display rational ignorance on anarchocapitalism and dismiss it with a snide remark or two, but you're in a different position here. You are posting to a blog in which the left is allegedly trying to understand and engage non-left positions constructively and you have been posting about how those who advocate private property institutions are being intellectually inconsistent. In such a position, you have a little more responsibility to try to understand opposing arguments before you dismiss them.

Of course, it's an open question whether libertarian or anarchocapitalism really belongs on the right - I got there from the left, myself. So feel free to say "I don't consider them to be on the right". But if you do consider them to be on the right, you might want to make a little more effort. If it takes you less than a minute to think of an objection to what they say, consider that they might have have thought about that objection and have arguments as to why it doesn't apply the way you think it does.

Otherwise, you could just assume your opponents are evil and stupid and not worthy of that consideration. But if you do, you might want to change the name of the blog. I suggest "left2left". :-)

Posted by: Glen Raphael | Jan 9, 2005 8:51:56 PM


Posted by: Glen Raphael

Elizabeth: It's fine for Brad DeLong writing in his own blog (and John and Belle, writing in theirs) to display rational ignorance on anarchocapitalism and dismiss it with a snide remark or two, but you're in a different position here. You are posting to a blog in which the left is allegedly trying to understand and engage non-left positions constructively and you have been posting about how those who advocate private property institutions are being intellectually inconsistent. In such a position, you have a little more responsibility to try to understand opposing arguments before you dismiss them.

Of course, it's an open question whether libertarian or anarchocapitalism really belongs on the right - I got there from the left, myself. So feel free to say "I don't consider them to be on the right". But if you do consider them to be on the right, you might want to make a little more effort. If it takes you less than a minute to think of an objection to what they say, consider that they might have have thought about that objection and have arguments as to why it doesn't apply the way you think it does.

Otherwise, you could just assume your opponents are evil and stupid and not worthy of that consideration. But if you do, you might want to change the name of the blog. I suggest "left2left". :-)

Posted by: Glen Raphael | Jan 9, 2005 8:51:56 PM


Posted by: John T

FranklyO,perhaps you had better define monoply,maybe you can raise John Sherman from the dead to help you. Monoply is what Mother government says it is,case closed. Microsoft was sued because they were bundling products "unfairly" & using market strength to do so. With a couple of beers under your belt I guess that's monopoly. My larger point is that the rich are to a considerable degree detested,and some of them are,I would hazard a guess,businessmen. You might think of that as income tax morality. The higher the return the worse the person. The lower the return pour the cup of human kindness over his flat head,with tax dollars of course. Mr. Herzog,are you paying attention? With or without Ayn Rand this bias goes back at least to the founding of the republic,given impetus by Jackson's crusade against the 2nd Bank of the U.S.,propelled by W J Bryan,T. Roosevelt,the muckrakers etc. ad nauseam. Did I leave out FDR's NRA Blue Eagle. It is a continuous strain in American society and politics and it didn't stop with JFK Mr Herzog. Note Kennedy forcing Big Steel to roll back price increases and calling the executives bastards in the process,about the time Ayn Rand wrote her piece. Just recall the ritualistic declamations against the rich in every political campaign. Who said "envy is the engine of democracy". It may have Revel but i'm not sure. Thanks to anyone who had the patience to wade thru this diatribe and who shows mercy for my having misspelled monopoly twice.

Posted by: John T | Jan 9, 2005 8:55:02 PM


Posted by: Don Herzog

John T, the problem with Rand's claim is not that actually, no one ever criticizes business, not that there's no envy and resentment against the rich, or any such nonsense. The problem is that in 1962 -- in the midst of the civil rights movement, before the passage of federal civil rights legislation, with southern state governments and murderous private actors organized to maintain white supremacy -- it was beyond weird to nominate big business as America's "persecuted minority." Or so I think. And I think too that you learn something about Rand's vision of the world when you see that that's the choice she made.

Posted by: Don Herzog | Jan 9, 2005 9:01:16 PM


Posted by: John T

Don Herzog, good,thoughtful response. Still we all have our own special axe to grind. Rand viewed the misuse of altruism as a curse on mankind something that transcended time and culture. She also saw it as an enemy of human progress and material benefits. She never came close to excusing predjudice and i do believe she spoke against it though I may be wrong. Nonetheless the worst of institutional predjudice is past us but the envy of those who have more than us is still alive and a broadsword in the hands of demagogues. Overall,but not entirely,I rather like Rand's worldview

Posted by: John T | Jan 9, 2005 9:56:03 PM


Posted by: Steven Horwitz

Actually, to clarify John T's point, Rand was an outspoken critic of racism, see for example: http://www.freedomkeys.com/ar-racism.htm . It's interesting in light of Don's comments to read what she had to say about the South in that essay, which was published in Sept of 1963, and to ponder how she could say what follows as strongly as she does yet still put the businessman as the *most* persecuted minority. (Warning to leftist readers, there are parts of this essay that you will not be so sympathetic to, but not because she underplays the evil of racism.) Rand wrote:

"The policy of the Southern states toward Negroes was and is a shameful contradiction of this country's basic principles. Racial discrimination, imposed and enforced by law, is so blatantly inexcusable an infringement of individual rights that the racist statutes of the South should have been declared unconstitutional long ago.

The Southern racists' claim of "states' rights" is a contradiction in terms: there can be no such thing as the "right" of some men to violate the rights of others. The constitutional concept of "states' rights" pertains to the division of power between local and national authorities, and serves to protect the states from the Federal government; it does not grant to a state government an unlimited, arbitrary power over its citizens or the privilege of abrogating the citizens' individual rights.

It is true that the Federal government has used the racial issue to enlarge its own power and to set a precedent of encroachment upon the legitimate rights of the states, in an unnecessary and unconstitutional manner. But this merely means that both governments are wrong; it does not excuse the policy of the Southern racists.

One of the worst contradictions, in this context, is the stand of many so-called "conservatives" (not confined exclusively to the South) who claim to be defenders of freedom, of capitalism, of property rights, of the Constitution, yet who advocate racism at the same time. They do not seem to possess enough concern with principles to realize that they are cutting the ground from under their own feet. Men who deny individual rights cannot claim, defend or uphold any rights whatsoever. It is such alleged champions of capitalism who are helping to discredit and destroy it. "

Posted by: Steven Horwitz | Jan 9, 2005 10:13:53 PM


Posted by: Don Herzog

Yes, that's right, and I'm afraid it heightens what's surreal. Then again, never let it be said that libertarians are without a sense of humor -- or good prose style -- on these matters: check this.

Posted by: Don Herzog | Jan 9, 2005 10:22:30 PM


Posted by: Micha Ghertner

frankly0,

My point is that Postrel, and other libertarians, are basically arguing that we need to be on the guard against the new "socialism" and "statism", which amounts to the view that we need to regulate the dynamism of capitalism and redistribute incomes.

I have not read enough Postrel to be sure, but I sincerely doubt she ever made an argument even close to one like "we must regulate capitalism in order to save it from itself." That is the classic argument put forth by New Deal leftists, who find Marxism a bit too radical, but are extremely unsatisfied with capitalism and instead favor a mixed economy -- that is, a mix of the two extremes, capitalism and socialism. This is precisely what people like Anderson want and what people like Postrel warn against. I don't see how you reached your conclusion from Postrel's argument.

Isn't the existence of Bill Gates and Warren Buffet pretty good evidence that the dynamism of capitalism is very robust in the US? Again, how has our support for public education and Social Security and Medicare, etc., stood in their way?

The existance of Bill Gates and Warren Buffett isn't evidence for either side. It could very well be the case, if my side is correct, that these two achieved in spite of statist obstacles, not because of them. Were these obstacles not in our way, I would expect there to be a great many more Gates's and Buffetts in the U.S., and nearly everyone else would be much wealthier too. It speaks to the dynamism and power of capitalism that it can do great things even in the face of misguided market interventions.

Posted by: Micha Ghertner | Jan 9, 2005 10:32:11 PM


Posted by: Micha Ghertner

I didn't intend to turn this thread into a discussion of Rand or the merits of anti-trust law. I used the Rand quote only in response to frankly0's call to prevent the emergence of very rich people and corporations. I now realize that I incorrectly interpreted frankly0's remarks. He was not calling for a seizure of or ban on extreme wealth. He was using Bill Gate's extreme wealth as evidence that the mixed economy as it currently exists is really not so bad, really not so socialist, since people can still make a great deal of money.

Which is true. People can still make a great deal of money. But this is a meaningless observation unless we first ask the question: Compared to what? Compared to full-scale socialism? Certainly. Not even the most rabid anti-communist would ever claim that the U.S. government's interventions into the market are worse than the Soviet Union's. But at the same time, people on my side of the ideological divide argue that the creation of wealth would be even greater in the absence of market interventions. One cannot conclude much of anything from the existence of Bill Gates or Warrent Buffett, other than the startlingly obvious and noncontroversial notion that things aren't as bad as they could be.

Now, I don't think the left as a whole is guilty of Rand's accusesation. And like much of what Rand says, this quote is filled with hyperbole and overgeneralization. But there is an element of truth to her statement - that what unites much of the left and the right is a scapegoating of businessmen and corporations for all that's wrong with the world. We see this from the social conservatives who accuse Hollywood , the news media, and the music industry for corrupting the innocence of children to make a profit. We see this from Buchananite isolationists like Lou Dobbs who whine and moan about "outsourcing America" and the loss of American jobs all to turn a selfish profit. We see this from the Naderite left, who call for a maximum income - a 100% tax on all income over ten times the minimum wage. And we now see this from even the moderate left, who see nothing wrong with a steeply progressive death tax, effectively seizing a huge portion of the fruits of a person's labor, or their parent's labor.

And let's not forget the favorite hobbyhorse of both the left and the right - Wal-Mart bashing. When one realizes that K-Mart, Sears, Target, and every other large retailer engages in the same business practices for which Wal-Mart is routinely vilified, and yet they never face the same sort of criticism, one must reach the only plausible conclusion - that Wal-Mart is hated for no other reason than being so damn successful. This hatred of success, this jealousy (which, apart from our terribly misguided foreign policy, largely explains worldwide anti-Americanism) is Rand's most profound realization.

Posted by: Micha Ghertner | Jan 9, 2005 11:31:54 PM


Posted by: rtr

The wealth of Bill Gates is mostly State created through monopoly protection of Patent and Copyright. As such it is a hidden tax against all that causes higher prices to be paid for Microsoft products and barriers to technological innovation from competing firms. It is theft of the use of other’s material property to be shaped in any manner they so choose. As such I have much contempt for the likes of Bill Gates and feel that society is generally much less materially well off than it would be otherwise. It should be remembered that Big Business sold out the freedom of the U.S. as much as the socialists. The solution to Microsoft’s monopoly is not regulation but deregulation. If the intellectually honest left could grasp this State protectionism could begin to be rolled back to the benefit of especially the poor.

Whether economic intervention is called “mixed” or whatever they are all inefficient confiscation. They are all degrees of socialist interference that do not work for the same reason that socialism does not work. By definition they are anti-trade. As they are anti-trade they are by definition making individuals poorer in every instance. Remember that trade only and always occurs because what is received is subjectively valued more than what is given away. When anyone is not willing to voluntarily trade for something forcing them to is necessarily making them poorer. It’s a good start that the left is beginning to understand how trade barriers hurt poor people in other countries. If they can understand the principles by which this is so application of them will bring the possibility of beneficial practical real change sooner than later. The left has its elements of anti-trade 60s hippie style protestors and the right has elements of bought representatives protecting the pharmaceutical industry. It’s these kind of false dichotomies of the left and right that allow their abuses to exist in worse forms than would otherwise be the case. That’s why libertarians see the Democrats and Republicans as more similar than dissimilar.

The Federal Reserve has the potential of bringing about the greatest economic disaster ever experienced by mankind. The monetary system is based on fake fiat money existing by force of declaration as legal tender that can be printed at will, not real goods that have been established in the free market. It might be impossible to predict when a collapse would occur. Government provision of social security and health care threaten long term fiscal solvency, and that is only two basic goods out of which the free market has produced! We have a crisis precisely because of government interference. The public needs to be informed that it is the government that is causing failures in the free market not the market. Housing bubbles are going to hurt the poor the most. Inferior health care offerings than would otherwise be the case hurt the poor the most. The rich will always be able to buy the best available but they themselves are worse off too than would otherwise be the case without government interference. Specific individuals are benefiting short term at the expense of everyone’s long term interests. One of those specific individuals is Bill Gates. He has made you poorer than you otherwise would be in a free market right now. The individuals who otherwise would be selling you cheaper better computer operating systems have been prevented from doing so by the State. The State confiscates property directly through taxation and it confiscates the use of property through regulation like patent protection. In spite of that, all should be shocked at the availability of cheaper better computers which stands in stark contrast to health care precisely because the government has interfered with it to the degree it has.

Posted by: rtr | Jan 9, 2005 11:53:37 PM


Posted by: Perseus

Prof. Anderson:

Trying to make Locke into a Christian, non-capitalist thinker is a doomed project. And, as I'm sure you're aware, Leo Strauss (Natural Right and History) advanced a thesis similar to C.B. Macpherson's, but as usual, his work is ignored.

To the main issue at hand. Your suggestion that we abandon the idea of "mixed economy" just as we have allegedly abandoned the idea of America as a type of "mixed regime" is a poor attempt at making a parallel since, when properly understood, both are integral concepts to the American regime.

Take your mention of America's government as once having been compared to a mixed regime. Your claim that the legislative branches were designed to represent distinct class interests is a misleading half-truth. The main point of the non-democratic features of the Constitution is to prevent majority faction. Taking your argument to its logical conclusion--and there is no reason not to without recurring to some notion of a mixed regime--we should directly elect Supreme Court justices as well. As Professor Harvey Mansfield of Harvard University puts it, "However difficult today's historians, political scientists, and philosophers may find it to accept, Madison knew better than they what he was doing--and he was smarter, too." Viva the idea of "mixed government"! (And as I point out to my students, the university is also an example of a mixed regime with a president (monarch), tenured faculty (aristocrats), and students (plebes). I don't suppose you're in favor of democratizing the university too, or are you, Prof. Anderson?)

As for your suggestion that we get "beyond" the idea of a "mixed economy" (in the sense of borrowing elements from socialism/communism) in favor of variants of advanced democratic capitalism, it amounts to little more than a RETURN to the nation's original economic principles. The first three types of government interventions in the economy that you list were contemplated and practiced from the nation's infancy. One need only read Alexander Hamilton's economic reports to see that he contemplated government provision of public goods (the dispute at that time was mainly over federal versus state provision, not whether to provide them), a central bank (the First Bank of the U.S. was the precursor to the modern central bank), and commercial regulations (including "judicious regulations for the inspection of manufactured commodities" designed "to improve & preserve" their character). Social insurance is simply a more advanced form of "welfare" provision or "poor relief" (to use the older term), which the states had from the beginning in one form or another. The only thing on your list that Hamilton didn't contemplate was labor unions. And the economic thinking behind these interventions can be traced not to socialism, but to a combination Mercantilism and Adam Smith's liberal capitalism. It is in this older sense of combining a primarily private economy with public (government) intervention that we may say that America has a "mixed economy."

Posted by: Perseus | Jan 10, 2005 12:17:33 AM


Posted by: Jason Stanley

Rand is surely correct that there is no more persecuted minority in American life than the wealthy businessman. Fortunately, there is some minor compensation for those long suffering business people. From today's New York Times:

"Charles K. Gifford...An amiable dedicated manager with a decidedly mixed track record as chief executive, Mr. Gifford, 62, as managed to survive strategic misfires, one bungled merger and another merger that kep him in the top ranks of the bank but no longer in control. For his ministrations, Mr. Gifford is promised a 16.36 million dollar cash payment, up to an addition 8.67 million in 'incentive payments' for work done over the last 13 months and 3.1 million a year for life. If he dies before his wife, she will receive 2.3 million a year, also for life...That's not all. The bank guarantees him 50,000 dollars a year in consulting fees, 120 hours of free flight time a year on the company's jet, and an office and a secretary, according to fedearl securities filings. All of this is on top of 38.4 million in company stock."

I live in New York City, where it is impossible not to read about, and socialize with, those in the finance industry. I occasionally find myself at social events or dinner parties with 28 year olds who make a million dollars in a year punctuated by lengthy vacations and client-subsidized orgies (which they seem happy to discuss, even with a socially conservative married person such as myself). This past year was a particularly good year for the finance industry; it was reported in the press that the New York area high-end strip clubs are abuzz with business after the excellent Wall Street bonuses (note that 76 percent of academics are married, compared to only 57 percent of the general population; the Chronicle of Higher Education recently discussed the distinctive problems singles face in the "Ozzie and Harriet" world of academia. The business world seems to be...different, no doubt due to the stresses of bearing up under such intense discrimination). As far as working hard, yes, some Investment Bankers work hard (though not as hard as doctors). But as an acquaintance who works as a trader on Wall Street happily told me the other day, you don't need to be an Investment Banker slave to make 8 million dollars a year. Apparently, one can work a 40 hour week and still "make more than most Americans do in a year with a push of a button".

I admire Bill Gates, at least most of the time. But is it really the case that Bill Gates is the most accurate model of the wealthy businessperson? How much are we as a society helped by the 30 year old multi-millioniare Wall Street Day Trader? How much would we as a society be hurt if he had, say, only 750,000 dollars a year to spend at Scores, instead of 1 million?

Of course, many investment bankers and even Wall Street traders work hard (though of course few work as hard as, say, most physicians or autoworkers). But I have some contempt for the view that those whose values are first and foremost to expand the coffers of themselves and perhaps their families should be objects of admiration. I don't think any economic argument supports the claim that the exorbitant incomes in the finance industry are necessary to the well-being of millworkers in Ohio.

In any case, anyone who thinks that investment bankers or Wall Street traders need or want our pity simply doesn't know many; their compensation comes in different coin.

Posted by: Jason Stanley | Jan 10, 2005 12:47:21 AM


Posted by: Jonathan Wilde

Of course, many investment bankers and even Wall Street traders work hard (though of course few work as hard as, say, most physicians or autoworkers). But I have some contempt for the view that those whose values are first and foremost to expand the coffers of themselves and perhaps their families should be objects of admiration. I don't think any economic argument supports the claim that the exorbitant incomes in the finance industry are necessary to the well-being of millworkers in Ohio.

Why is wealth a fixed-sum game? Just because people in one industry become wealthy does not mean it comes at the expense of people in another industry. Wealth is created in the market, not merely shifted from one person to the next.

Further, Microsoft's success does not only rub off on investment bankers and Wallstreet traders. It is estimated that Microsoft has resulted in up to 10,000 millionaires from stock ownership. The vast, vast majority of these not people on Wall Street. They are programmers, managers, secretaries, and tech nerds - people who work for Microsoft.

Posted by: Jonathan Wilde | Jan 10, 2005 1:04:10 AM


Posted by: Jason Stanley

Jonathan,

Ummm...in what sense does Charles Gifford's retirement package help our economy? For Pete's sake, Jonathan, the guy's retiring...he won't be working anymore.

I wasn't talking about Microsoft, as I stated in my post. Read my comment again ("I admire Bill Gates"). Some forms of wealth creation are better for all of us, and probably Microsoft is among them. But using Microsoft to justify a 1 million dollar annual bonus to a 28 year old in the finance industry (not to mention the absurdly immoral personal excesses that seem part and parcel of that industry) is like trying to justify World War I on the grounds that World War II was just. I am certain that the 28 year old would work just as hard for a 600,000 dollar annual bonus. I also suspect we as a society could find a bit better use for the extra 400,000 dollars than high-end strip-clubs or even ski vacations.

Posted by: Jason Stanley | Jan 10, 2005 1:39:36 AM


Posted by: Herbert Browne

(from Elizabeth Anderson)
"Here's another legacy of the Cold War that should be discarded:� the convention of classifying the systems of economic organization on a continuous spectrum from left to right, with communism on the far left, then socialism, then the so-called "mixed" economies of Western Europe and North America, and, on the right, the laissez-faire capitalist minimal state, and on the far right, anarcho-capitalism..."
Perhaps the practical way to solve this (and make it simpler for those who claim to have passed from "the left" to "anarcho-capitalism" from having to scramble over quite so many bodies & doctrines) is to think of the spectrum as a Round Table, with the "normative centrists" sitting opposite the hardline communists, "a-c" and fascists, while the leftists and the conservatives square off at right angles to the aforementioned axis... plenty of room for all, that way. �

(ibid) "Regulation of private sector actions to reduce pollution, ensure public safety, etc. was brought to capitalism by popular demand..."
Is there no "ism" for this?.. eg "commonsensism"?

(ibid) "..But the WTO may force the hands of the U.S. and Europe anyway:� chalk one up in favor of sovereignty-compromising global institutions.."
And, if an wholistic reality should be invited to the table, perhaps a future WTO triumvirate will find an economist,an ecologist and an ethicist in place, rather than 3 fellows with banking backgrounds.
(from DA Ridgely) "..I would far prefer that nation-states get out of the development business, hasten that international free trade that (EA) thinks is right around the corner and let capital (and even labor) flow freely.."
Well, now, capital IS labor- slave labor; but if you mean bestowing on human capital the same privileges as are now accorded to the monetary variety, I couldn't agree more. If borders were equally porous to both, but only reciprocally (ie any border across which money were allowed to flow must allow its flow in both directions, AND the same treatment granted to human capital), then that great sucking sound of the wealth of 3rd world plutocrats streaming into New York, Zurich, London, etc might diminish in volume, as local investment opportunities become, um, more germane.
(ibid) "Underdeveloped nations would still have to begin their developing economies largely on labor intensive and natural resource enterprise.."
Why? Two scenarios come to mind: a less-developed place well-endowed with solar & cultural climate might be very attractive to enough retired baby boomers to leap directly to a service economy; and a place with a general english language proficiency might attract migratory information professionals and attendant electronic infrastructure capabilities (and scale back a need to promote cotton, sugar, banana, etc exports and dig up the local bauxite reserves, etc. before its time.

(from Postrel, via Mona) "..Stasists object to markets because the decentralized evolution of market processes creates not just change but change of a particular sort. By serving the diverse desires of individuals and by rewarding the innovators who find popular improvements, markets constantly upset unitary notions of what the future should be like..."
Oh, yeah... I remember crack, too... and the best market is never any better than the worst instinct of the most aggressive and neediest badboy around.

(ibid)
"Markets don't build a bridge to the future--a path from point A to point B across a scary abyss; they continually add nodes and pathways in a web of many different futures. Market processes make it impossible to make society as a whole adhere to a static ideal--whether that ideal is a traditional way of life, the status quo, or a planner's notion of.." etc
So, markets would be ideal- on an infinite planet, with enough room to house every moral code and set of principles. It's essentially "a man proposes, and a market disposes" worldview, which works great for PEOPLE; and if that's all that people needed, then it'd BE the cat's meow, rather than a way of MARKETING it. (No, no... I really don't need one-- I have a long-tailed kitty and a rocking chair- thanks, though.) ^..^

(from Ayn Rand, via Micha Ghertner) "Every movement which seeks to enslave... needs..a scapegoat; ..in America, it is the businessmen.."
Now, as imputed 'duelling overgeneralizations' go, this one wins out. The range of businessmen is likely as broad as the range of fishermen, which can stretch from the guy who owns a few factory trawlers with 20-mile-long driftnets to the kid on hands and knees along the streambank, feeling under the overhang for a catfish belly. "American businessmen" is a mighty broad brush, friends...
^..^

Posted by: Herbert Browne | Jan 10, 2005 2:11:59 AM


Posted by: rtr

Jason Stanley shows how the tyranny of socialist persecution begins. It starts by defining the enemy as 28 year old Wall Street financiers who should be punished through use of the State to take some percentage of their bonuses. The end begins by defining Wall Street financiers as Jews with sin taxes placed on all non-practicing Christians justified by showing that the practice of Judaism and Islam does not do anything for the well being of the Christian majority.

That nobody here has pointed to this connection shows that they are as silent to those who would say how would we as society be hurt if we had no Jews and Muslims instead of millions, or no Democrats, or no liberals, or no gays? That is how singling out those with certain incomes allows the State to become the monster it has become and it lessens justifications for protecting persecuted minorities as it has already established the basis for persecution of minorities.

Posted by: rtr | Jan 10, 2005 11:02:02 AM


Posted by: Jason Stanley

I concede. Rtr is clearly right. The tyranny suggested by moderate Democrats such as myself who contemplate taxing people on the finance industry so that, say, a 28 year old with a 1.5 million dollar annual bonus may only receive in the end 600,000 dollars *is* comparable to European anti-semitism that led to the Holocaust!

Posted by: Jason Stanley | Jan 10, 2005 12:17:39 PM


Posted by: Micha Ghertner

Jason,

If only rtr's warning were as ludicrous as you think it sounds. Unfortunately, we have the millions of dead bodies produced by the Soviet Holocaust to disavow us of our moral blindness, a direct consequence of the persecution of wealth production.

Posted by: Micha Ghertner | Jan 10, 2005 12:30:04 PM


Posted by: Jason Stanley

There seems to be a conceptual confusion surrounding the term "minority", both in Rand's comments, and some of the comments in the thread. Some people seem to think that Wall Street Traders are a "minority" in the same sense as, say, Jews are a minority. That seems wrong.

It seems to be an ethical truism that we should strive to live in a country in which there are no minorities whose freedoms are restricted more than other groups. But if "minority" refers to any subgroup of a population, this is false. Murderers are a minority, in this sense, since they are a subgroup of our population. But murderers should all be in jail, and hence should all have their freedoms restricted.

I'm not of course making an analogy between Wall Street Traders and murderers. I'm just making the conceptual point that not any subgroup of a population counts as a minority, in an utterly standard use of the term "minority". It is completely uncontroversial that certain subgroups of our population receive different legal treatment. The differential treatment is based upon the choices they make in their lives.

Just as we are not unfairly privileging the minority who give to Tsunami relief or the Darfar relief efforts by granting them tax-relief, so we are not unfairly persecuting Wall Street Traders who works a 40 hours week by taxing them so that a 28 year old Day Trader might only make 1 million total dollars in a year, rather than 2 million.

Posted by: Jason Stanley | Jan 10, 2005 12:43:30 PM


Posted by: Jason Stanley

Micha,
Again, I don't really see Mr. Gifford's compensation package as "wealth production", except if by that you mean "Mr. Gifford's wealth production". Similarly with much of what's going on in Wall Street (neither is it plausible that these salaries are good for people outside the finance industry; witness New York City real estate prices. I recently was at a party of physicians, where they were all maintaining that a doctor in New York needs a "sugar daddy" in order to live there. Young physicians can't live in New York anymore).

The more important issue is whether taxing a 28 year old with a 1.5 million dollar annual bonus so that they only receive 600,000 dollars this year amounts to *persecution*. One argument would go via the claim that it is unjust to treat minorities differently. But see my previous post; Wall Street traders aren't a minority in this sense (unless you also want to argue that it is an unfair privilege to grant tax relief to the minority who contribute to the Darfur relief effort).

I contend merely that it is not Soviet-style persecution to tax a 28 year old who is working a 40 hour week with only a college degree (or less) so that they make (say) only 600,000 dollars extra, in addition to their salary.

Posted by: Jason Stanley | Jan 10, 2005 12:56:41 PM


Posted by: grib

Jason, You are, by your own admission persecuting a minority, though you try to avoid using the word. That should be a warning flag. The Social Sciences have very few controllable repeatable experiments, but where bigotry is concerned there is a very interesting one. We can turn any group of people into bigots by simply dividing them up randomly, and using language just like yours. Think long and hard about just exactly what it is about 28 year old day-traders that makes you want to hurt them.

Posted by: grib | Jan 10, 2005 2:57:21 PM


Posted by: rtr

It’s long past a warning. It was a warning 60 years ago when Hayek wrote The Road to Serfdom. The foundational parallels are in place everywhere. The U.S. has two primary competing socialist parties. That neither recognizes that they are socialist, because they are naively ignorant or blinded by ideology, changes nothing of the fact they are both in favor of socialism for different groups. It’s a much greater than zero probability prediction that the world will stand by and watch Israel’s destruction in the next decade. The U.S. would certainly back off as a protector if a U.S. city was first leveled and resulted in millions of deaths of Americans. The U.S. is not going to sacrifice the lives of 50 million Americans to save 20 million Jews (or however many are living in Israel). To the fundamentalist Islamist terrorist mind the establishment of Israel shows that terrorism works (and indeed there were many acts of terrorism involved in establishing Israel). That is the proposition of Osama Bin Laden that nobody is willing to admit.

The post Cold War economy is very similar to the pre-WWII economy of Europe. The Great Depression resulted last time from throwing up protectionist tariffs as businesses became as a result vastly over-capacitized when they could not sell to their old repeat global customers. The cry against “outsourcing” and “unfair trade” could easily produce the same result once the tariffs went up. After all tariffs are basically an act of war against the livelihoods of individuals around the world. The world economy is based on different colored monopoly money. After U.S. dollars become worthless, which would quickly happen with no Wall Street, many other major world currencies will have a similar fate. Price controls would definitely be revisited. The Federal Reserve would probably try a desperation conversion to gold colored “Goldbacks”. Roosevelt already established the justification for centralized command control of the economy.

If New York was leveled is there really any doubt that Arabs would be rounded up the same way the Japanese were during WWII? All the examples that might at first glance be perceived as ludicrous have their justifications previously established in law. A moderate president certainly would not come out of such a tragedy of biblical proportion.

Remember though how all the justifications for persecution started: hatred of “the rich”. The socialists of different parties were shocked at what they had enabled in Germany as well. The time is nigh when “mixed economy” needs a redefinition to democratic capitalism. Whether they’re called the Democrats or the Democratic National Capitalism Party the use of government is the same. What starts as hatred of the rich morphs into hatred of the Jew, hatred of the Arab, and hatred of the gay when the religious majority claims its democratic majority party power as has been enabled by the socialists. Like I said before, don’t forget to thank the Democratic Party socialists; it might be an imprisonable crime not to some time soon.

As Jason Stanley has demonstrated Wall Street traders aren’t a “minority in [this sense]”. Religion is a choice too. Homosexuality activity is a choice too. And so Jews and Muslims and gays aren’t a “minority in [that] sense” either. The persecution grounds have already been established in the U.S. They will be implemented if chaotic panic, in the true sense that has not been experienced since who knows when in the U.S., results from an act of destruction of a major U.S. city. The slide to more explicit tyranny is as tenuous as it’s ever been.

Posted by: rtr | Jan 10, 2005 3:17:03 PM


Posted by: Jason Stanley

Grib,

Unfortunately, I don't understand your argument. My original post was meant to heap scorn on the idea that business people are a persecuted minority in the States. One can make that point without persecuting business people (think: one can make the point that baseball players aren't a persecuted minority, without thereby persecuting baseball players). My second point was that it wouldn't even be persecuting business people to raise their taxes ten or fifteen percent (or twenty or thirty percent or forty percent). I'm not certain about why it would be "hurting" someone who works 40-50 hours a week to reduce their annual income to level of, say, six to ten times that of a physician, using state intervention in the form of taxes.

I suggest you think long and hard about what strange psychology is beyond your thought that paying who works 40-50 hours a week 'only' (say) 600,000 thousand dollars a year is "persecuting" them. Stockholm syndrome?

Posted by: Jason Stanley | Jan 10, 2005 3:19:08 PM


Posted by: oliver

EA's sounds like sage advice to me. I suspect the same outlook is cultivatable in other minds by alternate and sometimes simpler means, e.g. existentialism ala "Never mind what it meant to Jefferson (who owned slaves) or Ike (who obsessed over the Red Menace), we can make of it what we wish."

Posted by: oliver | Jan 10, 2005 3:40:31 PM


Posted by: Jason Stanley

rtr,

As you know, it is a matter of controversy whether being homosexual is a matter of choice. The other categories too have unfortunate racial overtones. But your general point, that minority status is not simply a matter of being born into a group vs. making choices, is of course correct (I was going to include that in my post, but it seemed to make things more complicated).

But I don't think that undermines the point that not any sub-group of a population counts as a minority in the relevant moral sense. Granted, it is not just birth vs. choice, since being Hindu is a matter of choice, and Hindus in America should be a protected minority. But there is a difference between, say, giving Evangelical Christians a special tax-break just because they are Evangelical Christians, and say, giving those who donate to Darfur relief a tax-break, just because they donate to Darfur relief funds. The former course of action would amount to illegitately privileging a minority, whereas the latter clearly does not. However, in both cases, it is someone's choice to belong to the relevant group -- Evangelical Christian vs. Darfur donator. That shows that "choice" vs. "non-choice" membership in a group is not the defining characteristic for the relevant notion of minority, but it doesn't show that it's an illegitimate distinction.

Increasing taxes on Wall Street Day traders doesn't amount to persecution of a minority, because it's relevantly analogous to giving tax benefits to Darfur contributors. In neither case is one privileging or persecuting a "minority". One is simply applying rules of fairness to adjudicate fair compensation. The original point was that in many sectors of the business world, compensation has gotten so out of hand relative to the rest of us, that it's absurd to talk of their being persecuted.

There are real human costs to the ever-growing gross inequities in wealth, especially when they are not balanced by obvious gains to society at large (try finding an apartment in New York City if you're only, say, a psychiatrist). I think that rtr and Micha's readings of the lessons of history are fundamentally flawed. In book one of *Origins of Totalitarianism*, Arendt argues that a significant causal factor in increased 19th and 20th century European anti-semitism is the presence of wealthy Jews who had lost the political power they had possessed before they were granted citizenship. As a result, they were perceived as having privileges that they did not earn, and were targets of significantly increased resentment.

If you're really concerned about the safety of the wealthy, ensuring that income is dispersed more fairly seems the way to go. In such a system, genuine wealth producers are allowed to profit handsomely, whereas the absurd excesses of corporate retirement packages and finance industry bonuses are curtailed. In other words, if there is any worry at all about threat to businesspeople in America today based upon consideration of the bloodlusts of the Twentieth Century, that just provides further support for my argument that we should guard against gross and unjustified inequities in financial reward. That is what curbs resentment.

Of course, the idea that there is any threat at all to the business elite is absurd to me. The American people are sufficiently conditioned against this sort of resentment, at present at least. All the more reason to think they're not persecuted...

Posted by: Jason Stanley | Jan 10, 2005 4:28:41 PM


Posted by: Micha Ghertner

Jason Stanley,

It seems to be an ethical truism that we should strive to live in a country in which there are no minorities whose freedoms are restricted more than other groups. But if "minority" refers to any subgroup of a population, this is false. Murderers are a minority, in this sense, since they are a subgroup of our population. But murderers should all be in jail, and hence should all have their freedoms restricted.

The conceptual problem here stems from confusing freedom with rights. Freedom is a meaningless concept unless properly defined. (The same could be said about rights, but that's a discussion for another thread...) We should strive to live in a country in which there are no minorities whose rights are restricted more than other groups. Restricting the freedom of murderers is not a violation of their rights, since no one has a moral right to commit murder without facing consequences.

On the other hand, restricting the rights of people to keep the fruits of their labor through a system of progressive taxation (or, for that matter, any taxation) is a violation of this principle. Restricting the rights of successful businessmen to run their business as they please, merely because they control a significantly large market share, as current anti-trust law does, is a violation of this principle.

It is completely uncontroversial that certain subgroups of our population receive different legal treatment.

This is not completely uncontroversial. It is true as a descriptive matter, but controversial as a prescriptive matter. Indeed, not only is it controversial, but it is unconstitutional. See: Fourteenth Amendment:

No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

Just as we are not unfairly privileging the minority who give to Tsunami relief or the Darfar relief efforts by granting them tax-relief, so we are not unfairly persecuting Wall Street Traders who works a 40 hours week by taxing them so that a 28 year old Day Trader might only make 1 million total dollars in a year, rather than 2 million.

This is another unsupported assumption. It is indeed a supremely unfair priviledge to give favorable tax treatment to those who donated to victims of the tsunami. Why should victims of the tsunami be preferred over victims of malaria, tuberculosis, or aids - all of which are afflictions which take a much larger toll on humanity than a single natural disaster? For that matter, why should we give a legal privilege to those who choose to visibly donate to charity at all? Doing so is not significantly different than raising taxes on some, and as we all know (or should know), charity done at gunpoint is not charity at all.

Posted by: Micha Ghertner | Jan 10, 2005 6:21:08 PM


Posted by: Micha Ghertner

Again, I don't really see Mr. Gifford's compensation package as "wealth production", except if by that you mean "Mr. Gifford's wealth production".

That wealth was produced by someone. Whether it was produced by Gifford, the previous CEO, or the shareholders of the company, the fact remains that it was still produced - not by you and not by the government. Thus, neither you nor the government nor anyone else unrelated to the company has any claim to that money. If Bill Gates chooses to give all of his wealth as a gift to his lazy, good-for-nothing son, that may be an unwise decision, but it is not your decision to make.

I contend merely that it is not Soviet-style persecution to tax a 28 year old who is working a 40 hour week with only a college degree (or less) so that they make (say) only 600,000 dollars extra, in addition to their salary.

It may not match the degree of Soviet-style persecution, but it is persecution nonetheless. And both forms of expropriation derive from the same flawed motives - a lack of respect for personal autonomy and individual liberty.

Posted by: Micha Ghertner | Jan 10, 2005 6:30:46 PM


Posted by: grib

My strange psychology is that I don't see how who people have economics with is any more my business than who people have sex with. I don't think rich people are particularly persecuted in America, but this is not for lack of trying. It doesn't bother me that someone somewhere might be making a buck or two. If what they have is worth less to me than what they want then they don't get what they want from me. If they get what they want somewhere else then good for them. I guess that makes me a hostage to dark forces.

This is coming off as more hostile than I really want it to be. I don't have a problem with taxing the rich, you can raise a lot of money that way. If your tax burden increases with income then that's not so much of a problem, it's like the ghosts getting faster when you play pac-man. I don't have a problem with sending more cops into a high crime predominantly African American neighborhood, but when you do so it's got to be the high crime part that you are interested in. Walking down the street with your head held high, despite obviously being black is not a crime. It will take a long time before I am convinced that someone who felt that black people need to know their place needs more police powers.

What curbs resentment is to quit doing it. What curbs hate is to stop.

Posted by: grib | Jan 10, 2005 6:32:39 PM


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