Wednesday, September 21, 2011

A Targetted Approach to Restoring Liberty

Fran came up with a great idea a few posts back to deftly maneuver the shoals of American national politics and eliminate Social Security.  In terms of present day political maneuverings and salesmanship, I think the idea is great.  But I objected on the grounds that, given the present constitution of banking, the money system, and the operation of markets, it is really more or less impossible to save and invest for retirement, as all too many erstwhile retirees are about to find out.

As such, the beast would eventually get re-implemented under some form or another, much as it was originally introduced in the 1930's in response to the Great Depression.  This, I believe, is a general principle of encroaching statism -- the installation of one program initiates a ratchet effect, where one policy creates a series of unintended consequences, which necessitate more policy, which create more unintended consequences, etc.  An attempt to roll-back one or more of these latter policies in general will not prove successful, if the problem it was installed to address in the first place hasn't been adequately dealt with.  In the course of things, the problem will raise it's head again, and the public will be left asking itself "Didn't we have regulation X to deal with this 20 years ago?"  Much of the public has spent the last few months/years asking itself just this question over banking deregulation of the 1980's.

In fact, banking is the perfect example of this process in action.  The original problem with banking was (and ultimately, still is) the practice of lending against deposits, which causes the process of lending to increase the supply of money and initiate the business cycle.  In response to the periodic financial crises that this process produced, as well as to solve other 'problems' of the business of banking that were connected to the tendency to pyramid various forms of money on top of the precious metal base, the banks erected the Federal Reserve System.  This, of course, allowed the banks to expand the money supply ever more readily and over a longer period of time, eventuating in the Great Depression -- the worst deflationary crash the US had ever experienced.  The cascading bank failures of that period instigated the creation of the FDIC, which prevented the deflation.  But this meant that during crashes, there was no longer any deflation of the larger money aggregates against the base, such that the supply of money rose continuously, eventually straining the ability to link money to precious metals.  Thus, silver coinage and the gold standard had to be abolished, and so on and so on, to produce the mess we have today.

This whole train of thought has led me to a different tack on things.  Normally, the public gets motivated to reform things which are most pressing on its present awareness -- usually some recent trampling it has been forced to endure at the hands of the political class.  This is either an unintended consequence of a previous policy, or the enacted policy itself.  As far as the rollback movement is concerned, I'm chiefly concerned with the latter.

The problem with the approach of rolling back the most recent assaults should be obvious.  Anyway, I explicitly stated it in the second paragraph.  The solution, I think, should be obvious as well, though it may sound rather strange.  The reformers keep starting at the wrong end of the timeline.  Rather than rollback the most recent political affront, they should really start back at the beginning.  This way, the latter layers of compensating policy will no longer be necessary once the original offenders and their unintended consequences have been eliminated, and they can be done away with without much controversy.

Thus, I offer this brief suggestion of an order of targets that might prove more successful than the approach used by conservative reformers over the last century or so.  It is based on my own admittedly limited understanding of history and economics; others with a better understanding might be able to suggest useful modifications.

Target #1:  Corporatism

It seems to me that this is where it all began -- the Gilded Age and the rise of massive corporations.  This is where the avalanche really got rolling.  Those who are familiar with my view of things know that I think the FED and central banking in general are one of the most destructive and tyrannical forces acting on mankind today, and that they absolutely have to go.  But it does seem to me that in the larger picture, central banking was actually more of an institutionally critical waypoint in a larger, more general movement towards centralization.  Several attempts were made at instituting a central bank prior to the coming of the FED, but these were all batted down in fairly short order by a public intolerant of such things.  It seems to me that the coming of the corporations was what created such fertile ground for something that had previously found American soil so hostile.

I do not think I need to elaborate too much on what it is about the mentality of corporatism that makes a thing like a central bank and large, bureaucratic government appear to be a good idea.  Obviously, once one accepts the idea that it is through large institutions that the greatest efficiencies are achieved, wealth is most effectively created, and that humans achieve their highest potentials in such regimented structures, a large institution of banks appears to be a great solution to the problems and inefficiencies of banking.  It also goes without saying that as a society becomes ever more accustomed to a way of life as a part of such structures, it produces a proletarian mentality which is not the most conducive to preserving freedoms.  It seems to me that the business dynamics of corporations also disrupt the community by causing unnecessary migrations of people from job to job and place to place, so that it becomes difficult for people accustomed to such a life to imagine depending on friends, family and neighbors in times of need, or committing significant parts of themselves to growing and developing a specific place and position in the community that would give them some security outside of their employer.

I have already written at length that I believe that, far from being more efficient and productive structures, large corporations are actually less efficient than their smaller counterparts, and owe their apparent success to economic and political parasitism.   In no small part, this parasitism is made possible by their persistent interventions in the realm of politics.  No doubt, practically any proposed reform measure which one attempted to pass through government would have to pass muster with the majority of the corporate community to have any chance of success, so embedded are corporate interests at this point.  Which is another way of saying that any attempt to decentralize society will not get past the corporate gatekeepers, since as centralized bodies themselves, they have an entrenched interest in keeping things the way they are.  So, any real attempt to change things at that level will have to substantially reduce this influence first.

There was a time when the majority of people in this country were either self-employed or owned their own businesses.  At least in these terms, it will probably be impossible to restore conditions to the state of things in the mid 19th century anytime soon.  At least some of the great corporate structures will have to stay with us for the indefinite future. But eroding at least a good fraction of the corporate share of the economy would go a very long way to creating a climate of self-confidence and robust independence that would further the cause of rolling back other nanny-state type legislation.

Target #2:  Public Education

No permanent or semi-permanent purging of the society-as-extended-government-bureaucracy mentality or the restoration of the family will be possible so long as the public school system remains intact.  Mass public schooling is both derived fom the notions of mass, corporatized industry and helps to encourage its growth and secure it.  Without the public school system, the middle class two-income family arrangement would not be nearly so widespread to the point of approaching universal.  It would also be much more difficult for the corporate/government class to efficiently mold succeeding generations of the class traditionally most responsible for upholding and passing on the accepted social norms.

This is to say nothing of what actually goes on all to often within the schools themselves.  A blow against them would both further the disintegration of corporate influence, and make yet further incursions against the Planners possible.

Target #3:  The FED, Money, and Banking

I will not dwell too much on this target as I've already stated my views on it many times.  The salient point here is that the inflating money system is far too much of a cash cow for too many entrenched interests to attempt to roll it back without a substantial contraction of the groups with a strong interest in maintaining it.  Today the FED itself is quite unpopular, even to the point that the notion of abolishing it is starting to be taken seriously.  But how serious are its new critics, really?  Does their thinking really go all the way to the core of banking, to the practice of lending against reserves?  Or is it more a sort of populist anger?  If they have not thought too deeply about the problem, such that they are not really ready to reform banking to the necessary extent, will there still be a commitment to keep out the central banking once all the old problems of banking re-emerge which the FED was created to address?

The odds of successfully withstanding the temptation to revert back would be drastically improved if there were fewer interested parties in doing so, which means a smaller average size of business, and a public with a better grasp of what was going on with money and business matters because it was more personally involved (and less stupidified by dumbed down schools...)  On the flipside, getting back to stable money would itself help to weaken the influence of those corporate and financial interests who favor inflating money, as the advantages conferred by artificially cheap lending would be removed.  It would also go a long way toward making more stable communities and encouraging longer term investments if monetary disturbances of the economy were reduced.

But there must be an established, thriving class of small-businessmen and investors with an interest in hard-money first to make it happen.  If there is a lesson here, it is that it's important to get the tangled mess of chickens and the eggs in the right order.

Target #4:  The Welfare-Warfare State

Only when these interests have been dealt with, and the resulting social transformation taken place, will the stage be set to deal with the issue that immediately rankles so many --  the tax and spend redistributist state.  The other forms of redistribution and social molding must be thoroughly expunged before there is much chance of successfully eliminating the more obvious ones.

On the bright side, I think that by the time one has arrived at this point, it will be fairly easy pickings.  No doubt the entire process would be a very long, hard slog and not the magical legislative stroke of a pen that people have come to expect of the notion of reform.  But I think that if most people could understand the depth and pervasiveness of the effects of those less visible phenomenon mentioned earlier in relation to these, they would know that by the time came to deal with the more obvious things, it would actually be a piece of cake.

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