Where are Obama’s Comrades?

July 31st, 2010 at 2:38 am | 103 Comments |

| Print

Stanley Kurtz, an anthropologist by academic training, wants us to believe that the small and insignificant tribe of American socialists, to which he has offered a thick description in his new book has had an enormous influence on our history:  it has spawned our first socialist president, Barack Obama.  Before we return to this argument, Kurtz’s painfully wrong misreading of the politics of Saul Alinsky and Michael Harrington, and the tortured internal logic of his latest posting, a question—or rather a variation on the same question—naturally arises from the gravity of Kurtz’s allegation vs. Obama: Who spawned Joe Biden?  And Rahm Emanuel?  And Larry Summers?  How about Christina Roemer?  And Timothy Geithner?  And—most insidious of all—the life long Republican, Robert Gates?

You see the problem.  Kurtz wants us to believe that one lone Leninist, Barack Obama, broke through the ideological defenses of the United States and—damn the people—was elected president of the United States.   But Lenin had a crew of top flight, like minded assistants around him:  Trotsky, Bukharin, Zinoviev and Stalin, to name just a few of the most prominent.  Who are the ideologically disciplined acolytes of Obama, implacably prepared to implement his, yes, long run “transitional program” to socialism?  Larry Summers—as mainstream an economist as the Democratic Party can offer, disciple of Goldman Sachs honcho, Robert Rubin, whom the faculty radicals at Harvard rode out of Cambridge on a rail for crimes against women?  Rahm Emanuel, a partisan Democrat, but one who famously despises the Party’s left flank, (“retards”, as he famously said) let alone any socialists beyond that?  Tim Geithner, another Rubin protégé, formerly of Kissinger Associates and recently the president of the Federal Reserve Bank of New York?  Joe Biden who….oh, do I really have to explain that Joe Biden isn’t a socialist, and wasn’t indoctrinated by Bill Ayers?  Robert Gates, the Secretary of Defense for George W. Bush?

So why would the socialist Obama appoint such ideologically unreliable cadre?  Could this be part of the master plan—if Larry Summers enacts socialism, then it will be all the more a “stealth” operation, to use Kurtz’s word, no?  It seems like quite a risk, though, for Obama not to insert like minded people in the most important positions in his administration.

Hmm…perhaps this is an even more remarkable and baffling scheme than even Kurtz realizes.  I’ll respond at greater length to his latest remarks soon, but, in the meantime, I invite readers and Kurtz himself to unravel this counter-intuitive plot.  But, then again, counter-intuitive is what this is all about isn’t it?

Recent Posts by Eugene Debs



103 Comments so far ↓

  • WillyP

    Rab,
    I just spent 1.5 hours watching a debate about the emerging identity crisis in the world of academic economics. That is, they are slowly beginning to integrate Austrian theories under different labels and with slightly varied, often mathematically involved modeling. This is interesting because until the 1970s, mainstream neo-classical economics completely dismissed the Austrian school, with several prominent economists denigrating it, at times irresponsibly.

    As a matter of fact, many “new” economists promised no business cycles and no depressions. Keynesians, Monetarists, politicians, bureaucrats, intellectuals, socialists, etc. I wish I could remember a specific example right now, but I can’t. I would recommend reading some criticisms written by Hazlitt, who it seems kept track of such claims better than most.

    I explain this, in part, because I find your above post orthodox Keynesian. 1) Save money 2) Depression hits 3) Spend saved money 4) End recession. It’s a neat model that makes intuitive sense, but tragically unrealistic and naive. To start (but not to finish), why is it that you think Milton Friedman rose to prominence? Precisely because of the deficiencies engendered by the orthodox theory/practice just explained.

    If you think that simply having the money in the bank to spend would have fundamentally altered the response of the economy to increased government spending, you are not taking into account the fact that money is not employed in production but goods. Remember, when the government spends money that was previously in saving, it must outbid the private sector. The same is true when government spends borrowed money; it must outbid the private sector.

    This outbidding, whether it is realized through previously saved money or through borrowed money, diverts resources away from private use to government use. Therefore, the only way for this government spending to be worthwhile is if it invested more profitably than the private sector would have invested it itself.

    I believe this nullifies your argument.

    Now, the reason why I reject government substitution of preference can be found in many different authors, only the most explicit being Mises and Hayek. Adam Smith’s “invisible hand” described coordination in the lack of a central planning authority. How was it that Scotland had just the right number of barbers, of carpenters, of farmers, of shipbuilders? He was genuinely perplexed how human freedom could spawn previously unrealized prosperity. Smith incorporated his studies of morality and sought to illustrate how humans were guided into making certain decisions.

    Implicit in his argument was the need for information. I’m sure there were others in this vein that scholars would be familiar with, but the two primary Austrian economists who focused on the problem of knowledge were Mises and Hayek. Their approaches were different, Mises being more precise and exact in the German tradition, in my opinion, Hayek taking more Smithian approach, but their conclusions were virtually identical.

    Society has a problem of coordination of resources. Through exchange, humans trade their property and labor to maximize their satisfaction. Direct exchange, that is barter, is inefficient because you must find the trading partner who has exactly what you need. Through a gradual process of choice, humans have adopted the institution of MONEY to facilitate exchange. Money, at least historically, was measured in weight. Thus the more of “it,” the higher its numerical weight value. 10 oz. of gold is more than 6 oz. gold. We can rank the relative value of gold in this way – 10 is 2/3 more valuable than 6. This allows us to RANK costs by expressing them in PRICES (a price being defined as a cost expressed in currency figures).

    Here’s the thing: for very small communities, it is not necessary to have money. People can barter, or it can be a communal system by which the head of the tribe, or a tribal council, decide who does what and who receives what. However, for large economies this is impracticable. Without currency figures, which facilitate profit/loss accounting (identifying productive activities), there is no meaningful information by which we can judge our economic decisions.

    This sounds abstract I’m sure. It is. But you should take away from this that money provides a very, very critical function in society. It allows coordination, which creates market sustainable business, which means, in part, stable jobs and the ability to plan your future. That’s the political argument, anyway. (It’s a little late to delve into more economics.)

    One last point: you may consider the effect of large-scale counterfeiting on this elegant system. This is essentially the role of the Fed.

  • Rabiner

    WillyP:

    Before I critique your position I’d like to thank you for your thoughtful response.

    “I explain this, in part, because I find your above post orthodox Keynesian. 1) Save money 2) Depression hits 3) Spend saved money 4) End recession. It’s a neat model that makes intuitive sense, but tragically unrealistic and naive. To start (but not to finish), why is it that you think Milton Friedman rose to prominence? Precisely because of the deficiencies engendered by the orthodox theory/practice just explained.”

    Yes, my previous comment was orthodox Keynesian with the caveat that it’s been shown that fiscal policy is incapable of following the principles of Keynes and thus fails in the long run. The main failure is the inability or willingness of Congress to save or pay down debt during good times but a willingness to deficit spend during bad times creating a structural deficit. This is obviously unsustainable and was shown to be true after surpluses were used to partially finance tax cuts in 2001 and 2003 rather than pay off the national debt. I like monetarism in the sense that control of the money supply is critical in determining the value of currency. If I recall around a 3% annual growth in the money supply was determined to cause around 1-2% annual inflation which is considered ideal to do two things: prevent deflation and provide enough currency to go after an increasing supply of goods and services provided.

    “If you think that simply having the money in the bank to spend would have fundamentally altered the response of the economy to increased government spending, you are not taking into account the fact that money is not employed in production but goods. Remember, when the government spends money that was previously in saving, it must outbid the private sector. The same is true when government spends borrowed money; it must outbid the private sector.”

    Yes, I understand the loanable funds markets and that public savings reduces the interest rates by increasing the available loanable funds in the market and government borrowing can crowd out investment by reducing the available funds that industry can use to invest. But the government is unique to business in their credit rating on paying back investors is better than any company (risk is lower), and they can offer incentives such as municipal bonds which are tax-free to make them more attractive even though they pay a lower nominal rate.

    The reason I say the response would be different if we didn’t have such a huge National debt before this recession is that having a 10 trillion dollar debt does cause worries among the political class and investing class that at some point what will we do. Greece spooked us because we have all this debt. If we had 1-2 trillion in debt instead I think it would be realistic to think that the US government would of been more aggressive (similar to China’s response) in stimulating the economy. You probably disagree with this policy decision but can agree that the likelihood that it would of happened would of been increased had our debt been significantly lower.

    “Society has a problem of coordination of resources. Through exchange, humans trade their property and labor to maximize their satisfaction.”

    Agree, maximization of utility.

    “Direct exchange, that is barter, is inefficient because you must find the trading partner who has exactly what you need. Through a gradual process of choice, humans have adopted the institution of MONEY to facilitate exchange. Money, at least historically, was measured in weight. Thus the more of “it,” the higher its numerical weight value. 10 oz. of gold is more than 6 oz. gold. We can rank the relative value of gold in this way – 10 is 2/3 more valuable than 6. This allows us to RANK costs by expressing them in PRICES (a price being defined as a cost expressed in currency figures).”

    Again agree. Currency is more efficient in allocating resources since its easier to find customers. Bartering requires you to find a person willing to take your commodity at a ‘price’ your willing to trade AND you have to want a commodity that that person is willing to trade at their desired price. That is far more complicated than using a proxy item such as currency which socially has value attributed to it.

    “Here’s the thing: for very small communities, it is not necessary to have money. People can barter, or it can be a communal system by which the head of the tribe, or a tribal council, decide who does what and who receives what. However, for large economies this is impracticable. Without currency figures, which facilitate profit/loss accounting (identifying productive activities), there is no meaningful information by which we can judge our economic decisions.”

    I disagree with this since globalization has rendered nothing being a ‘small community’. Everything is connected now. Sure there is the random village that hasn’t been connected to the world but lets talk about typical as opposed to the exception to the rule.

    I have no qualms with your writing here but wonder what caused you to think I was questioning the value of money in creating an more efficient transfer of goods and resources?

  • WillyP

    I apologize for not being clearer. I had an implicit end to my argument, but never made it explicit.

    The implication is straightforward enough. We always want to be investing in the most valuable activities, and even more so during a depression.

    Money facilities the creation of information to understand where the most profitable activities exist.

    The goal should be to allocate the most effective investment.

    Government, since it rejects these market signals, will never invest as wisely as the private sector because they LACK the very information necessary to make such decisions.

    And until someone can explain to me how a planning bureau is more intelligent than a decentralized system based of ethical rules, I flatly reject all forms of government intervention with the exception of the essential tasks of the state – that is, the maintenance of peace.

    Clear?

    I guess the other major point is that the primary destabilizing force in the American economy is the Federal Reserve, and by extension the fractional reserve method of banking. Both interfere significantly with emerging market signals and are painfully deleterious to the ability to coordinate economic activity. This all might sound very abstract and a bit more like philosophy than policy, but seeing as how we’ve been plunged into a 2nd Great Depression, I think it’s time we all got schooled in some fundamental mechanisms of a free society. Money serves a very important purpose and contributes significantly to conditions of societal comity, and a $2 trillion expansion of credit causes problems that dominate the news cycle for years, its ultimate consequences still unknown.

    Anyway, that’s my view from the sidelines. I would encourage everybody to study economics from the Austrian perspective: start small (Hazlitt writes the best stuff for beginners, Menger’s “Principles” are timeless, Bastiat writes for the layman) and build up (Sennholz, Mises, Hayek, de Soto). I would also encourage reading some general history books that highlight turbulent periods in history and trace their roots. I wouldn’t know where to begin with that list so I wont’ try.