20 November 2008

The G20 or how President Bush decided on global socialism

I hate it when I agree with Dick Morris. The guy is amiable, slick, insightful, more than a bit disingenuous and is able to hold a vendetta that blinds him to its outcomes, as it did with the Clintons. I rarely like his analyses, for all that I can see how he comes to the conclusions he does. Perhaps he realized what he had done in the years leading up to 2008, helping President-elect Obama's Kenyan godfather Raila Odinga to start taking control of that country, was having more of an impact than *just* keeping Hillary from the White House. That said his analysis of things going on in which he has had no say in, no power to influence, has been disturbingly dead-on. I discounted his blather on the election, by and large, but when he talks further afield I get a very queasy feeling. I distrust him as much as I admire him, and he has only one partisanship and that is to himself. It is when he talks about those things that will get to *him* or that he can't do anything about that I will listen as, for all of his two-sidedness with regards to his personal views, he also knows which side the bread is buttered on.

Yeah, you needed to hear that, first.

Also, I am not a conspiracy theorist, the world is way too out of control for conspiracies... all that it takes is well meaning fools to do what they think is right, at the moment, for things to go very, very wrong. We have way too many of those in the world in leadership positions.

I don't like what follows.

Do you remember the old saying that 'Only Nixon could go to China?'

Well the one to remember is that 'Only Republicans can set the stage for socialism'. The case in point... well, I won't start with Teddy Roosevelt and his expansive views of the Constitution and Progressivism, but I will point to the latest 'Big Government Conservative' who used 'Compassionate Conservatism' as his credo to get to the Presidency, namely Bush (43) and the G20 summit. Dick Morris wrote about European Socialism being the legacy of President Bush and it is hard to fault his analysis. At its core 'Compassionate Conservatism' is trying to use the tools of government to 'conservative' ends by encouraging private industry to provide things via governmental encouragement. It is a deeply regulatory form of governance, that depends upon regulations, mandates and social pressure on private companies and individuals to conform to the views of those in power. 'Compassionate Conservatism', by utilizing the tools and power of government and expanding it, does not put into place the Classical Liberal view of human rights and freedoms to be free from government. In this way 'Compassionate Conservatism' is no different than modern Big Government Liberalism or Radicalism, both of which seek to invest more power in government to control the individual towards ideological ends.

If you are getting the idea that this is like the tumult amongst socialists in the period of WWI to the end of WWII, you are correct. The two sides of socialism were the Internationalist strain, or Communist form, and the Nationalist/Populist strain, or Fascist/Nazi form. The highest ideal of those looking to put government into power over individuals and society is the ever adaptable concept of 'Pragmatism'. Whenever we hear about 'pragmatism' in foreign or domestic affairs, it is usually attached to a large government project or international concern that cannot be easily defined or explained in any way save to 'let the leaders do it'. Wanting to give 'health care to all Americans' is pragmatic: it has a lofty goal and disastrous means and yet is sold as a great boon, not a great eater of wealth and health. Similarly regulating the monetary system is 'pragmatic': government is given power to intercede in markets, even if it has no clear idea what it is doing. The goal of Big Government backers, Left and Right, is the manufacturing of problems or 'crises' so as to put 'pragmatic' solutions into place that tread upon the liberties and freedoms heretofore reserved for the individual or smaller governing units (the States in a Federalist system).

Even better is when intractable problems that cannot be solved at the highest level of government are put before it. 'Failing educational institutions' has been a credo of the Left and Right since 1958, when poor Johnny couldn't read, and yet for the hundreds of billions poured in from the federal level, that reading rate has been rock-solid steady. In having a 'war on poverty' society is told to ignore the fact that in a system of free individuals that succeed or fail based upon their own abilities, there will always be a 'bottom 10%'. The USSR eliminated that and made everyone equally poor, save for the ruling elite. In such a system 'health care' will be unequally distributed, but the charitable interests of individuals will seek to remedy that by putting money, time and effort into seeking a better culture to address these things at the lowest level. Big Government, by putting them at the highest and most regulated, squanders funds, time and effort at a prodigious rate compared to any private concern, and adding government backing in via 'Compassionate Conservatism' then layers that inefficiency ON TOP of private inefficiency and actually causes more and deeper inefficiency and lack of addressing the problems that individuals were doing previously.

Find a crisis and you will find a Big Government backer pushing for more regulation, even if all previous regulation meant to solve the problem that happened didn't work. The ideal that government that makes the people become representative of it will be a great boon and social balm ignores that to get to that point all other forms of government and social ideals will have to be modified or suppressed to that of government. No matter how 'good' the outcomes of 'pragmatic' decisions, the actual long-term outcome is destructive to individual freedom, individual expression and individual liberty.

Keeping that in mind, that manufactured crises lead to pragmatic decisions to infringe upon the rights of the individual and attempt to change society, I read Dick Morris:

The results of the G-20 economic summit amount to nothing less than the seamless integration of the United States into the European economy. In one month of legislation and one diplomatic meeting, the United States has unilaterally abdicated all the gains for the concept of free markets won by the Reagan administration and surrendered, in toto, to the Western European model of socialism, stagnation and excessive government regulation. Sovereignty is out the window. Without a vote, we are suddenly members of the European Union. Given the dismal record of those nations at creating jobs and sustaining growth, merger with the Europeans is like a partnership with death.

At the G-20 meeting, Bush agreed to subject the Securities and Exchange Commission (SEC) and our other regulatory agencies to the supervision of a global entity that would critique its regulatory standards and demand changes if it felt they were necessary. Bush agreed to create a College of Supervisors.

Only a Republican could do this, and it is a deeply shocking thing to read that a 'conservative' would step away from our founding understandings of what Nation States are and why they matter in the course of human affairs. Note that you will hear praise from many quarters on this 'pragmatic' approach to world governance of the financial markets via an un-elected governing body. Even Dick Morris cannot escape the siren song of the *idea* of this, just that it should be run as a series of cooperative agreements amongst Nations and not as a top-down control system imposed by un-elected individuals across the G20. The wind-up, however, is hard hitting:

All kinds of political agendas are advancing under the cover of response to the global financial crisis. Where Franklin Roosevelt saved capitalism by regulating it, Bush, to say nothing of Obama, has given the government control over our major financial and insurance institutions. And it isn't even our government! The power has now been transferred to the international community, led by the socialists in the European Union.

Will Obama govern from the left? He doesn't have to. George W. Bush has done all the heavy lifting for him. It was under Bush that the government basically took over as the chief stockholder of our financial institutions and under Bush that we ceded our financial controls to the European Union. In doing so, he has done nothing to preserve what differentiates the vibrant American economy from those dying economies in Europe. Why have 80 percent of the jobs that have been created since 1980 in the industrialized world been created in the United States? How has America managed to retain its leading 24 percent share of global manufacturing even in the face of the Chinese surge? How has the U.S. GDP risen so high that it essentially equals that of the European Union, which has 50 percent more population? It has done so by an absence of stifling regulation, a liberation of capital to flow to innovative businesses, low taxes, and by a low level of unionization that has given business the flexibility to grow and prosper. Europe, stagnated by taxation and regulation, has grown by a pittance while we have roared ahead. But now Bush -- not Obama -- Bush has given that all up and caved in to European socialists.

The Bush legacy? European socialism. Who needs enemies with friends like Bush?

I applaud President Bush in Iraq and disdain him on finances, regulation, his ability to actually understand that 'compassionate conservatism' is just as authoritarian as the Left/Radical form of ideal to 'spread the wealth around', save that most of the wealth will be put into the sticky fingers of government which, itself, is a vast tar pit of inefficient regulation.

At BusinessWeek Shankar Singham has this article of 13 NOV 2008 looking at how we got here, looking at the US side of the debacle and 'crisis':

These government distortions began 30 years ago when the U.S. government started to tell banks which people they should lend money to, so that all could share in the American dream of home ownership. The two government-sponsored enterprises, Fannie Mae (FNM) and Freddie Mac (FRE), readily built up vast portfolios of bad mortgages, and the much maligned greedy investment bankers merely took those assets and securitized them. To the extent that these parties were at fault, they were at fault for not understanding that the implicit government guarantee that Fannie and Freddie would not be allowed to fail was itself an enormous distortion, undercutting the value they ascribed to the assets in the first place.

Without the creation of the entire asset class in the first place, a minor problem would not have morphed into a huge problem. Whenever private companies are asked to perform public functions for some social good whose benefit is not clearly defined, alarm bells should ring. Many of the greatest problems that have plagued humanity have not been caused by bad people actively seeking to do harm (with the exception, of course, of dictators like Hitler), but rather by well-meaning people seeking to do good. Karl Marx, after all, had the best of intentions. When we add the activities of ratings agencies and changes in accounting rules halfway through the game, we see yet more government distortions that played a pivotal role in the crisis.

This is government trying to mandate good outcomes, not administer a fair process: it is biased towards the outcome and will skew the process to get to the desired outcome. That is Pragmatism writ large in the 'ends justify the means' sort of philosophy. Indeed, I would be remiss to not let Mr. Singham have his view on this present:

To all those busily writing the epithet to the era of Reagan and Thatcher, these events merely reinforce the notion that government's role in the economy should be limited to the protection of property rights. Certainly when parties are destroying property, or value, government has an obligation to step in, and this does mean some regulation. Even the most ideologically pure free marketer doesn't argue for absolutely no regulation; after all, we need competition laws, for instance, to ensure that the market is truly free and competitive. And we need governments to protect both tangible and intangible property rights.

That is the key to what regulation should be: It should always strive to be the most pro-competitive and welfare-enhancing possible, where potential costs are carefully weighed against the alleged benefits as regulation is crafted. After the Enron debacle, the costs of Sarbanes-Oxley regulation were not carefully weighed against the alleged benefits. We are now reaping some of the consequences of Sarbanes-Oxley, notably the mark-to-market accounting system, but also in a chilling of innovation whose effects haven't yet been entirely felt.

The true danger to the world is not the excesses of a few bankers who foolishly gorged themselves on a carcass that was already rotten. The true danger is the anticompetitive public-sector restraints that poisoned the economic system to start with. This danger manifests itself today in many guises—protectionism, industrial policy, and national champions to name a few. It occurs when government thinks it knows better than the independent economic actions of billions of individuals.

I am also not a 'free trader' in conception: trade is good but the Nation State must ensure that the entire Nation is not put at risk due to trade. Even Adam Smith cites this as necessary and thinks that such limits should be prudent, well enunciated and understood so as to not impoverish a Nation to benefit the few, and only the barest few to ensure that the Nation is protected in vital areas and does not shield inefficient leeches on the economy. There must be some regulation to secure the Nation so that trade does not weaken key areas of it: that is why we have governments at the Nation State level. Thus 'free trade' cannot be truly 'free': it must have provisions and understandings that Nations are to look after the interests of their citizens as those governments see fit. You cannot impose perfection from above or from non-elected bodies, as that is lethal to liberty and freedom to put power into the hands of an unaccountable few over the vast majority of the population.

Even worse is that this President Bush had received good and prudent information on what to do during a recession. This from an interview at the Hoover Institution of Milton Friedman by Peter Robinson on 13 DEC 2000:

Peter Robinson: You just s--said that the old notion of a Keynesian fiscal stimulus, cutting taxes to stimulate the economy, boosting government spending to stimulate the economy, won't work. Well, we have George W. Bush getting comfortable in the Oval Office, but he has a problem, which is that the economy is softening and everybody's turning to him. What should he do?

Milton Friedman: Sit there.

Peter Robinson: Don't just do something, sit there.

Milton Friedman: Let me give you a comparable case. In 1980-81, just prior to that, we were in a situation where inflation was running ten, twelve...

Peter Robinson: Double digits.

Milton Friedman: Double digits. And the fed--after the election, because before the election, in the five months before the election, the fed was very stimulative. It was pumping money in like mad. A more rapid increase in the quantity of money in that five month period than any other comparable five months period since the end of World War II.

Peter Robinson: Was Paul Volcker, the Chairman of the Fed at the time, culpable? Was that a direct effort to reelect Jimmy Carter?

Milton Friedman: In my opinion it was. At any rate, the month after the election, the money growth slowed down and went down very sharply. And the economy went into a recession. What did Ronald Reagan do? In my opinion, no other president in the post war period would have stood by and sat there, but Ronald Reagan sat there and supported Paul Volcker in his measures. It brought an end to the inflation, it started us on our path of lower and lower inflation, of disinflation, and the recession lasted for a year and a half, it was a fairly deep recession, but it turned around in 1982, early '83...

Peter Robinson: August of '82 is when the stock market starts to recover.

Milton Friedman: Yeah, and from then on, that's the beginning of this incredible period of good economic growth and of booming stock markets that we've had since. Now the advice that everybody was giving to Reagan at that time was that he should step in and stop that recessing from growing.

The incredible period of growth from a bad recession coupled with inflation and stagnation (Carter's Stagflation) was ended when minimal intervention was taken in the financial markets to end inflation. There was a 'crisis' that was pushed to get Carter re-elected, beyond the ongoing one in Iran dragging his Presidency down, and this second crisis was that if he would only do *more* to end stagflation, that things would get better. And yet they only got much better when very little was done and only to inflation. Friedman is correct that the great move by President Reagan was to do NOTHING and let the recession end its course and let the Fed bring inflation into check. Even the Internet Bubble ending in 1999-2000 plus the terror attacks in 2001 did NOT move the US economy into negative growth. That financial gain started in 1982 ran through four Presidents (Reagan, Bush, Clinton, Bush) and is only now in serious problems when President Bush wants to DO SOMETHING and not just SIT THERE.

My guess is that President-elect Obama will, if he has an ounce of economic smarts, just SIT THERE and be derided by his own party for a couple of years, probably lose the majority in the House if not the Senate and be hailed as a 'great achievement for the economy' when it recovers so as to push all his social agenda forward after getting some credit for 'ending the financial crisis' by doing what he is good at: Nothing.

Mind you he will still have all the lovely socialist interference and oversight of the economy once it does turn around, and may decide, like FDR did, to start increasing taxes to 'push money into the economy' and thus lengthen the recession and see if it can't get into a depression mode. If he doesn't do a thing to those controls, he will *retain them* for later use to Nationalize more of the economy. But if he tries to use them, as his Democratic colleagues have and as Sen. McCain and a number of other 'centerist' Republicans and President Bush have, then things will get nasty very, very quickly. And the man to put such power in the office isn't Barack Obama.

It will have been President Bush trying to be a 'compassionate conservative' and give more power to government to get to 'good ends'.

Just don't mind the means... unless you like your liberty and freedom.

Because this is where the Transnationalist Right meets the Transnationalist Left, as John Fonte describes it.


M. Simon said...

The very worst part of "Compassionate Consrevatism" that is almost totally unrecognized is the the government has effectively taken over the Churches.

Bush has united Church and State under the guise of Churches handling social services at government behest.

And the stupid Churches and esp. social conservatives thought that was just swell. Idiots.

They gave away their right to speak anything other than the government line.

A Jacksonian said...

What the Republicans have done to destroy charitable hospitals, via their support of medicare and medicaid is awful. By linking our economy so as to have European influence at the highest levels, will see the US go the way of Europe. Those on the religious side who think that government should have some say in supporting religion can now look at Europe and see where it now stands with regards to religion... save for Eastern Europe, traditional religious institutions have been on the wane, there, for decades.

That is what you get when government tries to do good: subservient, disinterested people, failing charitable institutions, failing churches and a failing economy. This is what HG Wells wanted, as Jonah Goldberg points out: Liberal Fascism.

And an end to individual liberty.