More Comments on the Rich By Richard Sale

America’s business community extols moral qualities such as its love of independence, frugality, self reliance, relentless determination, freedom from restraint, superiority of imagination, etc. Yet, in practice; it focuses on another and darker aspect of human life which aims at enriching itself at the expense of everybody else. No one ever professes this openly, except the dogma’s political opponents, and most of them are engaged in the same nefarious game.  Everyone professes to serve unselfish ends as a recipe for being thought well of. Of course, unthinking hypocrisy is common for all walks of life, but the bedrock fact is that we humankind are greedy creatures. War has bred greed into our natures and nothing is going to breed it out of us. Like pugnacity, larceny and the appetite for plunder sits at the root of our nature. “The powerful to what they can, and they weak grant what they must,” said the Athenians.

 

Most human beings confuse being busy with being alive. It then follows that most human beings do not examine what is under their noses. No, they are always searching for some far off glory, and, for the ordinary-minded, the gaining of wealth and showing it off, is the most popular and unimaginative ways of  achieving this. Taking what is not yours is a delight to many. Piracy, plunder, exploitation and pillage have been with us for a very long time.  The thirst for gold, slaves, excitement had has been the major motive for conquerors up to the present day, and for the businessman, outwitting others, defeating them, humiliating them, reducing them to poverty and desperation is merely a signal of their prowess. In other words, if your victims had proved smarter, more industrious and more ruthless, had more character, been more inventive, and more ruthless and heroic, they would not be victims. They think like the Greeks in Of course, this is completely heartless way to think.

 

But while the creatures of business may mouth axioms and precepts about self reliance and dedicated effort, no one betrays these precepts faster than a businessman. As part of their ideology, they forbid any remedy or dodge any penalties for criminal acts they may have done in pursuing their fortunes, and if curbs or punishments are put forward by the federal government or some other body, they resist them with the utmost strenuousness. They haughtily ignore rules put forward to prevent the carrying out of their unsound and reckless schemes. Businessmen have a highly mystical view of their drive to achievement which they see as uncontrolled by ordinary psychological checks and motives. When a businessman crook is confronted for breaking rules, he manifests the innocence of a freshly laid egg.

 

Unsound Judgments

 

Egotism and greed paralyze, said Goethe, but what they paralyze first is discernment.  Often our men of business suffer from a bland ignorance of their own proclaimed business essentials. Their concepts are often faulty. They tend to take facts on hearsay. Thus, many business men are poor judges of conditions or business affairs, its economic mechanisms, and their drive for riches merely increases their blindness. Think of get rich quick schemes and how eagerly they are taken up by so many. Yet to recklessly embark on quickly acquiring riches is similar to happily piling into a vehicle without knowing where it is headed, feeling joy simply because the vehicle is moving.  Human beings are given to chasing wealth guided by fundamentally unsound concepts designed to make them superior to the bulk of their neighbors. The want to be rich want to rake in the largest gain while making the littlest possible effort, and the idea of hauling a large treasure is enough to paralyze their capacity to reason. It also cancels any sense of proportion. Obvious minds read things at a glance. The lure of get-rich-quick schemes is taken on sight and immediate, bland recognition acts to obviate further thought. All parts of an experience are equally present for the hustler, but they are very far from being of equal value nor are they sufficient evidence of decent purpose. There is no tag or label on any trait saying: "This is important," or "This is trivial." Nor is intensity, or the vividness or the conspicuousness of a plan indicative of any proven value. The glaring defect may be totally insignificant in this particular situation, and the key to the understanding of the whole matter may be modest or hidden.

 

Getting Riches

 

The best and brightest of Americans went into business in order to spread civilization and create prosperity for all, but behind that rosy goal, Americans have a huge streak of fraud in them. For example, the 1862 Homestead Act was supposed to give would-be farmers a fresh start in life by giving them 160 acres in the public domain of the West, provided that the candidates cultivated the land for five years.  The price of the land was cheap. So what happened?  Land speculators hired agents who pretended to be farmers, and their job of such agents was to resell the land to the sincere, would-be farmers at inflated prices. (This is history, not a personal opinion.)

 

It is the fact that our businessmen have a long history of chasing phantoms believing they are real. Think of our frantic search for riches in the railroads of the south or the cattle ranches of the west, the goldmines of the Rockies. Some panned out, many did not. Yet no realizes better how deeply flawed certain schemes for getting wealth than the men who promote them. Businessmen, thinking themselves shrewd, court their ruin by thieving, first of all, not from the helpless public, but from themselves. During the 19^th century, while praising competition, they set up railway pools and other mechanisms to weaken it, and even in this case, the members of “pool,” ended up stealing from each other. Honor among thieves is a cheap myth.

 

The Coming of Chaos

 

There is no economic structure established by men that is immune to the vices which, in practice, will act to destroy it. It doesn’t do much good to scold and upbraid the business community as being mediocre in intelligence unless we can exhibit specific instances where their way of gaining their ends has been found so stupid as to be almost suicidal. It is always shocking to find that participants in a financial collapse know in advance just how unsound is the system they proclaim to support and profit by. The U.S. never had a central bank, and under President Wilson, thanks to widespread financial abuse, America finally set up the Federal Reserve System, a collective entity consisting of 12 different financial districts headquartered in New York, but administered by a board in Washington. By the 1920s, when President Coolidge authoritatively proclaimed that “the business of America is business,” the U.S. business system was already tinkering with collapse. At that time, there were more than 600 bank failures a year yet what was the reaction of the business community to those failures and the advent of the Federal Reserve? Constant bitching combined with constant attempts to weaken it. One historian, Hugh Brogan, said that undermining the Federal Reserve was very much like throwing away your rifle before a battle.  Trying to undermine the FRS was woefully idiotic because the U.S. banking system was completely a ramshackle, hastily cobbled together affair without any coherent regulation. There were thousands upon thousands of amateurish, local, incompetently managed banks strewn across the country operating at random. Many were undisciplined and unsupervised, with the result that a huge amount of U.S. savings neither went down the drain because they weren’t any measures in place to ensure that the bankers or stockbrokers were honest and above board in their dealings. Few were.

 

The state of high finance in America in the 1920s was not much better. They too had accepted and supported a financial system that was basically unsound. The Dawes Agreement is pretty obscure to most, but it was enacted just before the 1920s crash and deserves scrutiny. The business community thinks the way a school of minnows thinks – it thinks in a pack and swerves in one direction only to sharply veer and swerve in a different one. The Dawes Agreement was the brain wave of Coolidge’s vice president, and it was designed to rescue Germany from its financial collapse caused by the harsh penalties imposed by the WW I victors in Europe. Basically, it was a loan. Wall Street subscribed heavily to it, and it invested almost $4 million in loans to German banks, municipalities, and private borrowers without first determining whether it would it would ever get a descent return on its money.  For one thing, the money invested by Wall Street was not its own (it never is), but the money came from Americans trying to use Wall Street to put their savings in a safe place. (Wall Street made its money by being paid for services rendered.) So much of the America’s savings were misused in mistaken projects that serenely flouted common sense, and the loan to Germany was one. For example, a Bavarian village needed $125,000 to build a swimming pool, “but by the time the financiers were finished, they had borrowed $3 million from Wall Street,” to build it, Brogan says. In the end, Germany got $8.5 million from Wall Street. In other words, enthusiasm without discernment means a paradise for the gullible and increasing instability. In the execution of such projects, the means are mistaken for the end.

 

What such a failure highlights is a lack of the ability to judge rightly. Unless there is something doubtful appears in men’s minds as they consider a situation, the situation is read at a glance; it is taken in on sight, i.e. -- it is merely apprehension, perception, recognition, not judgment. If the matter is wholly doubtful, if it is dark and obscure throughout, and there is a blind mystery, no judgment takes place. But if a scheme suggests, however vaguely, different meanings, rival possible interpretations, and then you have disputes, controversy; different sides compete for a conclusion in their favor. This did not take place in the 20^th century.

 

The fact is that Wall Street’s management of American money was hardly careful, precise or painstaking.  During the 1920s, the economy was expanding, and middlemen involved in expanding it in rival cities were making huge money. Financiers in New York let much of this money slip through their fingers, and to recapture it, they entered into the stock market, (which one is tempted to describe it as a form of organized crime.) The financiers used their reserves of capital to launch new enterprises that would recover the moneys of the business ventures of Detroit, Chicago and San Francisco.  New York began to buy heavily and the prices of shares began to soar.

Secretary of the treasury Andrew Mellon, (clearly a borderline crook)  had lowered taxes so much the government made hardly any income, so people were spending  their largely untaxed savings in stocks and bonds in the hope that every year the stocks and investments would yield a higher dividend. The introduction of Wall Street's money into the market sent the shares lurching skywards. Big businessmen launched new ventures with optimistic, intriguing titles such as the Shenandoah Corporation, the American Founders Group, and the Ridge Corporation using misleading prospectuses. These financers argued to investors that “Your money is safe with us.” Suckers began to swarm.

But to return to the Federal Reserve, to Coolidge’s credit, he warned people not to invest in the stock market, (he was ignored,) and the Federal Reserve raised its rate charged by its banks by 1 percent and recommended that the bank not lend further money to these overblown ventures. Then a strange thing happened.  A man named Charles E. Mitchell, head of the National City Bank, and director of the Federal Reserve Bank in New York, one of the chief components of the system, used every bit of influence, coercion and underhanded power to force the Federal Reserve to eat its words and renege on its principles. Thanks to him, warnings about the instability of the boom were ignored, and the market soared to new and dizzy heights.

Then the sell off began.

Soon, General Electric collapsed then Anaconda Copper and other firms. Worst of all, the banks collapsed.  German aid was abruptly cancelled, which was like removing a patient from life support. And who suffered most from all this?  In America in 1931, there were million unemployed; by 1932, there were 13 million. Brogan describes what happened to working middle class Americans extremely effectively. “The descent came by stages; the loss of one job; the search for another in the same line; the search, growing frantic, for work in any line; the appearance of the breadline, where, astonishingly, you met dozens of other honest men who had kept to the rules, worked hard and now were as low as professional bums. It was work you wanted, not charity, but you were forced to plead desperately for charity. Often you did not get it for there wasn’t enough to go around.”

America was so poorly organized, so much a victim of its “rags to riches” dogma, that it could do nothing effective for the poor and out of work. There was no law in place anywhere, and state governments were worse than ineffective when it came to such measures as fresh taxation or public works.  The problem of relief was not something they had anticipated, and it took months to realize that only the actions of the federal government could improve the lot of the people out of work.  In 2008 the same tendencies were still in existences and broke out when they dared and could, the more for having outwitted regulation to curb them. Thus a whole class of misguided, greedy, reckless, predatory businessmen had once again bankrupted the American economy and damaged the prestige and standing in the world.  Once again, business had proved deaf to any interest but its own. In 2008, we saw the same type of people, with the same type of vices that believed that social responsibilities were assigned only to the individual, not the government. Self-help was America’s mistaken bedrock ideal, and once again, we saw a group that wrecked the lives of many who were not guilty of speculation or selling mortgages to people who couldn’t pay for them, and the whole smarmy exploitative group is once again at work: the stock market is soaring once again to record levels while Lincoln’s dream of “an equal start in the race of life” has completely died.

People who bray about America’s greatness should keep the outline of what I have related in the forefront of their minds because for more financial disasters hover in the wings. As I write this, a senior official of a hedge-fund has been sentenced to three years in jail for insider trading and other offenses, and there is also current rash of cities and states who are grabbing private property “for the private profit of others,” says a Wall Street Journal story. An economist, Dr. Neil Gilbert, says, yes, there are vast economic inequalities, noting that the after-tax income of the 1% increased by 201%), but he asserts that the middle class is better off than it was 30 years ago, and adds, “The public often agrees with politicians who declare that the middle class struggles to make ends meet. But this is a quest to satiate our desires for material consumption within our limited resources, not a struggle for survival.” So the hard-working should have only a little material comfort, but not a lot. Too much and they will lack the will to go to their underpaid jobs. They must be doing okay in America because they can buy TV’s and refrigerators. Never mind that they must accept being incessantly underpaid. Never mind the poor whose lot is nothing else but toil and scanty wages had have imposed on them endless economic inferiority.

From his words, it is clear that Dr. Gilbert cannot write, and from his words, how can we judge of the weight of his opinion? Clearly, it has been purchased.

We cannot change human nature, but it lies within our means to curb it, and issuing three year jail terms for white collar thieves isn’t much of a start.

Post Script

As I was finishing up these fragments, Col. Lang called me up with the welcome news that former Senator James Webb had not ruled out running for the office of the Presidency of the United States.  That is good news, a promising prospect.  Webb is a former Secretary of the US Navy, a novelist, and a man of principles and grit.

Pat’s dream is that Webb would partner with Senator Elizabeth Warren, who is morally strong, alert, with a depth of intelligence and sensibility that is rare in politics.  I have a personal admiring crush on Ms. Warren. 

But would such a ticket be viable? Would it not prove too “liberal?” Perhaps we should wait and see.

Comments

[William R. Cumming]

WOW! Thanks again Richard! David Hume and Adam Smith 18th Century stalwarts of CAPITALISM and even influential with Marx and Engels believe and wrote that GREED was the greatest threat to CAPITALISM! Carter Glass of Virginia steered the bank owned Federal Reserve into existence through legislation.

There is no real regulation or taxation of hedge funds. Perhaps one could ask why tax accounting and security regulation accounting are two very different systems. Both are designed to achieve the lowest taxes or the least regulation.

I call American Capitalism corporate socialism because few corporations can operate at all without direct or indirect financial assistance from the government. Few businesses provide a service to the consumer!

Yes we are largely washing each others laundry, dirty laundry often.

A recent book CAPITALISM IN THE 21st CENTURY has arrived in translation from FRANCE. It at least inferentially supports Richard's post and its themes.

[walrus]

Thank you Mr. Sale. A Webb/Warren ticket might help the country recover.

[Joan]

I think Webb and Warren would be good but I'm not convinced they could accomplish much other than beating themselves bloody against a perverse congress. What is even worse, I am not convinced we, as a people, want our situation to improve. It seems to me that we are stuck in an obsessive-compulsive rut of kissing up and and kicking down.

I am out of my depth on this blog, having no academic or career experience and knowledge on which to base my opinions. So please be tolerant.

[VietnamVet]

Mr. Sale,

Yes, I would also vote for a Webb/Warren ticket. Democrats have to do something like this to continue as a political party. Besides a likely western economic crash due to the emergence of the BRICS second world economic order and western financial corruption, there are organizations out there that are intent on globalizing war. American boots are on the ground in Chad. Last night, a Ukraine Army checkpoint was wiped out by professionals who said they were Pro Russian Separatists.

http://www.bbc.com/news/world-europe-27515514

The civil war is escalating and somebody wants the Ukraine Army fighting in it. This is on the road path to a shooting war between NATO and Russia.

[Highlander]

Well Richard,apparently, I am not the only one around here to use the overly broad brush stroke technique from time to time.

[William R. Cumming]

My belief is that both Houses of Congress will stay Republican from January 2017 until January 2025! A discouraging thought to any other party candidates if accurate.

[Bill H]

Mr. Sale
I share your enthusiam for James Webb, but I still have reservations about Elizabeth Warren. She SOUNDS like everything you say, but based on his words pre-election, so did Barack Obama, and we all know how that turned out. The "morally strong" part is not demonstrated until she is tested in action and we have simply not seen that.

Two presidential appointments which, it was pointed out to me in an earlier thread, were even less consequential than I had thought they were, and one very vanilla term in the Senate. That same person said that not much is expected from first-term Senators, but that doesn't change the fact that she did not do much of anything.

She may turn out to be everything that she sounds like she is going to be, but right now that is a crap shoot and the odds ara against us. Politicians very seldom turn out to be as good as they sound, or anything even close to it, and the last time we elected anyone to the executive branch based on the way he sounded, disregarding a serious lack of experience, it simply didn't work out at all well for us. Letting ourselves be dazzled by pretty words just does nat have a good track record.

[Highlander]

I think your 2017 prediction is probably going to work out, but I'd be surprised if the 2025 holds up.

[Richard Armstrong]

I pray that Sen. Warren remains in the Senate where she will continue to gain influence. Her years as an educator have given her a remarkable ability to break through the intentional obfuscation by almost everyone in Washington and to simply and accurately describe problems and solutions rationally and reasonably. Persons wishing to tangle with her soon look as foolish as a precocious freshman trying to "one up" their professor.

Frankly, I think she scares the hell out of a lot of people in Washington.

If she were to become anyone's VP she would become as influential as every VP before her except Dick Cheney.

[different clue]

We corrected some of that during the New Deal period. Financial Players and other members of the fortune-seeking classes felt so frustrated by successful New Deal regulation of their activities that they launched a movement to get the New Deal laws and regulations undermined and repealed. Then they engineered their Roaring Twenties 2.0 and New Great Recession. Would Webb and Warren see it that way? If elected, would they say something like: "The Reagan Revolution is Over and the Roosevelt Restoration has begun. There is no Brezhnev Doctrine for Oligarchy."

The New Deal was so long ago that we could call it the Old Deal now. The Old Deal was a good deal for most of us.
Would Warren/Webb run on some version of bringing back the Old Deal?

[confusedponderer]

I think that Bruce R. Scott has it right when he describes capitalism as a System of Governance.

He elaborates here, in a 2012 lecture in, of all places, Tripoli:

https://www.youtube.com/watch?v=xTb4gyxhiXY

He provides an excellent and necessary introduction in the little book "The Concept of Capitalism" (94 pages). From the cover:

"A single system of economic governance – capitalism – prevails in the world today, both in theory and in practice. Yet there is neither a standard definition of capitalism nor a theory of how it works. Moreover, the most common conception of capitalism is that of a one-level system governed by markets, i.e., supply and demand, where many socioeconomic externalities are ignored. The purpose of this book is to counter this conception, showing that capitalism is more than markets. In fact, capitalism shares many parallels with everyday organized sports, in that both are indirect, three-level systems of governance where "freedom" is conditional on "playing by the rules." In organized sports, games (level 1) are shaped by official rules and monitored by referees (level 2), which are in turn regulated and revised by a governing organization (level 3) that oversees the sport as a whole. In capitalism, markets (level 1) are shaped by institutions and regulations and monitored by independent officials (level 2), which are in turn selected and shaped by a political authority (level 3) that oversees the system as a whole.

As simple and obvious as this parallel with organized sports may seem, the underlying cause of much of the economic instability of the last 25 years, and specifically of the current crisis, has stemmed from not understanding capitalism in this way, i.e., as a three-level system of governance. Only by improving our understanding of capitalism can we create better institutions and implement better policymaking to not only fix the present crisis of our capitalist system but also avoid future ones."

At greater length:
Capitalism: Its Origins and Evolution as a System of Governance (680 pages)

[William R. Cumming]

A great comment as usual from CP!

But an error to view Capitalism as a system og governance.

Actually its a RELIGION!