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Table of Contents
Part 1: History and Overview of Economics and the FoFIP Proposal
1.
2.
3.
4.
Preface ……………………….
Introduction ………………………….
History and Nature of Economics …………
FoFIP Economics ………………
Part 2: Application: Power and Group Dynamics
5. Galbraith’s, Anatomy of Power …………….
6. Freud’s Group Dynamics ………………….
Part 3: Summary and Conclusion
7. Summary and Conclusion ………………….
Part 4: Let’s Put this all Together
8. Let’s Put this all Together ………………………………………….
9. Further Reading ………………………..
10. References ……………………………………………………………………….
Abstract
Current frustrations among American voters have reached a level
not seen since the Viet Nam war, perhaps since the founding of the
country. This is reflected in gridlock, extreme polarization of right
and left, single digit congressional approval, qrowing income
inequality, and the Tea Party and Occupy movements. The
following collection of essays are in support of a solution to the
problem via a proposal of a new theory of economics that supports
the middle classes rather than the poor or the wealthy to effect a
stable economy which does not allow the constant bickering and
abuse on both sides of the rich versus poor dynamic. This middle
class focused theory proposes the development of a measure of the
Family of Four Income and an index to indicate the distribution of
wealth and the strength and size of the middle class by this index
be added to current measures and indexes to ensure that the U.S.
economy is strong in both peace and war. Economists can then
evaluate the strength of the middle class and make
recommendations to politicians to strengthen or weaken the safety
net or to strengthen or weaken the upper 10%. These essays are
written in support of a grass roots political action committee to
affect positive change in the distribution of wealth. It is further
proposed that the Family of Four Income Program (FoFIP) be an
independent organization of sufficient strength to lobby for the
middle classes and the FoFIP. The final two essays present some
well-known views on power, the exercise of power, and group
dynamics, so that those who are interested can be as skilled as
possible in promoting the FoFIP.
Preface
Without the pen of the author of Common Cents, the sword of Washington would
have been raised in vain. John Adams.
The redistribution of wealth is a constant. Before Reagan, it favored the poor and middle
classes; since Reagan, it has favored the upper 10%. There is no reason to assume that the rich
get richer and the poor get poorer represents the natural flow of money or a healthy economy: it
merely illustrates that in spite of all economic systems of the past, the rich still get richer, and the
poor still get poorer and that no one has bothered to think this through. The motivation for
writing this collection of essays is to demonstrate that the successes of the middle class in the
1950’s and my personal experience, training, and reading have convinced me that a theory of
economy based on the strength of the middle class in peace and war would effectively stabilize
the economy and defeat that rich get richer, and the poor get poorer dynamic.
Growing up in a lower, middle-class family in the mid-west, my parents and other adults were all
aware of the family of four income and what jobs and college majors would likely provide such
an income. There was little interest in jobs that paid millions, but great interest in jobs that
allowed you to raise a family, own a house and a car in a safe neighborhood with good schools, a
hospital, a church and convenient shopping. In fact, an interest in wealth beyond that was
considered tawdry at best and dismissed with lines such as, "We don't want that kind of money."
This was an outgrowth of the efforts of the World War II generation who came home from war
to create an economy that included jobs with family of four incomes, job security, 40-hour work
weeks, vacations, insurance, retirement, pension plans, and social security. They provided good
schools, immunizations and doctor's checkups for their kids, and they saw pets and family
vacations as important to raising children. They also supported unions to help guarantee the
whole family of four system.
Growing up in this environment, trying to understand what constituted a good life and a nice
family, I tried to watch and listen. This is what I saw:
My father would leave work decisively every day at five to go home for dinner and take care of
his family. We (my mother, five siblings and I) always expected him at six minutes after five.
His insistence on leaving not earlier or later than five was part of the discipline that the World
War II generation agreed was necessary to create the family of four economy. It was not "greed
is good." It was good-hearted and family oriented. It was the true right wing. The right wing that
people feel nostalgia for that was destroyed by Reagan and the broken right wing that has
followed him. It was not the right wing that would bury the family of four income and attack job
security, 40-hour work weeks, vacations, insurance, retirement, pension plans, and social
security on the pretense that the voters would be better off with trickle down economics and
cutting taxes on the rich. It was a generation that kept a wary eye on the wealthy, recognizing the
sneers, spin, and frozen, grinning countenances of the greedy.
Since Reagan all of that has diminished significantly as the wealthy have continued to take more
and more family of four incomes out of their companies, their communities, and the stockholders
pockets, and put it in the pockets of the upper 10%. There is no excuse for it. It is not based on
family values; it is not based on sound and accepted economic principles; it is not based on what
the U.S. Fore Fathers envisioned for the U.S. economy, the free market, free enterprise, and
laissez faire; it is not based on the family of four income; it is based on personal greed. Trickle
down is as much of a joke to them as is the claim that cutting taxes on the rich will create jobs.
Both are snide dismissals of a thinking public who recognize that trickle down and cutting the
taxes on the rich are merely more hands in their pockets taking away the wealth that they have
rightfully earned and which deserves to go to their families. There is no trickle down, and the
wealthy do not create jobs, and most importantly, it is not the result of the economics of a free
market, free enterprise, and Laissez-Faire, and the upper 10% and the media should not be
allowed to bamboozle people with that cheap and see through excuse.
Let's assume for the sake of easy math that a family of four income is $50,000 per year. With
that figure in mind, we can note that each $100,000 executive bonus takes 2 family of four
incomes out of the company, the community, and the U.S. economy. Every seven figure annual
income takes 20 family of four incomes out of the company, the community, and the U.S.
economy every year. Every nine figure annual income takes 200 family of four incomes out of
the company, the community, and the U.S. economy every year. One $25,000,000 severance
package for failed performance (cf Carly Fiorina) takes 520 family of four incomes out of the
company, the community and the U.S. economy every time. Her only reason for running for
president is so she can further support the rich and get another huge retirement bonus for failing
at anything else, the wealth of an ex-President. This is even more rankling when you consider
that those upper 10% bonuses and salaries are being paid to people in New York or DC and not
in the communities where that money was earned as in every MacDonald’s, Walmart, Burger
King and so on. Every time you shop there your money is primarily going to Wall Street not to
your community.
The innovation and arrival of ATM's saved banks billions in salary packages and yet rather than
paying us 50 cents each time we used it, they charged us instead and think that we are unaware
of the guile behind this. There are countless examples of the shiftless, cunning, conning
mentality of the broken right wing but little as yet that we can do about it. They turn to us and
say we are going to have to take cuts in Medicare and the minimum wage and shamelessly turn
around and give themselves millions in bonuses for having done so. They turn to us and say, like
Herman Cain, "Don't complain. Go out and get a job and earn your wealth." This jaded, sadistic
dig is just one of many that are eating at the hearts of the American public. The wealthy look,
act, walk and talk like perps and pimps because they are. Their targets, the American family,
look, act, walk and talk like vics because they are.
The bonus happy executives aren't that good. We are. They did not provide the talent, creativity,
hard work, inventiveness, and social skills necessary to run a business. We did. They merely
developed a set of financial tools to wrench the profits from us and line their own pockets in the
name of “sound business management” something to which, they tell us, we could never attain.
They lower the wages, remove benefits, raise our fees and then when we have the audacity to say
that my child needs a doctor or my grandfather is bedridden, and I can no longer care for him,
they say, "You should have thought of that earlier. You should have worked harder." And then
for the brilliance of those rejoinders, they give themselves another million dollar bonus and
create a 9 figure income for a crony.
They tell us that authors, inventors, artists, and creators cannot run a company, but they can.
And with that little excuse they take companies from inventors and workers and hand it over to
MBAs and JDs who pretend they understand these things better than the creators do and
therefore, they not us are deserving of the profit of our creativity and hard work.
They are not making this wealth, they are taking it, and it is time to take it back. They do not
grow their companies, their communities, or the U.S. economy: in fact the problems in America
today are precisely the result of this shift in the distribution of wealth and this destruction of the
inventor, the talent and the creative, and it is attributable to one thing and one thing alone, the
greed of today's wealthy and their inability to make judgments about anything other than the size
of their wallets and their next bonus. They could see Social Security running at a profit if they
did not see a huge sum of money that they could transfer into their own pockets. They could
realize that government jobs are good jobs if they did not see the government payroll as a target.
If they did not have their hands and minds on everybody else's wealth, they could see that local,
state and federal governments would be far more interested in creating jobs with family of four
incomes than the wealthy would ever be. There would be no mansions or yachts to pay for if the
government were creating the jobs, and there certainly would be no 7, 8, & 9 figure incomes or
bonuses. The right wing has gone so far off track as to see themselves as the new fascists and
liberals as the new non-Aryans. Jesus Christ was a liberal, and we are all sure that he still
believes in giving to the poor, not creating them. The family of four income represents a
distribution of wealth that would be expected of a Christian country. The current distribution of
wealth looks like the Rome of Christ's time more than anything that could arise out of
Christianity.
The frustration of the American voting public is profound and justified and the occupy and tea
party movements indicate the mere tip of an iceberg of a growing mass movement to get jobs,
houses, and families back from the broken right wing that took it, the evil broken right wing that
took it.
Fortunately, there is a solution at hand to return the distribution of wealth to the way it was in the
50's: we simply need to surtax the rich. President Obama had a 5.6% surtax the rich bill on the
table for his 2012 election but this quickly disappeared once he had those votes and was in
office. We can look at such a thing as a good start that hits exactly the right note. We can surtax
the rich to pay the national debt; we can surtax them to fix social security; we can surtax them to
put student grants and loans back on the table to the levels they were in the 70's. We can surtax
them again and again and again until the wealthy sit-up straight, fold their hands nicely on the
table, admit they were wrong, apologize, and put the money back. We can also make sure that a
surtax the rich bill is as easily available and as easily implemented as a draft bill. The former to
defend us from the rich who have demonstrated they can become internal enemies and the latter
to defend us from external enemies.
There is no need for discussion or debate: this not about a fair tax. It is punitive. We can make or
break the 2016 election around the surtax, and from there, we can try again to refocus the poor,
the rich, and the middle classes on the Family of Four income. President Obama had a surtax on
the rich ready to go. How about the family values right wing (not the broken right wing)? Are
you serious about family and the family of four income or are you interested solely in your
personal ever growing wealth as you pretend the poor are indolent, stupid, and undeserving.
When the rich turn to us and say, "Who's going to pay for this?" We're going to turn to them and
say, "You are!" and then press the voting button for the surtax and never again tax ourselves or
those poorer than us. The voters of the U.S. made that wealth possible, and those same voters
can take it back. The rich simply refuse to appreciate what we the voters have done for them.
Introduction: On Popular Misconceptions of “Liberal” and “Conservative.”
Show me a young Conservative and I’ll show you someone with no heart. Show
me an old Liberal and I’ll show you someone with no brains, Winston S. Churchill.
Given the vitriol between left and right in the media and in our schools and communities,
it is probably best to review the terms liberal and conservative before we approach the
problems of today’s polarized economy.
Abbreviated dictionary definitions of “Liberal” and “Conservative” conservative (full
definitions at the end of this chapter):
Liberal: Favorable to progress or reform, as in political or religious affairs.
Conservative: Disposed to preserve existing conditions, institutions, etc., or to restore traditional
ones, and to limit change.
We can conclude from the dictionary definitions of liberal and conservative that the character
and definition of both liberals and conservatives have been subjected to obscene and grotesque
exaggeration and hyperbole to the point that, in spite of an underlying understanding of these
terms by junior high school students and above, the core meaning we all know has been entirely
pushed into the background as politics of the last 50 years have changed them to:
Liberal: Baby killing, homosexual, drug or alcohol addicted losers trying to take over the nation
via an open door policy to gangs, cartels, terrorists, drugs, and welfare cheats through our
southern border, leading to revolution and the installation of Barak Obama or Hillary Clinton as
the first U.S., post constitutional/communist, dictator for life.
Conservative: Jack-booted, racist, greedy, toe-tapping-homosexual, misogynists who want to
hand the nation over to the wealthy while leaving the poor and middle classes to fend for
themselves in ever growing unkempt ghettos without proper education and no safety net, ever
reducing the size of government and feeding the untaxed aristocracy, leading to a postconstitutional U.S. that leaves the Cheney’s the rulers of Pennsylvania, the Gates, the rulers of
Washington, the Bushes the rulers of Texas, etc.
In losing sight of, even blinding ourselves to, the simple truth of the core definitions of liberal
and conservative, through our vicious, nit-picking hyperbole, we have also lost sight of the
wisdom of Churchill in the quote that opens this essay. A young conservative hasn’t got a heart
because the young want to make a novel contribution to their culture to show the value of the
newest generation and themselves as individuals. They look to contribute and so favor “progress
and reform,” in short, liberalism. As they mature, they become conservatives to protect their
contributions, to correct their errors, to protect the overall system that made them possible, and to
give the next generation their chance.
While the exaggerated definitions of conservative and liberal seem justified, it would be better to
be more conservative than liberal in sane discussions of these matters. The unexaggerated views
of the problems of liberalism and conservatism are far easier to work with and far more sane.
That is, conservatism, left unchecked, results in stagnancy. Liberalism left unchecked results in
the throwing out of all of tradition, the throwing out of the baby with the bath water, of an
excessive focus on creativity and newness. The polarization we see today indicates that both the
right and left are being childishly extreme.
The potential stagnancy of conservatism is no more of value to a nation than the liberal throwing
out of the entirety of the previous culture to create a new one (as in communism). Every culture
needs both conservatives and liberals to prevent the extremes of stagnancy of conservatives or
the loss of tradition of liberals in order for the nation to advance or at least remain stable. They
also need to cooperate and respect each other rather than demonize each other through that
hyperbolic nitpicking and hysterical overreaction mentioned before.
The emphasis of liberalism on progress and reform naturally attracts the creative and the young
as it requires creativity to effect progress and reform. The conservative emphasis on protection
and preservation naturally requires a suppression of creativity in the name of understanding and
propagating that which has been established before.
Professions that require creativity like media, theaters, film, etc. will naturally attract and
encourage liberals. A liberal media or Hollywood bias is not a political movement: it is a natural
outgrowth of the dedication to and need for creativity in those industries. Business tends to
attract conservatives to protect and maintain financial institutions though business can cut its
own throat with attitudes that could prevent all of creativity in a “get the inventor/creative out”
mentality. This is not something that can be remedied or rallied against. There is nothing wrong
with either liberals or conservatives. Just as there is no war on women and no war on men, but a
constant war between the sexes, there is no war on liberals and no war on conservatives, but
there is constant strife between them. Liberals and conservatives both just need to respect and
understand each other and get along, like we did before hippies and Viet Nam and Nixon and
Reagan.
Liberalism was overwhelmed by the appearance of Viet Nam, the romaniticization of illegal
substances, civil rights, and contraceptive rights. Conservatism was equally as overwhelmed by
these issues as liberalism which explains why we have had 25 years of bad liberals followed by
25 years of bad conservatives. We have to resolve our differences around these issues in order to
move forward.
Our inability to reconcile both sides is the biggest threat to the nation, not liberalism alone or
conservatism alone. Unfettered liberalism can lead to communism as we saw in the 70s;
unfettered conservatism can lead to aristocracy as we see today.
As stated, the redistribution of wealth is a constant and is always an issue. For example, before
the Great Crash, it favored the Robber Barons, after the great crash, it favored the poor and
middle classes. Just as before Reagan, it favored the poor and middle classes; since Reagan it has
favored the upper 10%. Liberals and conservatives need to work together to create a balance.
The communists would have that distribution constantly moving toward the poor, and the
aristocrats would have that distribution constantly moving toward the wealthy. It is currently
favoring the wealthy, and that biased redistribution toward the wealthy has been on-going since
Reagan. Are we to expect another Great Crash? Will today’s Robber Barons be at fault? Will we
need another New Deal to correct it once again? Will this history repeat?
This entire set of essays to demonstrate that a focus on the middle class and the family of four
income in peace and war would stabilize what is now a never-ending battle, which will always
favor the rich because they have the resources to apply to the matter, and that only with a stable
middle class can we prevent the two extremes of Robber Barons and Great Crashes.
Neither communism nor capitalism is willing to ensure a free market, the former pretends the
masses should be “in charge,” as the rich will only further take advantage, and the latter pretends
the wealthy should be “in charge,” as the poor uneducated masses cannot understand or handle it.
The only way to ensure a free market and an equitable distribution of wealth is through the
regulation of both communism and capitalism and through efforts to legislate a redistribution of
wealth that favors the middle classes rather than either of the extremes. We the voters run
things, not the liberals or the conservatives.
The founding fathers and Adam Smith both saw the possibility of and were concerned about the
development of a small but cruel aristocracy arising from the U.S. economic system, and that is
what we are seeing today. From the earliest discussions of Laissez-Faire, free enterprise, and the
free market, the need to regulate monopolistic endeavors and corporations has been asserted to
prevent what we are seeing in the economy today.
Communism was unknown in their time, but properly protecting the free market in the first place
would have prevented that that world-wide fiasco. The conservatives of today like to pretend
that there are excessive regulations on corporations while the liberals complain that the safety net
is falling apart. Since civil rights, which was successful under Martin Luther King, but fallen
into drugs, violence, and stupidity afterward. Since Reagan, a generation of self-seeking
politicians, MBAs, and lawyers have been modifying laws in favor of big corporations and the
upper 10% at the cost of wages and the safety net for the poor and middle classes.
Liberals have completely lost sight of the fact that there is more to liberalism than political
correctness and civil rights. The protection of the rights of workers, students, and education have
fallen far behind those of gays, women, abortion, and drugs; conservatives have completely lost
track of the fact that there is more to conservatism than wealth as a mark of success.
The founding fathers were particularly sensitive to all these issues. The Boston Tea Party
demonstrated their interest in protecting the everyday citizen and voter from unfair taxes and
corporations and the importance of freedom in the state and in the market. They were
particularly leery of corporations and restricted them far more aggressively than we do today.
The conservative pretense that less regulation on corporations and fewer taxes on corporations
are what Adam Smith and the Founding Fathers intended, is as foolish as to think the founding
fathers had no interest in freedom or the poor. Such beliefs are either a deliberate fabrication or
the result of a particularly poor education in economics. The founding fathers saw it necessary
to legislate corporations to such a degree that they only allowed them: 1) to exist for a limited
amount of time, 2) to sell stocks but not buy them, and 3) to sell only one product. Do not let
todays wealthy or media tell you that they are protecting the free market, free enterprise, and
laissez-faire, and don’t let them tell you they are carrying on the traditions of Adam Smith and
the Founding Fathers.
The efforts to create a red state only nation will leave us little different than the People’s
Republic of China with a small and cruel aristocracy running the nation in spite of the structures
that exist. A blue state only nation will leave us little different than the communist nations of
Eastern Europe leading slowly and painfully to financial ruin in 50 to 100 years.
The only solution to the matter is to recognize these problems and to stop the vicious, hyperbolic
nit-picking on both sides of the aisle, respect and understand one another across the aisle,
recognize that neither the throwing out of the baby with the bath water of the left nor the
stagnancy of the right furthers the U.S. or its interests. And finally, we must return to the
definitions of liberal and conservative that we first learned from a dictionary and a junior high
school civics class when were tweens and stop the hysterical mischaracterizations of both.
All this being said and then done, the voters and legislators can work together in support of the
middle classes, the family of four income and an ever growing middle class rather than an ever
growing DOW, GNP, or the wallets of the upper 10%
Full dictionary definitions of liberal and convservative from Dictionary.com.
From Dictionary.com:
LIBERAL
[lib-er-uh l, lib-ruh l]
adjective
1.
favorable to progress or reform, as in political or religious affairs.
2.
(often initial capital letter) noting or pertaining to a political party advocating measures of
progressive political reform.
3.
of, pertaining to, based on, or advocating liberalism, especially the freedom of the individual and
governmental guarantees of individual rights and liberties.
4.
favorable to or in accord with concepts of maximum individual freedom possible, especially as
guaranteed by law and secured by governmental protection of civil liberties.
5.
favoring or permitting freedom of action, especially with respect to matters of personal belief or
expression:
a liberal policy toward dissident artists and writers.
6.
of or pertaining to representational forms of government rather than aristocracies and
monarchies.
7.
free from prejudice or bigotry; tolerant:
a liberal attitude toward foreigners.
noun
14.
a person of liberal principles or views, especially in politics or religion.
15.
(often initial capital letter) a member of a liberal party in politics, especially of the Liberal party
in Great Britain.
Origin
Middle English
Latin
1325-1375
1325-75; Middle English < Latin līberālis of freedom, befitting the free, equivalent to līber free +
-ālis -al1
Also from Dictionary.com:
CONSERVATIVE
[kuh n-sur-vuh-tiv]
adjective
1.
disposed to preserve existing conditions, institutions, etc., or to restore traditional ones, and to
limit change.
2.
cautiously moderate or purposefully low:
a conservative estimate.
3.
traditional in style or manner; avoiding novelty or showiness:
conservative suit.
4.
(often initial capital letter) of or pertaining to the Conservative party.
5.
(initial capital letter) of, pertaining to, or characteristic of Conservative Jews or Conservative
Judaism.
6.
having the power or tendency to conserve or preserve.
7.
Mathematics. (of a vector or vector function) having curl equal to zero; irrotational; lamellar.
noun
8.
a person who is conservative in principles, actions, habits, etc.
9.
a supporter of conservative political policies.
10.
(initial capital letter) a member of a conservative political party, especially the Conservative
party in Great Britain.
11.
a preservative.
Origin
Late Latin
1350-1400
1350-1400; < Late Latin conservātīvus, equivalent to Latin conservāt (us) (see conservation ) + īvus -ive; replacing Middle English conservatif < Middle French < Latin, as above
Essay #1: The History and Nature of Economics
The proposal of any new law or regulation of commerce which comes from
[capitalists] ought always to be listened to with great caution, and ought never to be
adopted, till after having been long and carefully examined, not only with the most
scrupulous, but with the most suspicious attention. It comes from an order of men,
whose interest is not exactly the same as that of the public, who have generally an
interest to deceive and even oppress the public, and who accordingly have, upon
many occasions, both deceived and repressed it, Adam Smith. Cited in Goodwin, p.
29.
A Short Note on Montesquieu and Political Organization
In the following presentation and discussion of theories of economy, there is virtually no
mention of the structure of the governments within which these economic systems operate, and
rightly so given the goal of exploring and hopefully, explaining the flow of wealth independent
of the type of government, but an important aspect of applying our economic knowledge to the
society as a whole requires at least a basic understanding of different forms of government.
Montesquieu’s, The Spirit of Laws, (1748) provides an easy schema with which to look at the
governments of the world to help evaluate the economies of those nations.
Montesquieu, Charles de Secondat, baron de Montesquieu (1689).
The Spirit of the Laws (Fr: De l'esprit des lois,) is a large and complex volume on political theory
written by Charles de Secondat, Baron de Montesquieu in 1748. The first English translation
was written in 1750 and strongly influenced the founding fathers in their establishment of the
United States. Montesquieu's work was tremendously influential world-wide at the time and is
still considered a foundational work in political theory. Montesquieu is probably the best known
political theorist of the modern age.
Although it is a work of tremendous complexity at nearly 1,000 pages, his basic organization of
types of government can streamline our thinking about the political systems of the world that
define the boundaries of a given economy. For Montesquieu, there are three and only three types
of government: 1) republic: where some (aristocracy) or most (democracy) people are sovereign,
2) monarchy, where one person rules but according to established rules, and 3) despotism where
one leader rules by “whim and caprice” no matter what the established rules happen to be. In the
introduction to chapter one, he says:
There are three types of government: REPUBLICAN, MONARCHICAL, and
DESPOTIC. To discover the nature of each, the ideas of them held by the least
educated of men is sufficient. I assume three definitions, or rather, three facts:
one, republican government is that in which the people the people as a body
[democracy], or only a part of the people [aristocracy], have sovereign power;
monarchical government is that in which one alone governs, but according to
fixed and established laws; whereas, in despotic government, one alone, without
law and without rule, draws everything along by his will and his caprices. (The
Spirit of Law. p. 10)
Montesquieu’s theory then only allows of: rule by one, rule by many, or despotism as the
only possible forms of government. Thus when we think about the economies of
particular countries, we can think about the different forms of government in these three
forms to better understand economic systems. Republics and monarchies are likely to be
quite similar economically, but despotisms are likely to be as random and poverty ridden
as we see in Cuba and N. Korea (to name just two) because no one, not even economists,
can make accurate predictions given the character of a despot.
CAPITALISM
History of Capitalist Economics
It is important to understand from the start that economics is not particularly difficult though it is
obscured by those who would like to make it seem so (like the capitalists in the quote above).
This first essay gives a quick history of economics and economic systems beginning in the 1600s
when such systems first made their appearance. We begin with Colbert and Quesnay and
continue through to Reagan. The appendix of this first essay provides a table with a
chronological list of major economic thinkers, their dates and their systems.
Previous to international trade that led to mercantilism and laissez-faire, there were feudal,
monarchical, and ecclesiastical cooperation and competition for the food, shelter, and clothing of
themselves and the populace in support of those of institutions. These societies were primarily
agrarian, and no one tried to explain the flow of money. It was growing international trade, the
discovery of America, and trade to and from America and India that necessitated a better
understanding of the flow of money. As the system began to develop from feudalism and an
agrarian society to trade and the institutions necessary to support that trade (mercantilism) and
grow in complexity, this too needed an explanation. Colbert and Quesnay are the first well know
writers to try and explain the flow of money.
Colbert and Quesnay, Mercantilists and Physiocrats
At this time, in the U.S. and Europe, with the development of trade, came the development of
many new businesses to support it: insurance, banks, shippers, and so on which saw the rise of
capitalism and a further need to support it.
There were now banks who would pay interest to savers and then invest a portion of that money
in other projects outside of banking. They also loaned money to individuals and companies for
interest. Finally, there were a growing number of corporations where many people pooled their
money to help fund projects.
So in the earliest attempts to explain, improve, and evaluate the economy, which first came into
view through international trade, there was already an opposition between regulation and hands
off approaches to trade and the economy.
Colbert’s system was called “Mercantilism” (regulation of trade) and Quesnay’s, “Laissez-Faire”
(Fr. Leave it alone). The first name for economists was coined in Quesnay’s time. They called
themselves physiocrats in contradistinction to mercantilists, and they rejected mercantilism
because they believed that if wealth were allowed circulate naturally (without tariffs, subsidies,
and quality regulations) like blood in the body, it would regulate itself.
Jean-Baptiste Colbert was the minister of finance in France at this time of growing trade. He
believed it was necessary to regulate trade so that France could maximize their profit and gain an
edge in trade. To do this, he passed taxes on imports (if they were cheaper than French
products), subsidies on exports (if they were too expensive to export), and regulations on quality
for manufacturers so the French exports would be of consistent quality. Mercantilism is as
simple as that: taxes on imports, subsidies for exports, and regulation on manufacturers.
Following Colbert came Francois Quesnay who first argued that a “leave it alone” economy is
better than the manipulation of mercantilism with their tariffs, subsidies, and regulations does not
guarantee the best economy but only leads to a never ending battle between different countries
on tariffs, subsidies, and regulations. He argued instead that it was best to ignore tariffs,
subsidies, and internal regulations, and to trust that the economy would better take care of itself
for the benefit of all if such regulations were dropped. This, he called, “laissez-faire” (let it be)
and simply wanted governments and government regulations out of the whole thing.
Adam Smith
As knowledge of mercantilism grew and trade became more complex and at the same time as the
American Revolution, Adam Smith (a Scott), wrote a very thorough description of his view of
economics that led to the conception of capitalism that we know today. In his book, An Inquiry
into the Nature and Causes of the Wealth of Nations (1776), usually called, just The Wealth of
Nations.
Capitalism is a term based on “capital,” the money and resources needed to start and run a
business. Capital is also referred to as the “means of production,” that is, the money, stocks,
property, machinery and so on, anything that can be used to create, support, and fund new
projects. Those who have that sort of money, property, anr so on to invest and who actually use
it got new projects and companies are called Capitalists.
The terms free market, free enterprise, supply, demand, and several more were introduced in this
book. Of particular note was the term, “competition” as normally defined. Smith argued that no
one is involved in economic activity except for his own benefit or advantage. From this he
concluded that the basis of economic activity the driving force of all financial exchanges is
competition among buyers, sellers, and businesses, and to date with the exception of communism
and Mitlon Friedman’s surprising reevaluation of this term (below), this is still the underlying
assumption of all capitalist economic systems.
He then added that the supply of goods and the demand for goods is based on what is available
plus the competition among buyers, sellers, and competitors to maximize their own profit.
Agreeing with Quesnay, he said that the best economy was a laissez-faire economy and that with
this “leave-it-be” attitude, the economy would naturally maximize the profits for all as best as
could be done, and that things would develop equitably for everyone as though “by an invisible
hand.” The Founding Fathers were influenced by Smith as well as Montesquieu and they too
accepted the laissez faire, free market, free enterprise, supply and demand, and so forth of
Smith’s system. For Smith and the Founding Fathers, it was only necessary to pass laws against
those who would abuse Laissez-Faire and the free market.
Smith argued that monopolies and corporations were dangerous to free enterprise, the free
market, and laissez-faire. The founding fathers of the U.S. shared this fear and passed laws to
regulate both monopolies, and corporations. Corporations at this time were only allowed to sell
one product, could only exist for a limited number of years, and could not buy stocks in other
corporations. The founding fathers felt that without strong legislation against monopolies and
corporations, wealthy businessmen would influence politicians to the detriment of laissez faire,
the free market, and the common man and would lead to a small but cruel aristocracy dominating
the American economy as we see today.
He further distinguished between public and private business. Things like military, street
cleaning, building bridges and roads, and so on were the business of government to be paid for
with taxes, while everything else was to be handled by business and supply and demand. This
idea is still prevalent today when discussing public and private sector affairs.
A short note on Smith’s “invisible hand.” At the time of Smith’s writing, science and empirical
thinking were new and prominent in the world, and the explanation of science, even the science
of economics, was meant to be done without the mention or use of the intervention of God or
religion. Some have argued that Smith’s invisible hand was still theological, but it is more likely
Smith saw the invisible hand as the movement of natural sociological forces in economics.
Malthus and Ricardo
Thomas Malthus and David Ricardo are particularly easy to understand. Malthus, better known
as a sociologist than as an economist, argued that “starvation and extreme poverty” are inevitable
and normal due to the ever growing population of the poor doubling every few decades. Ricardo
agreed and wrote an economics book that brought “scientific” justification to Malthus’s ideas via
a series of abstract principles to describe Smith’s free market and international trade. His book
was titled Principles of Political Economy and Taxation (1817). It was through Ricardo that
economics became more like statistics than essays, and it became much more academic.
Somewhat like Smith who said that anyone participating in the economy is always competing to
gain his best advantage,
Ricardo posited “economic man” as one of his abstract principles, that part of each individual
which, when dealing with economic matters, works solely for his own advantage. This is a small
advance over Adam Smith’s idea that in economic matters, people always fight for their own
advantage. Economic man is an idealization and abstraction of that part of anyone engaged in
economic activity.
Ricardo’s term, “comparative advantage” is still bandied about today, but most of his concepts
and the belief in the inevitability of poverty and starvation have fallen to the press of reality.
Further his idealized free market led to the conclusion that whether you are poor or rich, it is
because you deserve to be so as per that idealized free market and the inevitability of starvation
and poverty of the masses.
As comparative advantage is still known and discussed, it is enough to know that it is a principle
of international trade that argues that even impoverished nations can still profit through free trade
by specializing where they have an advantage.
Says Law, the Law of Markets
The French economist, Jean-Baptiste Say (1767–1832), wrote A Treatise on Political Economy
(Traité d'économie politique) in 1803, wherein he proposed a law that was prevalent part in
economics throughout the 19th century that stated:
As soon as a new product is created, it creates a market for other products equal to the
value of its market.
When applied to the entirety of the economy, this means that whatever a nation produces, its
aggregate production, will create an equal demand. This almost sounds like “if you build it they
will come,” but it is a little different. What it means is that to the degree to which you make a
new product, its worth, say 1 million dollars, will create an equal demand (1 million dollars), not
for its own products, but for products in general.
Both Adam Smith's, "invisible hand" and Say's law ‘s were used in support of the laissez faire
idea that a capitalist economy will result in full employment and prosperity as long as the
government does not intervene.
After the Great Crash of 1929 and Keynesian economics became popular as a cure for the
depression. Say’s law came under dispute and since then it has been abandoned.
Spencer, Darwin, and the Survival of the Fittest
Spencer Herbert Spencer (1820 – 1903) was a Victorian philosopher, biologist, anthropologist,
sociologist, and prominent classical liberal political theorist. He wrote a book called, Principles
of Biology, He was the first to propose the theory of evolution as the development and progress
of the physical world, but unlike Darwin, who actually proposed his theory of evolution a little
later for only the physical world, Spencer extended it to the human mind and sociology as well.
It is from his work that we get the rather Malthusian idea of “the survival of the fittest” in
economic matters. Spencer believed that evolution and survival of the fittest is true in society as
well, and that all of the distribution and redistribution of wealth is merely a matter of the fittest.
The wealthy naturally thought that was true of their wealth that they and their families are the
fittest because they are the wealthiest. The poor and middle classes were not convinced. This
still comes up now and then, but not in responsible settings.
Keynes
John Maynard Keynes, (1883 – 1946), was a British economist and one of the founders of
macroeconomics, the study of a much larger picture than anything previous to everything we
have looked at to this point, which was subsequently renamed “microeconomics.” His ideas
caught on and became an economic school of its own, called Keynesian Economics. He is widely
considered the most influential economist to date.
Macroeconomics concerns very large pictures of supply and demand, not a snap shot of the auto
industry or of a single corporation like Proctor and Gamble or indexes like the Dow Jones.
Macroeconomics concerns itself with a compilation of all of supply and demand, that is, an
aggregate of the entirety of the U.S. production (supply) and consumption (demand). This was
not original with Keynes but he studied previous works on the subject and argued that
government regulation was necessary to predict and prevent booms and busts. This was to be
done with an eye toward aggregate indexes, such as the gross domestic product (GDP) therefor
suggested that the government use fiscal and monetary policy to keep an eye on and prevent
downsides to the economy.
Keynes lost his influence in the 1970s, due to criticism from economists, most notably Milton
Friedman who did not believe that governments could manage the realities of impending booms
and busts (the business cycle). Keynes came back into favor after the 2008 financial crisis.
Keynesian economics was the theory used in response to the crisis by President Barack Obama.
Keynes is perhaps the central economist of influence today, but there is still much discussion and
debate on this issue and very little is settled or stable.
Mises and Hayak
Ludwig von Mises (1899-1992) and Friedrich Hayak (1881-1973 noted that the planning of
economies as seen in communist countries simply were not working. So they wanted to revive
the liberalism of the 1900’s in which believed that government should be too small to oppress
people. Hayak in particular argued that it is not enough to assume the market works as with
economists back to Smith, it also has to be understood how it works. Hayak, improving on
Smith’s invisible hand, stated that the market is a collection of individuals and groups who
together (without the planners of communism) created a group intelligence that created the
market, and this worked best with laissez faire. Anything like government interference,
regulation, or planning and control would interfere with that group intelligence. Goodwin (2012)
calls this the “invisible brain.”
These ideas will be picked up by Galbraith, throughout is many works and become far more
thoroughly worked out in his definitions of “conventional wisdom” and “countervailing powers.”
This will be described in the upcoming section on Galbraith.
Milton Friedman 1912-2006
Milton Friedman (1912 – 2006) was an American economist, statistician and writer who taught
at the University of Chicago. He also received the Nobel Memorial Prize in Economic Sciences
in 1976. Hayak had become a professor at the University of Chicago where he inspired Milton
Friedman, also a professor there to carry on and expand the neoliberal system. Friedman
reasserted the importance of the individual in economy as a contrast with the failing communist
economies. He says,
The world runs on individuals pursuing their self-interests. The great
achievements of civilization have not come from government bureaus. Einstein
didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t
revolutionize the automobile industry that way. Milton Friedman.
This sounds a lot like Adam Smith’s view of the market, but unlike Smith or any other
previous economist, he argued that rather than being every man for himself
competitiveness, he left a lot of room for good-heartedness, making it an integral part of
market dynamics. He argued that in guaranteeing an individual’s right to choose, such
that if government does not interfere, individuals will recognize that the welfare of others
is also an important to his own welfare.
As mentioned above Friedman was instrumental in the loss of influence of Keynesian
economics, particularly Keynesian governmental regulations of business. He was only in favor of
one government regulation of the government on the market, a 3% raise in the money supply
every year, which he called “monetarism.”
He was a liberal but he did not like modern American liberalism which he felt was too prone to
collectivist thinking and thereby an open door to socialism and communism. For him, a true
liberal advocates for the free market, small government, and minimum government interference
in the economy and elsewhere. Friedman says:
Old liberals may go on calling themselves by this designation – which is
rightfully theirs – but they do so at the risk of being confused with American
liberals. To avoid such confusion, they may resort either to explanatory footnotes
or to adopting a new appellation for themselves, such as “libertarians.” The most
essential difference is that the classical liberal wants the individual to be free from
coercive interferences, especially from interventions by the state, whereas the
American liberal wants the state to intervene in all sorts of situations and restrict
the individual’s freedom of action in a variety of ways for a variety of objectives.
In arguing for the liberal, not American Liberal, point of view, he says:
Indeed, a major source of objection to a free economy is precisely that it . . . gives
people what they want instead of what a particular group thinks they ought to
want. Underlying most arguments against the free market is a lack of belief in
freedom itself.
And further:
The scope of government must be limited. Its major function must be to
protect our freedom both from the enemies outside our gates and from our
fellow-citizens: to preserve law and order, to enforce private contracts, to
foster competitive markets. Beyond this major function, government may
enable us at times to accomplish jointly what we would find it difficult or
expensive to accomplish severally. However, any such use of government
is fraught with danger. Capitalism and Freedom, pp. 2-3.
Friedman doctrine
Friedman argued that a company should have no "social responsibility" to the public or society
because its only concern is to increase profits for itself and for its shareholders and that the
shareholders in their private capacity are the ones with the social responsibility. He wrote about
this concept in his book Capitalism and Freedom. In it he states that when companies concern
themselves with the community rather than focusing on profits, it leads to totalitarianism.[1][2]
In the book, Friedman writes: "There is one and only one social responsibility of business – to
use its resources and engage in activities designed to increase its profits so long as it stays within
the rules of the game, which is to say, engages in open and free competition without deception or
fraud."[3]
“The Social Responsibility of Business is to Increase its Profits,”The New York Times Magazine,
September 13, 1970, The New York Times Company.
Galbraith
John Kenneth "Ken" Galbraith, (1908 – 2006) was an American economist, diplomat, and wellknown liberal, a prolific writer, who wrote over 40 books and 1,000 articles. As he was an
advisor to both Kennedy and Johnson, he is believed to have been instrumental in the structuring
of the “war on poverty.”
He was an “institutional economist,” a movement which began to look at larger groups or
institutions and their role in affecting the economy, likely inspired by Keynesian aggregates.
Institutional economy studies the history and development of institutions such as corporations,
military oligopolies (near monopolies like the auto industry, states, and so on.
Galbraith rejected the technical analysis and mathematical modelling of neoclassical economics
as being incapable of responding to larger groups, which cannot be reduced to statistical axioms.
In short, they are incapable of dealing with this larger reality. This was in keeping with his
contributions to institutional economics characterized by his focus on oligopoly, and the
interaction of government, military, and corporate spending. In addition, he coined the term,
“conventional wisdom,” which is widely used today to describe a generally held opinion that
may or may not be true. For example, “the get richer and the poor get poorer” is a widely held
opinion of the general public.
Galbraith was the originator of the idea of that the U.S. economy was managed by, what later
came to be called somewhat inaccurately, the military-industrial complex. This complex of
economic powers, characterized by the competitive needs and powerof the military, government,
and corporations, according to Galbraith, were far more influential on markets than general
assertions of a free market and free enterprise.
Galbraith criticized the belief (still prominent today) that an ever growing GNP (material
production) and an ever growing Dow Jones Industrial Average is necessary for economic
growth. This made him one of first of the post-materialists who shared this belief. He argues that
the military-industrial complex is nothing less than the collusion and competition of large
oligopolistic corporations, the military and the government allowing them to influence and
manipulate social trends and values. He argues that the bottom-line mentality and the near
obsessive focus on constantly growing production and profit, supports the richest (the 10%,
today’s Robber Barons). The power of these large groups affects politics, social attitudes, and the
market in a shortsighted way. He also says such influence and power of the few is contrary to the
principles of democracy.
Communism was even more effective in this in that ALL property was taken from everyone and
then given to the state. Unelected officials of the government were placed in charge of all the
wealth of a nation to be sure everything was fairly and evenly distributed. Ideally, those in that
position of responsibly would be those who understood Marx the best, ie monomaniacal
demagogues who wanted to own and control everything behind the complex and intellectually
challenging works of Marx.
In the 1920s, while much of the world was in revolution and involved in the growth of
communism, the U.S. was prospering and the Robber Barons arose and practiced an extreme
version of American capitalism that led to the Great Crash of 1929. Galbraith wrote a book on
the crash and concluded (rather tentatively) that the five causes of the Great Depression were: 1)
“an unusually high income inequality”, 2) “a bad over-leveraged corporate structure,” 3) “an
unsound banking system,” 4) “unbalanced foreign trade,” and 5) “the poor state of economic
intelligence,” all of which we see today, but far worse than before the Great Crash.
In another of his bestsellers, The Great Crash, 1929 (1954) he describes historically and analyzes
economically that great meltdown of Wall Street. He rather tentatively argues that the cause of
the crash was due to five factors: 1) “an unusually high income inequality,” 2) “a bad over
leveraged corporate structure,” 3) “an unsound banking system,” 4) “unbalanced foreign trade,”
and 5) “the poor state of economic intelligence.” A point to which we have returned since
Reagan.
You may also hear of behavioral economics in the context of institutional economics, which
added to institutional economics extra insights based on the discoveries of behavioral psychology
and cognitive science, rather than simple assumptions of how individuals or larger groups of
people will behave with much more precision than just economic man or competition.
Reagan, Reaganmics, and Trickle Down
Ronald Reagan (1911-2004), U.S. President from 1981 to 1989 was elected largely for his
staunch conservative principles, primarily his economic policies. He was elected after 10 years
of inflation and stagnancy (called “stagflation”) with his promises to fix the economy with
conservative, fiscally responsible policies. Though he was not an economist, his program came
to be referred to as “Reaganomics.”
His polices were called, supply-side economics, because it focused on the capitalists, more
accurately the rich, by supporting big business and corporations at the expense of the middle and
lower classes. The rationale for this was called the “trickle down” theory which supposed that
the more money the wealthy make the more it will trickle down to the poor and middle classes.
“Trickle down” was the pejorative liberal term for Reaganomics, while those who favored called
it “free market” economics.
The four pillars of Reagan's economic policy were: 1) reduce government spending, 2) reduce
federal income tax and the capital gains tax, 3) reduce government regulation on big
corporations, and 4) tighten the money supply to reduce the stagflation.
SOME NECESSARY ECONOMIC TERMS
Financial Instruments
Before we go farther we need to understand some economics concepts arising out of the
development of capitalism and its expansion due to the industrial revolution. They are
“Fractional Reserve Banking,” “Financial Instruments,” and the “Gold standard.” These
terms are not necessary for the purposes of this essay, but the reader may find them useful when
paying attention to economics after reading this essay.
Fractional Reserve Banking and the Creation of Money
As anyone knows, banks pay people interest on their money for depositing it with them. Banks
also offer loans. The funds for these loans are taken from customers’ savings and then loaned
out to others at a much higher rate than they pay their depositors. Thus the banks make a healthy
profit off depositors’ savings. As you might imagine, this loaning of depositors’ money is quite
dangerous and banks have to be careful to keep enough in the bank to be able to give their
depositors their money back on demand. Thus, they are required by plain common sense and the
federal government to keep a fraction on reserve, so they can meet the needs of depositors. The
federal government decides what the fraction should be.
There is also an entity called the “Federal Reserve Bank.” This is a bank that only banks can
use. Banks and only banks can leave deposits the Federal Reserve Bank and earn interest and can
also get loans from them at a higher interest rate then the get for their deposits so the Federal
Reserve Bank can make loans as well. So they can get loans as well or save the money that is
beyond the fraction that is on reserve. The interest rate paid be the Federal bank is what they talk
about in the news. The U.S. government has the right to raise or lower those rates. This is
managed by the secretary of the Treasury. How does this make a difference to the whole
economy? Simple, if the interest rates that the banks are paying off go up or down, there is a
downward pyramid spiral right through to the depositors who will also be affected by this.
Millions of individuals and businesses will have either more or less money in their pockets due
to the smallest percentage change in that interest rate charged by The Federal Reserve Bank.
The creation of money, money that only exists in depositors and loan contracts that has not been
paid yet simply has no existence beyond that promise. As the money comes in and the interest is
paid on savings and the loans are paid, that money once again is no longer just paper promises.
Only that part which remains unpaid is paper only.
Financial Instruments
We also need to briefly discuss precisely what it is that people actually do to drive a capitalist
economy besides just earning wages and paying wages and buying and selling. A financial
instrument is a tradable entity (asset) that basically falls into two categories: 1) equities which
are equal (hence equity) shares in ownership called stocks or shares in a company, and fixed
income assets, which are primarily debts, IOUs. These include bonds, bank accounts, and so on.
With these you are promised a certain profit at the end of a certain period, just like an IOU. The
IOUs are not only called fixed income instruments, they are also called derivatives. Equities can
also
Fixed Income (debt securities): loans, deposits, bank notes, debentures, bonds. Both short term
and long term.
Equity Securities (divided into equity and derivative instruments):
Equity: Common stocks, preferred stocks.
Derivative: Forwards, futures, options and swaps.
This should be sufficient for our purposes as we turn now to our history of economics.
Gold Standard
While the money of Fractional Reserve Banking does not actually exist except as contractural
promises, the potential money is guaranteed by contract, and it works quite well except for a too
small fractional reserve or the extremes of inflation and deflation. The gold standard can prevent
the creation of money that is completely worthless. Although the gold standard has not been used
world wide since 1971, there are still those who argue that we should return to it because without
it, the money is worthless and the danger of both deflation and inflation is much higher and just
for the moral reason that we are spending money we do not really have.
The basic idea of a Gold standard is to have a standard by which to judge the fairness of prices.
If one ounce of gold is worth $1,000 then a $20,000 car is worth 20 ounces of gold, a hamburger,
much less. Since gold holds its value better than other metals used for coins, gold was chosen
for a standardized value. This goes back two or three millennia to the Roman Empire and Asia
Minor.
The U.S. used only coins until Salmon Chase, the Secretary of the Treasury, printed the first U.S.
paper currency in 1861. Currency is not much different than pelts exchanged for supplies by a
pioneer trapper, but currency is easier to carry in a wallet than gold or pelts. However, since the
exact value of a piece of paper is quite small and a pelt shows its value immediately to the
trained eye, currency is actually more like an IOU from the government. Or conversely, you can
see currency as a kind of receipt that the consumer carries with him and uses for trade.
Say ou have $5,000 in gold on deposit in the bank and the bank gives you 4 $1,000 receipts, 9,
$100, receipts, 4 $20 receipts, and so on. With a gold standard all currency has to have an equal
amount of gold in the bank to back it up. This is a gold standard and gold, when we are
conducting business with currency backed by gold, all the gold in U.S. vaults had to equal the
amount of currency that is issued by the government.
Without a gold standard and without sufficient gold to back it up, the U.S. dollar turns into an
IOU with nothing to back it up. It is as if the bank (the U.S. bank in this case) is handing out
recipts (currency) without requiring any deposits.
The U.S. has not been on the Gold Standard since 1971. The following timeline provides a
sketch of our history with the gold standard.
1861 first paper money
1900 first time on gold standard in Gold Standard Act
1913 Federal Reserve Act created the Federal Reserve Bank, the bank for banks and placed the
printing of currency under their control.
1917 The U.S. joined the allies and WWI on April 6, 1917
1914-1918 WWI caused the gold standard to be supended twice.
Wilson bans the EXPORT of gold cancelling the gold standard with other countries.
1929 The Great Crash
1929-1933 The Great Depression
1933 Franklin D. Roosevelt closed the banks from March 3, to March due to a run on U.S. gold
13 and during this time, banks turned over all their gold to the Federal Reserve Bank. The banks
also could no longer redeem dollars for gold. On April 5, he ordered Americans to turn in their
gold in exchange for dollars.
1934 Franklin D. Roosevelt issues Executive Order 6102 forbidding the hoarding of gold by
forbidding people other than jewlers to own gold. The Gold Reserve Act was signed putting us
back on the gold standard, but no one could own or export gold. Leaving the rather odd result
that people could turn in their cash for gold except they were not allowed to own gold. For this
reason some people say he actually took us off the gold standard. This is why there is dispute
about whether he put us on or took us off the gold standard.
1944 While WWII was still being fought, Bretton Woods Conference 730 delegates from the
Allied nations met in Bretton Woods, New Hampshire. This conference established set of rules
and institutions to standardize international banking.
1945 The outbreak of World War II ended the Depression, allowing countries to go back to a
modified gold standard. Most countries adopted the Bretton-Woods System, which set the
exchange value for all currencies in terms of gold.
1971 Richard Nixon, pressured by inflation, Viet Nam, a trade deficit, and the threat of a run on
Fort Knox, issued an executive order taking us off the Gold Standard. This also caused the
collapse of the Bretton Woods agreement.
We have been off the gold standard since then though it became legal to own gold in XXXX.
COMMUNISM
Marx and Engels
This section on Communism is necessarily longer than the previous section on Capitalism due to
both the necessary and unnecessary complexity of Marx’s theory. Unlike capitalism,
communism is quite difficult to understand. It is necessary to try and make it clearer because, as
is, it is too obtuse and presupposes too much prior knowledge of philosophy. This excessive
complexity lends itself to large cliques of pretenders to understanding who can easily take over
those few who actually understand.
Writing about the same time as Malthus and Ricardo. Friedrich Engels and Karl Marx Germany
wrote two books which were the basis for the communist and sociologist movements that
appeared in the latter half of the 19th century and spurred the world wide communist revolutions
in the first half of the twentieth century. The first was The Communist Manifesto written by both
Marx and Engels and the second was Das Capital, written by Marx. Though they were both
prolific writers and essayists, those two books are the basis of their fame and their unifying
theory of communism.
Marxism is in many ways, an exact opposite of Capitalism. Where capitalism posits competition
as the underlying driving force of economics, communism, particularly as articulated by Marx, is
a theory based on cooperation and the end of competition resulting in a Utopian classless society
of cooperatives. Where Adams saw competition as the underlying force of economics, Marx saw
it as the underlying problem of the rich get richer and the poor get poorer dynamic and thought it
must be utterly overthrown to create the communist utopia. Lenin summarizes the historical
origins Marxism:
Marxism is the system of Marx's views and teachings. Marx was the genius who
continued and consummated the three main ideological currents of the nineteenth
century, as represented by the three most advanced countries of mankind:
classical German philosophy, classical English political economy, and French
socialism combined with French revolutionary doctrines in general.
Acknowledged even by his opponents, the remarkable consistency and integrity
of Marx's views, whose totality constitutes modern materialism and modern
scientific socialism, is the theory and program of the working-class movement in
all the civilized countries of the world ....” Lenin 1914.
Using that quote from Lenin as a starting pointing from which to explore communism, the
following is a more detailed description of Marx’s world view, the origins of those views and
Communism.
Galbraith states that the for better or worse, Engels and Marx were the first to give the peasants,
the common man, and the working class a sense that they too could be the holders of the power
and the purse strings rather than the monarchy or other government structures. Before that time
neither peasants nor the aristocracy had any sense that power the distribution of wealth and so on
could be articulated at all or that peasants could understand it.
In some ways, communism was a complete reversal of Smith’s through to Ricardo’s theories as
it has as its core principle the belief that the citizens could share rather than compete and thereby
create a new form of government based on cooperation or the sharing of all the assets and profits
as much as possible with all the laborers rather than just among aristocrats, monarchs, and
industrialists and allowing a pittance to trickle down to the workers. Both Engels and Marx
thought that revolution was inevitable in their time, and they sought to guide that revolution with
the principles of communism. There were many communist and socialist groups and movements
at the time, but a gathering in London of many of the leaders of these movements led to the
Communist Manifesto. Marx and Engels were the authors but perhaps more like editors as the
work was a result of the conclusions of that gathering.
Fascism grew up primarily as a reaction to growing socialist forces and focused on a new
aristocracy (the National Socialist Party) based on racism rather than on the establishment of the
peasantry as a new larger elite that would eliminate the aristocracy. Racial superiority and the big
lie (the Jewish banking conspiracy and the supposed inherent inferiority of the Jews) were as
much an attempt to befuddle and manipulate a confused and uneducated, hostile peasantry as
delusions on the part of the leaders. The poverty in Germany in particular was resented by the
Germans because the poverty of the reparations required by the treaty of Versailles at the end of
World War I.
As Marx based his work on that of Georg Wilhelm Friedrich Hegel, it presupposes an
understanding of that phenomenally difficult body of work, particularly the Phenomenology of
Spirit renowned worldwide as the most difficult book of philosophy ever. It also presupposes a
knowledge and understanding of important philosophical movements of the 17th and18th
centuries, particularly that of science versus theology, arguments in support of which were
extremely complex and sophisticated. And this just to understand the context and the background
to it. To avoid this problem, this discussion of Marx and Engels is written in manageable chunks
which, for the most part, can be read by a high school grad. In this way, the cliques of
pretenders, the soi-disant enlightened, cannot arise because anyone who has actually read these
essays will easily see through the pretense.
Further, if anyone had actually understood the fairyland utopia Marx expected to arise out of
communist revolutions, they would have rejected him straight out. I suspect his following was
based on crowds of the gullible with bad leaders who only knew a few, glib one-liners and some
buzz words about communism, and whose leaders allowed them to pretend in order to swell the
number of their followers and to manipulate them, like you see in today’s media. Let’s turn now
to the actual discussion of Marx and Engels. I rely heavily on a 1914 essay by Vladimir Lenin
on Marx’s views of communism. I have attached it in an appendix at the end of this collection of
essays. It is well-known as one of the most succinct and elucidating descriptions of Marx,
Marxism, and the context in which it arose.
Classless Society and Communist “Utopia”
The term classlessness has been used to describe philosophical and political movements that
want to remove all social classes and castes (monarch, lords and barons, aristocrats, warriors,
peasants, untouchables, etc.), and replace them with a society of free men and women who
advance or retreat in life due to their own efforts rather than their membership in a particular
class. Communes of the hippies, kibbutzim of Israel, and so on as well as the Bolshevik (Russian
Revolution) and South American and Asian communist revolutions were all attempts to realize
this ideal classless society, where only ones work and efforts counted for advancement and
regression in wealth and status. The term classless also refers to a society where the rich have no
power to influence the politics of the nation and rather unrealistically a society without poverty.
The most important element of a classless society is for the leaders and later the followers to be
able to see through their own ethnocentric beliefs and conditioning so they would not “taint” the
pure classless society to come. The “enlightenment” required for the communist utopia was the
realization and understanding of classlessness, a world without poverty or class distinction due to
that understanding.
As we saw in the Lenin quote above, Marx was a synthesizing force among a variety of
movements to implement a classless society. Marx was originally a follower of Georg Wilhelm
Friedrich Hegel, a philosopher who described the development of consciousness from primitive
man through to Hegel’s era of the European Enlightenment. At the same time, the “God is dead”
(cf. Nietzsche) theories of science were being explored. These were based on a materialistic and
scientific viewpoint that insisted that the only valid objects of scientific observation had to be in
some way physically measurable. As God, the psyche, spirits and so forth have no physically
measurable properties, they were therefor considered not only unscientific, but disproven and
false.
Hegel’s description of the coming to consciousness of an individual and a culture is described in
a series of stages of consciousness going back to primitive man who was largely unconscious, to
conscious man, feudal, to self conscious man, and finally to a stage he calls “absolute spirit.”
There are actually 15-30 stages in this work depending on how you separate stages and
substages. This was all described in the Phenomenology of Spirit, the work mentioned above
recognized as the most difficult book of philosophy ever. The full list is given here:
HEGEL'S STAGES OF CONSCIOUSNESS
Materialism
1.
2.
3.
4.
Sensory (infantile) consciousness
Perceptual consciousness
Understanding consciousness
Self-consciousness
5. Desiring self-consciousness
6. Master/Slave self-consciousness
Idealism (rejected by the materialists)
7. Stoicism
8. Skepticism
9. The Unhappy Consciousness
10. Idealism
11. Rationalism
12. Empiricism
13. Ethical self-consciousness
14. Legal self-consciousness
15. Spiritual consciousness
16. Tragic consciousness
17. Alienation consciousness
18. Lacerated consciousness
19. Duty consciousness
20. Freedom consciousness
21. Forgiving consciousness
22. Religious consciousness
23. Natural religious consciousness
24. Artistic religious consciousness
25. Revealed religious consciousness
26. Spiritual consciousness
27. Philosophical consciousness
28. Absolute consciousness
Marx, like Hegel for consciousness, traced the history of economics back to primitive tribal man.
Specifically, to the hunter-gatherer stage of human development. He saw this society as ideal in
that everyone was equal and everyone contributed (worked) and benefitted equally in a truly
classless society without money and without competition. Hunter gatherers worked to eat, sleep,
and clothe themselves, everyone cooperated and worked when they could and ate and rested
when they could. In particular, Marx saw this as an ideal society free of competition and 100%
cooperative. This is the utopia he thought would return with the classless society and the end of
competitiveness brought on by communist revolutions led by the “elite” who understood
classlessness. If this seems insane and poorly thought out, you are right, but much of this was
buried in the obtuse and unnecessarily complex writing of Marx. Other than intellectuals, few
could read it and few did. Most people were roused to action and belief by the intellectuals and
of course those who pretended they had read it and lived on buzz words and one-liners heard at
organizational meetings and disseminated through the coffee shops and bars and workers at
work.
The first appearance of class based society for Marx was the coming of agriculture and the
possibility of excess production which would have to be guarded and dispensed with some
caution from other groups and from the excesses of their own group, and from this developed,
leaders, guards, and ordinary workers and this is where competition and trade began.
Feuerbach, Marx, Engels and the materialists broke from Hegel in rejecting all the stages beyond
the master/slave stage of Hegel’s phenomenology because from Hegel’s stage of idealism and
beyond was viewed as still too religious, theological, and spirit bound. One might even wonder
if one or more of them were acting out a paranoid delusion as being Jesus Christ and building his
kingdom on earth, or at least out of earth.
The materialists set off on their own with communist materialism as the true end of the process
without the slightest reference to spirit except to dismiss it. However, looking at Marxism from a
Hegelian point of view, it is necessary to conclude that the materialists merely got stuck in the
constant Master/Slave back and forth that Hegel decribed.
The transition from the master and slave dichotomy and to the first stage of Hegel’s Idealism is
effected by the surrender to an expert or a teacher as a guide to further learning, (cf Rasmussen)
and given the outcome of communism worldwide we see that it has only ended in master slave
nations made up of those forced into and trained in a materialistic narcissism by far more
narcissistic leaders, the sorts who could never see anyone as superior except perhaps a deceased
predecessor, quite the opposite of the fairyland utopia Marx had promised.
Following that initial development of classes with agriculture came ancient society based on
master and slave. This then was followed by feudal society with lords and serfs where serfs
could share in some of the benefits of their work, unlike slaves. This in turn was followed by
recent history, capitalist society, the development of which was outlined earlier beginning with
Mercantilism.
According to Marx, from ancient society to the present but after the hunter gatherer stage of
human development, there has been a war between the rich and poor. In this view there are two
and only two opposing classes, the poor, which Marx called the proletariat, and the rich, which
Marx called the Bourgeoisie.
Marx and Marxists believed that there would once again be a society as classless as the huntergatherer stage once the development of production, technology, infrastructure, and
administration were completed through a communist revolution to establish it. The war between
rich and poor would end and result in a classless society where everyone participated and
benefitted or lost equally. This is not to say Marx was on the side of the poor or the rich or that
he was a friend of the lower class. The Marxist system was for workers only, those who
produce.
In his communist utopia, these workers would be equal and all owned all the capital of the nation
equally, no private ownership to prevent the development of classes and competition. Everyone
in this classless utopia would be self-employed and equal owners of all capital. There would
naturally be those who made more than others but this will be recognized and supported by the
classless as a result of talent and hard work. Having achieved classlessness, resentment of such
matters would not exist.
But do not make the error in thinking that Marx was supportive of the poor and destitute. Quite
the opposite, he makes it clear that his revolution and the spoils thereof were for those who had a
wage earning job within production and industry. His revolution was for workers, those who
produce only and against both the unemployed, which he chose to ignore and the bourgeoisie,
which he chose to overthrow. The massacre of over 100 million people by communists and
fascists was likely motivated by the belief that once the non-workers and those who could not
understand classlessness and ethnocentricity could be disposed of as once the Communist Utopia
was established all would work and there would be no poor. Lenin quotes Marx:
Alongside decayed roués [hell raisers] with dubious means of subsistence and of
dubious origin, alongside ruined and adventurous offshoots of the bourgeoisie,
were vagabonds, discharged soldiers, discharged jailbirds, escaped galley slaves,
swindlers, mountebanks, lazzaroni, pickpockets, tricksters, gamblers, maquereaux
[pimps], brothel keepers, porters, literati, organ grinders, ragpickers, knife
grinders, tinkers, beggars — in short, the whole indefinite, disintegrated mass,
thrown hither and thither, which the French call la bohème.
He also had little respect for the unemployed, whatever their source. He saw them merely as the
“vast reserve army of the unemployed,” to be drawn upon as needed but otherwise ignored.
Though not included in the above quote, he also saw clergy and service personnel as part of that
same group of miscreants because they simply are not producers, the former feeding dreams and
the latter merely moving things around.
Marx insisted that revolution by the proletariat (the workers) was necessary to effect the
communist utopia. He felt it was only through the complete destruction of the current capitalistic
system that communism could take root, where there would be no more economic crises or
competiveness and production is supposed to increase in great measure. He considered this a
grassroots “democratic” system, but without a vote or at least without those miscreants and
unemployed just mentioned.
At the time of Marx, the U.S. democracy was still referred to as the “American Experiment” and
the monarchies, aristocracies, and communists did not believe that any electorate which included
the uneducated could effectively choose leaders. The U.S. focus on good public education is
designed to prevent an uninformed electorate. Marx simply could not conceive of an effective
electorate and had no confidence in the American experiment or in electoral democracy. His
ideal democracy was not one of an informed electorate, it was for an elite, those with jobs, not
the miscreants, clergy or service personnel. With a successful communist revolution, there would
be no leaders and no state. The state was expected to dissolve once classlessness was established.
It would be inpossible for communism to end in either monarchy, the specific classed society he
sought to unseat, or democracy, and therefore, according to Montesquieu’s theory, only
aristocracy (rule by few) or despotism was possible, and that is precisely what we have seen
around the world. Russian and China have become aristocracies (or oligarchies, a form of
aristocracy but without birthright), while Cuba, North Korea, and many others became
despotisms.
Marx’s Philosophical, Materialistic Viewpoint
Marx and Engels were writing during the Enlightenment age of Western Philosophical history.
As stated, he was at first a follower of the philosopher, Georg Wilhem Friedrich Hegel who was
not satisfied with Hegel’s views of spirit and its religious/theological overtones. Marx begins to
doubt Hegel in all of the Idealistic stages of the Phenomonology, In the latter stages of the
Phenomonology,. As we just saw, in this book, Hegel traced the development of logic,
philosophy, and consciousness from primitive consciousness to modern scientific consciousness
and beyond to a development he calls, “Absolute Spirit,” which in many ways is not unlike
Buddhist enlightenment. Marx rejected all of the stages in the Idealism section of the stages as
still being too religious to be considered true science.
There were many followers of Hegel at the time and the followers split into two groups, Left
Hegelians, also called the Materialists and Right Hegelians, known as the Idealists.
Idealists, Mind over Matter Versus Materialists, Matter over Mind
This was the age of the discovery and expansion of science and the scientific method and deep
questioning of religion and theology. The left Hegelians rejected the entirety of religion and
theology (Spirit), believing that everything was better explained by science and the assumption
that all of man and the world can be explained with the scientific method without any reference
at all to Spirit, Heaven, God, the Garden of Eden, etc. Hegel and the right Hegelians believed
that science should and must include a spiritual (non-physical, and not of nature) dimension and
that this dimension was an advanced development of consciousness beyond materialism.
For the materialists, including Marx and Engels, Hegel moved away from natural science and
into theology and spirit after the master/slave consciousness, and they sought to develop beyond
that point solely with natural science, physically measurable science, and nothing at all to do
with religion, theology or Spirit. The stages of Idealism simply were no different than the
Creator.
Hegel called thoughts and images in consciousness taken together in an aggregate, the Idea. The
achievement of the Idea of Idealism was the goal of the idealist stages and the mastery of mind
(the ideal) over matter. This second series of stages constitute Hegel’s idealism which begins
where the Materialists broke off as in the list of stages above. The idealist stages of stoicism,
skepticism, the unhappy consciousness and beyond were necessary to coordinate man in nature
with man in his mind.
As a left Hegelian or a Materialist, Marx believed that thoughts and images in the mind were
merely bi-products of the brain and thereby of nature and not at all separate from it. Unity, Unus
Mondus, and other terms were a goal of alchemy, religion, philiosphy and even science. For
Hegel Unity was the spirit as superior to nature or mind over matter; for Marx Unity was the
recognition of materialistic enlightenment (the realization of classlessness and that images and
thoughts in the mind are bi-products of nature) or matter over mind.
As a right Hegelian or Idealist, Hegel believed things and their development in nature were mere
images, made real coming from the Idea existing somewhere or other before the world existed.
Much like Plato’s forms or Jung’s archetypes.
Engel’s says on this:
The unity of the world does not consist in its being.... The real unity of the world consists
in its materiality, and this is proved ... by a long and wearisome development of
philosophy and natural science...." [Hegel’s The Phenomenology of Spirit.] But if the ...
question is raised: what thought and consciousness really are, and where they come from;
it becomes apparent that they are products of the human brain and that man himself is a
product of Nature, which has developed in and along with its environment; hence it is
self-evident that the products of the human brain, being in the last analysis also products
of Nature, do not contradict the rest of Nature's interconnections but are in
correspondence with them.... Lenin 1914.
Engels also wrote:
The great basic question of all philosophy, especially of more recent philosophy,
is the relation of thinking and being ... spirit to Nature ... which is primary, spirit
or Nature.... The answers which the philosophers gave to this question split them
into two great camps. Those who asserted the primacy of spirit to Nature and,
therefore, in the last instance, assumed world creation in some form or other ...
comprised the camp of idealism. The others, who regarded Nature as primary,
belonged to the various schools of materialism.
And that is the basis of the materialist versus idealist positions in philosophy, mind over
matter (Hegel and the right Idealists) or matter over mind (Marx, Engles and the left
Hegelians, later called the Materialists). This philiosophical/theological battle still exists
today in academia and in the media. In academia, it is quite complex. In the media, it is
the war on Christmas and atheists versus the religious.
If you suspect a note of magical thinking in this and a search for a utopian paradise both in the
Materialists and the Idealists, you are correct. The argument about the prominence of either spirit
or nature in unity has to do with the disconnect between thoughts and reality and how to unify
them so they work better together and so that the world works better.
Marx believed that the theological past was disproven by science and therefor must be destroyed
by a communist revolution to transform the past theological, Idealist society into a truly
Materialist paradise. This explains why communists believe that the whole world must be
communist before theirs and everyone elses world would transform into the Materialist paradise.
They can also blame their imperialist takeovers, poverty and cruelty on non-communist, Idealist
interference and that they are converting or prosletyzing communist ideas for everyone’s good,
for the greater good and they are dedicated to this project until everyone is “enlightened” to the
wonders of a classless society.
They were arguing that religion could never result in an ideal society or Utopia and only the
materialist could truly coordinate mind and nature. This was at a time of rejection of all religion
in the name of science and future understanding, peace, prosperity and truth – the God is Dead
(cf Nietzsche) period of Western Philosophy which, according to Marx, acould only be brought
about by communist revolutions.
At first Marx was a left Hegelian but had not yet broken with Hegel. However, both Marx and
Engels became excited by Feurbach’s rejection of Hegel and became followers of Feuerbach
instead.
To Marx, Feuerbach's historic and "epoch-making" significance lay in his having
resolutely broken with Hegel's idealism and in his proclamation of materialism,
which already "in the eighteenth century, particularly French materialism, was not
only a struggle against the existing political institutions and against ... religion and
theology, but also ... against all metaphysics" (in the sense of "drunken
speculation" as distinct from "sober philosophy"). Lenin 1914.
Marx and Engels pretty much accepted Feuerbach criticizing him only for not being consistent
and thorough enough. Marx and Engels became the most influential of the materialists, leading
to the communist revolutions and movements throughout the word, many of which still exist
today (mostly in extreme poverty blamed on those who still do not get the idea of classlessness
and of course foreign interference, which of course is why they HAVE to take over the world in
order for communism to work).
The materialist/idealist argument continues today in the war between Capitalism and
Communism as well as in later writers on philosophy, economics, and politics. But one later
development of the nature/spirit debate requires some discussion. This is the debate between
innateness and blank slate linguistics and the development (in a Hegelian stages sort of way)
nature/nurture. To understand this dispute, it is best to make clear what is meant by scientific
method, more materialist than idealist, and the empirical method, more idealist than materialist.
The Scientific Method and the Empirical Method
In these discussions of what is and is not science, it is good to keep in mind three related but not
completely synonomous terms:
1. Emperical Method in Medicine
2. General Empirical Method
3. Scientific Method
These are ordered from the broadest to the narrowest in scope: the first is the broadest in scope in
that it covers trusting all of experience without any further break down by experiments or
theories; the second is the next broadest but requiring sound theories, replicable experiments, and
so on but is not as limited as the third, and the third is the most constrained requiring that all
experiments be based on physically measurable properties. That is, in the scientific method, the
only valid objects of scientific investigation must have physically measurable properties.
The scientific method and the empirical method are often confused with each other. Though
basically the same, empirical referring to experiment (from the Greek Εμπειρίκου, empeirikos:
experienced), and the scientific method is a set of steps by which you conduct scientific
experiments within established parameters. The only real difference is that the empirical method
is broader in scope than the scientific method. The scientific method requires that experiments be
based on physically measurable objects of observation and tests. The empirical method allows
all of experience to provide valid objects of scientific investigation, not just those that are
physically measurable. Psychology, especially as seen in Freud and Jung illustrate this. The
intentions, motivations, emotions and so forth that form the objects of observation for
psychology simply cannot be weighed, smelled or measured in any means of the five senses. As
such, the scientific method is a subset, a more constrained subset, of the empirical method. Many
of those interested in the scientific method get caught by the belief that the scientific method is
the be all and end all of all of empiricism, so they foolishly dismiss medical empiricism and
general empiricism.
Based on five senses evidence (physically measurable), the scientific method is involved with
problems that can be solved and are potentially falsifiable taken from published records. In the
scientific method, if knowledge is not available publicly it cannot be critiqued, refuted or
replicated. Science deals with theories that can be tested. The test must be based on physically
measurable properties.
Empirical Method
Empirical:
a) derived from or guided by experience or experiment,
b) provable or verifiable by experience or experiment.
c) in medicine it is the view that sense experience is the only source of knowledge. There no
hypotheses or experiments.
In the above definition, the empirical method is not constrained by physically measurable
experience. Instead it allows both experiments so constrined as well as experiences in the mind
which repeat sufficiently often and with sufficient pattern to formulate hypotheses, make
predictions, and draw conclusions. Psychology of dreams and the theory of mythology therefore
are considered valid objects of scientific observation.
A very clear example of an empirical theory comes from linguists with Noam Chomsky widely
hailed as the founder of modern linguistic studies. His theory of grammar, formally called,
syntax, is a theory based on nouns and verbs, subjects and predicates and the way they interact to
form phrases and sentences.
However, nouns and verbs, subjects and predicates, and phrases and sentences simply have no
physically measurable properties yet they lend themselves quite well to theory and experiment.
Stages of an empirical investigation
You’ve noticed a problem: questions and statements are clearly related
Literature research: No one has described this relationship.
Gather data: Put a lot of sentences and questions together and note the relationships
Theoretical Phase
State your hypotheses (informally): Sentences and questions seem to be related by a predictable
rearrangement such that questions seem to be formulated from (see example).
Are your hypotheses falsifiable (contrast w verifiable): Sure, just find counterexamples.
Are your hypotheses: a) consistent with your chosen theoretical framework, b) go beyond it in a
way that suggests you are wrong or in a way that forces a change in the theory.
Further, such a theory can not only be implemented in a computer program to create
descipritions such as these
-----------------------------Penn TreeBank Label Bracketing
-----------------------------(S (NP-SBJ the man
(SBAR (WHNP-1 who)
(S (NP-SBJ mary)
(VP likes
(NP *T*-1)))))
(VP is
(VP reading
(NP a F)
)))
--------------------------Penn TreeBank Tree Diagrams
-----------------------------------------S--------------/
\
--------------NP-SBJ-------------/
\
DET
------------NP-------------
t
/
/
\
NP
--------SBAR--------
m
\
WHNP-1
VP
i
\
NP-SBJ
--VP--/
VP
\
NP*T*-1
NP
/ \
VP
-----S----/
m
\
/ \
/
w
---VP----
r
a
VP
F
DET
NP
l
-----------------------------First Order Predicate Calculus
-----------------------------read(SUBJ-A: -,OBJ-T: a F)
------------------------------
To illustrate the scientific method, here is an example:
Scientific Method
1. You have a question about science: At what temperature does watter boil?
2. Do Background Research: see who else has commented on the matter (done in the
case of boiling water)
3. Construct a Hypothesis: water should boil at the same temperature every time.
4. Test Your Hypothesis by Doing an Experiment: Put four pots of water on the stove
with four themometers and make notes about the temperature.
5. Analyze Your Data and Draw a Conclusion: Water ALWAYS boils at 212. (Then
hope that’s true).
6. Publicize your hypothesis, experiment, and conclusions: write it up, see if you can
publish it.
The above is a falsifible hypothesis, experiment, and conclusion. Any one else can try the same
experiment to see if it works the same or devise another to see if it can be disproven. Within the
scientific method, if an experiment or a theory is not falsifiable, it is nothing more than an
assertion or a dream.
On its own, the scientific method does not really approach the theoretical or talk mauch about
metatheory (the theory of theories). For example, it is assumed that a chemist is using the theory
of science as articulated and discussed in a thery of science class, but the chemist using the
scientific method does not need to have taken the class or to even consider what effects he is
having on the theory of science unless a breakthrough like the bottling of anti-matter forces him
to.
It is merely the hubris of the immature involved in scientific method that causes them to want to
usurp the empirical method.
Simplicity and Occam’s Razor
Occam’s Razor: If there are competing theories or competing solutions that work equally well,
prefer the simplist until there is further proof. The common way to say this is, “Don’t multiply
theoretical entities beyond what is necessary to explain a phenomenon.” Or prefer the simplist
explanation in the face of two or more possibnilities with the same predictive results.
For example:
If you hear horse steps, in central park, don’t think a Zebra escaped from the zoo.
The Nature/Spirit Debate Today
With that, we can get back to the nature/spirit debate and its development through to today. As
stated, there has been a nature/spirit fight in academia since that time about what constitutes a
valid object of scientific investigation. For the Materialists, it is only those things which could in
some way be physically measurable (weight, length, sound waves and so on, but physically
measurable). For the idealists, psychology (the study of the psyche, from the Greek for ‘soul’)
could also be an object of science. This was represented perhaps first by Hegel, but later by the
earliest psychologists, Bleuler, Sigmund Schlomo Freud, Karl Jung, Alfred Adler, the object
relationists like Klein, Wittiger, and many more.
Freud never specifically addresses the issue, but Jung argued that anything that recurs in
sufficient frequency and with an identifiable pattern, even dreams, dream symbols, myths, fiction
and so forth, is indeed a valid object of scientific investigation, justifying Freud’s and his
theories as true empirical science. The materialists rejected this out of hand arguing that
psychological theories are mere speculation and too spiritual to be true science.
The Materialists still rejected such Idealistic notions as “pseudo-science.” Within that sphere,
Skinner’s psychology of behaviorism came along which refused to accept any of the Idealistic
theories. He undertook the study of psychology solely with what was physically measurable.
For example, “anger” could not be called anger unless there was scientific, physical proof of
what it was such as heart rate, breath rate EKG, etc. Dreams could not scientifically be described
beyond rapid eye movement which indicates dreams are occurring and no further analysis. This
became a huge academic debate between what came to be called the hard sciences (physics,
chemistry, and botany for example) and the soft sciences (sociology, psychology, and
linguistics). In reality, this was nothing more than the continuation of the Materialist/Idealist
debate and the Communism/Capitalism debate in economics. It is a question has not yet been
solved (save by this paper) and which continues to haunt academia and even the media in the war
between Communism and Capitalism.
At this same time Noam Chomsky of M.I.T., was revolutionizing the soft science of linguistics,
using the empirical method to draw conclusions and write a theory of human grammar, formally
called “syntax.” But unlike psychology, the study of syntax was providing a far more complex
and disprovable theory (disprovability is one of the key elements of a true theory). Psychology, it
could still be argued, was not disprovable.
Chomsky’s empirical, scientific theory of syntax consisted of a theory of nouns, verbs, and so on
and they way they interacted to create words and sentences. This produced a huge body of
literature with complex theories that made accurate predictions about the nature and structure of
sentences.
Chomsky and Skinner were working at about the same time and Chomsky in a very famous
paper, lambasted Skinner’s theory of Behaviorism as not being a theory at all, while his syntax,
was a true theory and far better constructed than skinners.
The implications of this are tremendous as a theory based on the scientific study of nouns, verbs
and so on and their interaction in phrases and sentences and is far more predictable and reliable
than psychology, this demonstrates that science can indeed be applied to areas that are not
physically measurable (nouns, verbs, sentences, etc have no physically measurable properties).
And THIS (Eurkea!), disproves the materialist contention that science simply does not exist in
the Idealistic stages of Hegel’s stages and these stages should be dismissed as disproven by
materialism.
The materialists can still argue that nouns, verbs, syntactic structure and so forth are still just biproducts of the brain, but the contradiction that disproves all of materialism is that: in that it is
stated that science cannot be done on objects that are not physically measurable is more than just
a mere assertion, there should be no syntactic theory at all and thereby by their own criteria the
entirety of materialism is disproved but clearly there is, and therefor all of materialism must
agree that science can be done on these non physical properties as they illustrate that Spirit can
be studied and theories can be constructed based on this theory and therefore the materialist
contention that spirit does not exist scientifically fails utterly.
The debate between Materialism and Idealism ends with Chomsky. Not only Skinner, but all of
Materialism is disproved. The materialists can of course still argue that the structures described
are still a product of nature
Naturally, the Materialists in philosophy and Behaviorists in psychology did not give up their
convictions at all, and in spite of Chomsky’s empirical demonstration that Behaviorism and by
that all of materialism is completely wrong, they continue to this day in academic battle. Fuck
Marx.
The innateness of language is where this all came to the surface, Chomsky’s discoveries
demonstrate that language is far too complex for a child to learn and therefore there must be a
component in the brain that supercedes the child and manages language learning. That is, that
language learning of tremendously complex structures all of which are not physically measurable
or even directly observable demonstrates again, simply by the fact that theories can indeed be
constructed on such objects as nouns, verbs, and syntactic structure. This alone is sufficient to
disprove all of materialism. Even if the materialists could find a theory that was physically based
(which they could not), this would not change the fact that the existence of spirit is deprived and
the nature-only basis of materialism is gone. Fuck Pinker.
This was further supported by Derek Bickerton’s roots of language and much of his later work
Probably the most amusing thing about materialists/behaviorists/cognitivists is that they never
notice that none of philosophy, math, or statistics could ever be objects of scientific observation
and therefore, on their criteria, they should all be banned from science as being too
Idealistic.Author’s Commentary
Hegel's Phenomenology of spirit could have prevented communism, communist revolutions, and
the attempt to rid the world of religion had right materialism, the acceptance of Hegel’s stages
prevailed over left materialism the rejection of all of Hegel’s Idealist stages.
Marx’s materialism then is man, his brain, his achievements etc. as products of nature and no
creation no creator. Hegel has no problem with spirit and the spiritual and actually recommends
that we continue our religious observances even if we were too scientific minded to believe in
god as our tradition, as good for community, and to maintain a level of morality higher than
man's law. Feuerbach’s break from Hegel and Marx following him in that and popularizing via
his materialism. This is where the split between church and secular science and alchemy the
split between church and theology and science was particularly strong here and was likely the
end … spirit and nature, the source of behaviors and the split between hard and soft science and
a reconciliation between hard and soft sciences would repair the damage done by Marx.
Certainly Marx does not understand the unity of spirit and nature.
The main burst of unions in industry was in the 1930s in the U.S. about the same time as many of
the communist revolutions and was likely strongly influenced by such ideas, but in the U.S.,
prosperity, a strong sense of individualism, and the vote kept the union movement from
becoming more than just “influenced” by communism, and it also prevented revolution.
Table #1 for Essay #1: The Nature and History of Economics.
Who
When
Where
What
Colbert
Quesnay
Smith
1619-1683
1694-1774
1723-1790
France
France
Scotland
Mercantilism
Laissez-faire
Capitalism
Malthus
1766-1834
Ricardo
1772-1823
Engels
1820-1895
Germany
Massive destitution
inevitable given the
population growth of
the poor.
Applied abstract
models in agreement
with Malthus
Communism
Marx
Keynes
1883-1946
U.S.
Aggregate Capitalism
Spencer
Competition,
demand, free
free enterpris
Social Darwinism
Mao
1893-1976
China
Galbraith
1952-200?
U.S.
Reagan
What’
Chinese
Communism/land
reform
Liberal Capitalism
Land reform
Reaganism or Reagan
Economics, Trickle
Down
Redistributio
to the rich.
Family of Four Income Policy (FoFIP) Theory of Economics
The economy of a country is a bi-product of the health, good nourishment, skills and education
of its populace. The better the general health, good nourishment, skills and education of its
populace, the better the economy. The lower the health, good nourishment, skills and education
of its populace, the worse the economy. Shifts in supply and demand can only be met by a
flexible, educated, inventive populace. This must be the first principle of any theory of
economics and any governmental approach to economics. All forms of government must respect
this or be at a loss in both peace and war. Though the history of world economics indicates that
the rich get richer and the poor get poorer has always dominated this very sane view of the
world, the economy, and the people. This likely explains why Adam Smith and the Founding
fathers allowed the government to regulate business but only against abuses of laissez fair. In
particular, this explains why the Founding Fathers legislated so harshly against corporations. The
concept of "manipulating markets" in a true free market would only exist as the criminality of
either communism or capitalism and would be regulated by the government. That is, the
founding fathers understood that a free market economy and laissez-faire still requires the
regulation of predation (capitalism) and collective, mob thinking (communism).
An economy will succeed to the degree that it encourages, rewards, and develops the skills,
health and good nourishment in its populace and will fail to the degree that it discourages
(disparages), punishes, and retards the development of skills in its populace.
A successful economy would foster good public education, access to education and training at all
levels and for all age groups and classes. It would also ensure that its population is well-fed and
healthy. It would tolerate but not favor the privileged; it would also tolerate but not favor the
masses, particularly the indolent. It would also favor a living wage for all able bodied workers
who have moved beyond their family of origin, a wage that encouraged health, good
nourishment, and the development of further skills. A focus on the middle class and growing the
middle class would be paramount to successful, long-term, economic planning and the reduction
of poverty and predatory wealth. Such an economy would see the distribution of wealth as a
constant and something to be watched. Both an excessively powerful wealthy class and
excessively weak lower and middle classes would be seen as dangers to the economy in both
peace and war. Further, the theory of the FoFIP would guide economic regulation almost
automatically into a natural flow of wealth, laissez faire, and a free market.
In this regard, I propose a new theory of economics which mitigates against both communism
and capitalism and uses a “Family of Four Income Policy” (FoFIP) measure and index to judge
the health and stability of the economy. This is proposed as an addition to existing economic
measure and indexes rather than as a replacement for them.
This would require the establishment of a standard FoFIP and an annual review of that income as
well as a measure of the percentage and number of the population who are receiving that income.
The measure would look at the amount of income necessary for a family of four to provide for
children and life with for example, 40 hour work week, two week vacations, retirement planning,
a house, a car, clothing and food, health care, books, computers and other school supplies in a
good neighborhood with access to schools, church, shopping, and so forth. This measure should
be designed like a family budget such that it could actually be used as a budget for a family
making that income.
Once that measure is established, it merely remains to create an index of the number of jobs that
are paying that salary and the number of citizens who are receiving it. A similar calculation, also
updated annually, could be made for a “living wage.”
By establishing a measure of the family of four income and an index of the number of family of
four incomes in the economy, government, business, and voters can regulate and reduce the
numbers of both the poor and the rich and guarantee a stable economy in both peace and war.
Currently most efforts to regulate the economy and encourage prosperity rather than disaster are
based on raising or lowering the interest rate or raising or lowering taxes. For an individual, tiny
changes in taxes or the interest rate seem meaningless but when you consider a one dollar tax cut
or raise on the 100s of millions who pay taxes, you can see how reducing or increasing the flow
of m
Demonizing the poor and worshiping the rich has never resulted in anything other than “the rich
get poor and the poor get poorer” and the insistence that this either God given truth or the facts
of natural science (e.g. physiocrats was the first name for economists).The masses in the past
were destitute, while very few were rich. Early economists took this as a given as you saw in the
previous essay and simply sought to describe it. Marx’s work, to a certain extent, was a failed
criticism and political experiment in enlightenment era science. An important aspect of the
Enlightenment era was the heightened development of science through accurate measurement
and the rejection of superstitions and the church.
A successful economy would foster good public education, access to education and training at all
levels and for all age groups and classes. It would also ensure that it is populations is well-fed
and healthy. It would tolerate but not favor the privileged; it would also tolerate but not favor
the masses. It would also favor a living wage for all able bodied workers who have moved
beyond their family of origin, a wage that encouraged health, good nourishment, and the
development of further skills.
Such an economy would see the distribution of wealth as a constant and something to be
watched, protected and regulated to avoid too large busts and booms as well as the free market,
free enterprise, fair competition, good cooperation and laissez-faire. Both an excessively
powerful wealthy class and excessively weak lower and middle classes would be seen as dangers
to the economy. I focus on the middle class and growing the middle class would be paramount
to successful, long-term, economic planning.
Enlightenment era theories of economy are incapable of appreciating the arts. The only
Modernist theories of economy (Galbraith, Herman/Chomsky, and Bralich’s FoFIP) recognize
the importance of talent in the economy both in sports and art. Without the support of talent we
will support a never ending lowering of the bar that is seen in communist countries and driven by
consensus rather than talent (the creative, the Creator, the Creation as sacred rather than
profane).
Galbraith argues that when a company makes a huge profit, it should go to those who make the
least first - from my point of view that would ensure the FoFIP.
Thus the FoFIP theory of economy only needs to add two measures and two indexes to current
private and public sector thnking about the strength of the economy The two measures are a
standard living wage and a middle class wage and the two indexes are the number of living
wages, and the number of FoFIP wages.
There could be various sources of these measure and indexes: governmental, democrat, or
republican, but the most important would be from an independent organization focused on the
FoFIP and strong enough to lobby in both houses of congress.
Neither communism nor capitalism represent a free market. The former favors a never ending
lowering of the bar of collective mentality, and the latter favors predatory, bottom-line thinking
that pretends that profit is the sole measure of meeting supply and demand and the grace of God.
Neither communism nor capitalism cares about a proper supply for a true demand nor the quality
of goods, services, and labor.
Summary and Review of Galbraith’s, The Anatomy of Power.
Introduction
James K. (Kenneth) Galbraith was a Harvard Professor, a liberal economist, an advisor to
presidents, a U.S. Ambassador to India, and much more. He wrote over forty books in his time
and over 1,000 articles and reviews. His most famous book was The Affluent Society. Unlike
most scholarly works on economics, this and several others were best sellers in the 50s to 70s.
As per Galbraith, his most important trilogy was American Capitalism: The Concept of
Countervailing Power, The New Industrial State, and Economics and the Public Purpose. He
was renowned as a compelling author who made the “dismal science” readable and in places
even humorous.
One of Galbraith’s last books was The Anatomy of Power, and this is the book that concerns us
here. In it he outlines a theory of power, the sources of power, and the exercise of power. To
understand it, it is first necessary to understand a concept introduced in his first book, American
Capitalism: The Concept of Countervailing Power.
A countervailing power is a power that acts against an opposite power with equal force. In that
first book he introduces that term into economics to demonstrate a contrasting power to the
“competition” originally introduced by Adam Smith as the core force of economic activity. He
states that previous writers had been so convinced that the root source of economic activity was
competition that no one bothered to look for another. For Galbraith, the countervailing power to
competition was “on the other side of the market” in the consumers and suppliers. That is, on the
other side of the competition of supply and demand are suppliers and consumers.
That was the source of the term. Over many books he develops the theme of countervailing
power to include a number of more countervailing powers besides consumers and suppliers:
church, government, military, unions, press, media, and so on.
As much as the larger powers of supply and demand, monopolies and oligopolies (near
monopolies based on coordination and competition of a few corporations in one industry such as
the auto industry) would naturally like to utterly control prices and wages to guarantee their
future and make their predictions about future markets more accurate, they cannot do so without
some regard to suppliers and consumers and their power and wants. So, according to Galbraith,
the suppliers and consumers can compete to raise or lower prices in competition or in response to
changes in the cost of raw materials etc. No matter how much large corporations can create
markets or influence consumers, they are not and could never be absolutely in control.
In noticing that first instance of countervailing power in consumers and suppliers, the other
countervailing powers with their respective needs and opinions can also be introduced and
considered. Certainly, corporation man will think primarily in terms of the countervailing
powers of corporations versus consumers and suppliers, but he must also consider government
regulations, military needs and regulations when seeking military contracts, unions, public and
church opinion and so on. Thus anyone in any of these institutes may be focused on one or two
of the other powers at some place in the corporation. It is like the competition in a forest of a
variety of trees, bushes, and plants vying for space but still maintaining an ecological balance by
that competition for land, sunlight, and rain. If anyone of the powers in the economy or in the
forest becomes too week or too strong, the ecology or economy will be disturbed.
Having introduced the term “countervailing powers,” I’d like to add one more thing to our
exploration of power. The three forms of government of Montesquiue discussed above: 1) rule
by one sole leader by established laws like monarchy, 2) rule by many, either all the people as in
democray or some of the people as in aristocracy, and 3) rule by the whim and caprice of a
despot which has no recourse to established laws. You may have noticed that “anarchy” does
not seem to be included, which is correct but anarchy is actually no government at all, which
leads to violence and chaos, rather than the panacea the anarchists promise.
Now with these things in mind: countervailing powers and the three types of government and
keeping an eye open for the three sources of power,the three exercises of power, and the three
regulations of power, it is possible now to move to summarize and review Galbraith’s last book,
The Anatomy of Power.
Summary of The Anatomy of Power:
Galbraith begins his book with a discussion of the meaning of the word “power.” He quotes
Max Weber, a German sociologist, who says that power is, “the possibility of imposing ones will
on the will of others.” Galbraith goes on to add, “The greater the capacity so to impose such will
and achieve the related purpose, the greater the power.” He further says it is the ability of one or
more persons to …,” then quoting Weber again, “realize their own will in a communal act
against the will of others who are participating in the same act.”
This sounds rather imposing or dominating, but it includes all of power and its exercise from
those who are convinced by a good leader or a good teacher to those who are coerced by a
totalitarian and his thugs or bamboozled by a narcissistic demagogue and his sycophants. For the
purposes of this essay, a short paraphrase of the above definition of power should suffice:
Power: The ability to enact one’s will in the will of others who comply sometimes willingly,
sometimes not.
Having defined power, Galbraith then distinguishes between his three sources of power and the
three means of exercising that power. Each source of power has its own means of exercising that
power.
The Three Sources of Power: Personality, Property, and Organization
Galbraith first presents his theory of the three sources of power and the three exercises of that
power. These are relatively easy to understand and you might actually see then as equivalent to
the three forms of government, rule by one, rule by many, and rule by madness, the madness of
out of control bearauacracies.
Alongside the three types of government, the three sources of power are: 1) Personality (Jesus,
Cleopatra, Hitler, Clint Eastwood, Indira Gandhi, J.P. Morgan), 2) Property (all that an
individual or a corporation owns, not just land), and 3) Organization (Apostles, gang members,
bureaucracies, administrations).
In rule by one or personality we can see dynamic figures like those listed above but also in
ourselves and in the world in our personal charisma, talents and strengths. In rule by many, the
focus is ownership or property and the votes of either all of free men who have a right to own
property (whether they do or not) or just by th e landed aristocracy or some other elite group. In
rule by madness, despotism, the rules and laws exist but as the despot behaves as he pleases there
is no cohesion to the rules and laws.
The Three Exercises of Power: Condign, Compensatory, and Conditioned
The three exercises of power are: 1) Condign (deserving of justice, more stick than carrot), 2)
Compensatory (wages, land, money, machinery, laborers, etc., used to motivate, (more carrot
than stick), and 3) Conditioned (belief system, brain washing, education, and training).
To put the sources of power and the exercise of power together we need only look at the division
of the U.S. government into the Executive, Legislative, and Judicial branches. The executive
branch represents the power of Personality, the personality of the President, which has the power
to enforce laws (hence the police and FBI are parts of the Executive branch. That is, they have
the condign power of forcing people to comply (far more civilized than that of ancient slave
cultures but still it is the ability to inflict punishment that characterizes the condign power of
personality).
As a side note the Founding Fathers of the U.S. were followers of Adam Smith as mentioned in
essay 1 and also Montesquieu.
The executive branch represents personality, the personality of the president and the exercise of
the condign power of the police, the FBI, CIA, and so on.
The legislative branch represents property and compensatory power, not so much in having
property and wages to disperse but more importantly in passing the laws that govern such
dispersal.
Finally, the judicial branch of the U.S. government has the power to judge whether laws are
acceptable or not and whether they are being applied correctly. In that way, they are the final
word in the organization and permissible actions of bureaucracies and administrations.
Having identified the three sources of power and the three means of exercising that power,
Galbraith moves to a description of the interaction of those three powers.
The Dialectic of Power
The interaction of the countervailing powers, their source of power, their exercise of power, and
their interactions can be understood through the Dialectic of Power.
A dialectic is an argument and a discussion in one. The term, “dialectic,” comes from
philosophy and is based on the development or growth of an idea or ideas through a process of
argument and discussion to abet learning or psychological transformation. The core of the idea
is that the psychology or philosophy of an individual, a group, or a nation can grow and develop
through that kind of argument, through dialectic. It is not a shouting match or a test of wills or a
matter of insistence or buzz words or bamboozlement: it is honest and is driven by the
advancement of truth.
The most common way to illustrate this is through the philosophical terms: thesis, antithesis, and
synthesis. Thesis is an idea, antithesis is the addition of a new and opposite (countervailing)
idea, and then synthesis is the transformation of both ideas into a new one which will itself be
another thesis for a later development. Adam Smith’s thesis of competition was met by
Galbraith’s countervailing antithesis of consumers and suppliers. This then became the synthesis
as the idea that there are many countervailing powers which itself can become a thesis for a later
development once a suitable countervailing antithesis is proposed. Here is a schematic version of
what was just said.
Thesis: Supply and Demand
Antithesis: Suppliers and Consumers
Synthesis: Communism/Socialism
We can certainly also consider communism to be a countervailing power to capitalism.
Thesis: Capitalism
Antithesis: Communism/Socialism
Synthesis: FoFIPism (let’s hope)
Galbraith also points out that when a countervailing power begins to arise, like communism in
response to capitalism, it is unlikely to be equally as strong. Though as the new power grows in
power and further confronts the original idea, a synthesis should arise that is better than both or
they will stand with equal power and a need to cooperate or oppose each other as with military,
government, and industry. Like the forest mentioned above, they all compete for sunshine, water,
rain and air and over years forests change. In one’s personal life, the same thing can be seen.
High school cliques and organizations become college or workplace connections and
organizations and then become more sophisticated again after college in the workplace. Any
individual is a member of many organizations which compete for the attention or support of each
individual. In recognizing and understanding the forest metaphor, an individual can support or
not support organizations as he pleases. Priests, Generals, CEOs do this all the time, and the
better this is understood by them, the stronger their power. This is also true at the worker on the
lowest rung on the ladder in a corporation who has to deal with the countervailing powers of coworkers, unions, and supervisors.
Like the corporate structure just described you can see countervailing powers in everyone’s lives.
In school, students have to consider parents, classmates, teachers, and so on for their decision
making and group participation. In business the countervailing powers are, at the very least, the
military, industry, and the three branches of government. Gangs are no less subject to the need to
consider countervailing powers. They need to regard neighbors, police, ordinary citizens, rival
gangs, and more as their countervailing powers.
It is through an understanding of the power of these groups and how to manage oneself within
these countervailing powers that an individual remains an individual or at least is not totally
submerged in any one of the countervailing powers he needs to take account of.
Symmetry/asymmetry
Galbraith points out that most countervailing powers are symmetric in that there is an opposite
relationship between two such powers, but there is a rarer form of countervailing power which he
refers to as asymmetric. By this he means it come out of nowhere rather than in response to an
existing and opposite power. Examples he gives are Mahatma Gandhi, Jesus Christ, and Martin
Luther King. The asymmetric countervailing powers bring something new, something
unexpected and likely only coming from personality.
Power through History
Galbraith reviews and analyzes the development of power in the past starting as early as ancient
Egypt. In that history he points out that in early societies, condign power was most used, and as
an example, he sites galley slaves who bend their will to the will of the slavers due to the fear of
the lash. That is, it was much more stick than carrot. As society developed and commerce and
industry grew, the second type of power, compensatory power, began to compete with and
overtake the condign power of the past. This occurred as a transformation into feudalistic
economies and later to mercantilist economies as we saw in Essay 1. That is, wages began to
replace the lash. Compensatory power was more carrot than stick. In a final development, the
third type of power, conditioned power, began to compete with and take over compensatory
power, as the bureaucracies and administration grew through mercantilism and later the
industrial revolution, they began to eclipse the compensatory powers, and became the dominant
force in the economy. That is as the societies became more complex, bureaucracies and
administration became the most important source of power and became more and more
characterized by the organization man rather than the individual, or the property holder.
Concentration and Diffusion of Power
Though Galbraith goes into much more detail on this subject, for this review it is enough to
know that both diffusion and concentration of power have to do with discipline. The military is a
good example because it is based on good discipline. If the upper echelon of the hierarchy is
disciplined those lower in rank will be as well all the way through to the lowest private. If there
are problems at any level in the hierarchy, they tighten up the military discipline where they see
the weakness. This is true of all other disciplines: the corporation must have disciplined
corporate men; sports must have disciplined players and coaches. Whatever is the basis of the
discipline it has to be strengthened internally in order to be disseminated outwardly. Without the
disciplen, the power will become diffused, leading to less success and perhaps collapse. When
the American military is in a battle or a war, it is the discipline that is most important so that it is
transmitted throughout the ranks and so that they can prevail in battle. To lose discipline in the
military is to lose the training and skills.
Whether you be part of a family, military, a corporation, a school, or a club, the group’s success
depends for its existence on following and maintaining the rules. As soon as that is lost the
group becomes looser and if it doesn’t repair the error, the group will succeed less and less and
eventually fall apart.
If opposing groups have weaker or poorly articulated rules the power of the opposing group will
take over that of the other. The more the leaders stick with the rules, the more will the followers;
and the more the group is disciplined, the more they will disseminate their power and prevail
over their opposition.
In a bigger picture of the United States, there is the military, the press, special interests, the
publishers, industry, and many, many others competing for members, money, and success in
their endeavors as in the forest analogy.
Individuals and groups are constantly competing for and exercising power. However, the more
the individuals understand that the discipline of the group by the leaders and followers will
strengthen their power and influence, the more they can build in terms of disciplined members
and leaders.
Internal and External Power
Internal and external power are co-dependent. The stronger the discipline of the power from its
leader down to the lowest level, the stronger the discipline within the group devoted toward
achieving mutual goals, the more likely they will be to prevail over countervailing powers.
This is why the military and the church are so focused on hierarchy, discipline, and the
maintenance of the chain of command. Any little break will promote the possibility of failure.
This is why we can predict that ISIS will fall to a more disciplined group and that gangs who
lose their rank or discipline will fall to the citizenry, the police, or rival gangs.
From the Cub Scouts, Brownies, Boy Scouts, and Girl Scouts up to the Presidency the stronger
the discipline in following the rules of that particular power, the more they will achieve their
goals, impose their wills upon their countervailing powers.
The Regulation of Power
Naturally all individuals and all groups have all three sources and use all three exercises of
power but in varying degrees. In anarchy, there is absolutly no regulation of power and chaos
breaks out until someone can bring order to it; in personality,the condign power of a personality
like Al Sharpton or that of the police (subject to the President) can bring an end to a riot (a very
good example of anarchy); in aristocracy or democracy ownership or right to ownership is
exercised with compensatory power; and finally in conditioned power, in organization, the
presence or absence of rules determines the exercise of power, brutish if there are no rules as in
anarchy or the rules are ignored as in despotism; but ever more humanely as the organization and
beauracracy is respected.
With all three sources of power and their related exercises of power, the more civilized a leader,
owners, or organizations become, the higher on the ladder of justice will be the culture.
Authoritarian/Totalitarian
Galbraith makes a distinction between authoritarian and totalitarian power in that the former
comes from legitimate sources from all of personality, property, and organization and the latter is
illegitimate, as with Hitler, Mao, Stalin, and so forth.
Review and Commentary on Galbraith
One of the things that bothers me about Galbraith is that he is on board w the support of the arts,
he, by omission, thereby dismisses the arts as a countervailing power of its own. He lumps
Hollywood and TV shows with press and media and ignores the ability of art to both freeze and
or transform the culture. Hollywood makes a particularly good example. Unlike corporate
America which is foolishly looking for automatons and company men, Hollywood must respect
talent and creativity AGAINST the company man or they would not make any money. There
might to some extent be competitors who'd prefer to be "in charge" take over and create Borgs
and automatons and company men. They simply would go broke and in the long run merely
disappear. When was the last time a great Maoist, Nazi, Marxist, Communist, Muslim, or other
gang film ever made money? It simply has never occurred. Those are destructive not creative.
Though Galbraith presents a general theory of reform, he does not provide any means for it's
application. I think an asymmetrical approach via the FoFIP is it and is precisely what I've been
doing. Thanks to Galbraith I am encouraged and motivated to continue my "voters first" FoFIP
project and far more aware of what I am doing and how to do it.
The god complex of commie dictators ("I am the state.") should have been, "I have contributed to
and furthered the state." But in trying to throw out old economics rather than replace it they
ended up regressing the culture to a primitive tribalism where draconian force is the only way to
prevent dissent (advancement).
Talent based corporations vs Borg based corporations
Talent based corporations area multi billion industry equal to or greater than Wall Street
Corporations
he underestimates the role of personality in the current economy and it's connection w charisma
(talent) and art; and thereby 2) he underestimates sports Hollywood and television, lumping them
in with press and advertising. Putting them into one category called Talent
To avoid discussions of the difference between art and sports, we can quickly note that this part
of the economy can rival any other multi-billion dollar sector of the economy. He dismisses art
as an individual effort rarely requiring much organization. And sports he sees as driven by the
organization and teams and not the talent. However, in the personalities of the individual
participants and whatever organizations that grow up around them, they have to focus on the
dynamics of talent and creativity to make a living. In this environment robber barons do not
arise. Every employee must recognize and promote talent, a complete opposite of today's
corporate company man who must conform to survive. In the world of talent, personality
survives and it exerts influence via talent, creativity, and art, not conformity and competitiveness
and not with condign power other than the exclusion of those without talent. Attempts by well
funded interests who insist on conformity and competition will only make bad movies or losing
sports teams no matter how much they posture and prate to the contrary. This difference between
talent and conformity is far more important than found in galbraiths system. Where he posits
military state industry and religion as major countervailing powers I believe talent should be
added to this list as well as a major countervailing power and kept out of press and media.
Further there is reason to consider art as the highest form of personality and the least draconian.
So in sum personality has been excessively diminished in galbraiths system resulting in not
giving talent it's proper place. So along with FoFIP measures and govt regulation to support
them, I'd like to propose measures of the strength of Talent in the economy to bring a balance
rather than a conflict between creativity and conformity in my theory of the economy.
Condign compensatory and conditioning - to paraphrase - punishment reward cooperation - I
think what Galbraith misses is that there are aspects of reward and punishment in all three means
of the exercise of the three types of power, personality, property, and organization. He seems to
think that there is an order of growing reward and justice from personality to organization rather
than both justice and injustice being present in all three. Back to ancient Egypt there were good
kings and bad ones. And the use of reward was utilized as well. Compensatory power also can be
used for punishment - so I think condign should be changed to justice. Neither Galbraith nor
Freud acknowledge or discuss the difference between control and power, tho Freud goes into
great detail on suggestion and hypnosis without mentioning the word control even when
discussing people acting contrary to themselves in on-stage hypnosis. You might see that as a
roundabout way of talking about control, but he never mentions it and never distinguishes it from
power and neither distinguishes between good and bad power. (Except lightly in Galbraith where
he makes a distinction between totalitarianism and true authority. Justice that grew to the Magna
Carta and us foundational documents and principles. I am also convinced that he missed
something in not recognizing talent and was excessively light on skill.
Power vs Control
One large gap I find in both Freud and Galbraith is the distinction between power and control but
I think there is a hint in the hierarchy of power given below. Power can be abused or helpful but
as society develops it becomes more and more just. As society regresses as with ISIS, gangs,
Nazis, and so forth it becomes more and more abusive and at the most primitive level (usurpers,
betrayers, and pretenders) on the hierarchy, power disappears and control is paramount and all
legitimate authority is gone and all that is left is brutality and criminality.
Manufacturing Consent
In 1988, Edward S. Herman and Noam Chomsky wrote a very popular book called
Manufacturing Consent which is quite consistent with and perhaps influenced by Galbraith’s
Anatomy of Power and his theory of countervailing powers. The Anatomy was written in 1983
and manufacturing consent was written in 1988. Both Chomsky and Galbraith lived in
Cambridge at the time, Chomsky at M.I.T. and Galbraith at Harvard.
The book demonstrates clearly how the mass media creates crowds of followers and consumers
out of their viewers. As the industrial revolution, grew Capitalism grew and advertising became
more and more important to the profit of the manufacturing industry. Television, radio, and
movies expanded the reach of advertising, and this further increased the cost of doing business
and the profit. With accelerating costs and profit the manufacturers and the advertisers became
larger and larger leading the oligarchic situation we see today.
Herman/Chomsky synthesizes this process and demonstrates how the advertisers under the
pressure of profit, pressure the media (sources of information) to conform to the needs of
advertising and profit. This forces the media to bend their dedication to truth to the needs of
advertisers and corporate leaders. Flak, the lowest rung on the latter leaves critics far outside of
the media/advertising loop, but they must to some extent be cautious about flak growing
unmanageable, which reverses the profit from top to bottom but to a much lesser degree.
To this I would like to add a fifth stage, “Collectivism] the stage at which Communism is struck.
For any advance beyond the level of primitive tribalism, individualism is required, beginning
with the criticism of Flak advancing to novel work of sources (educated commentary), to the
creative and insightful work of advertising (in modern times) and then to the ingenuity of the
wealthiest, profit.Profit
Advertising
Sources
Flak
[Collectivism]
[Collectivism]
Flak
Sources
Advertising
Profit
Those whose collectivity insists that they cannot be criticized are at the lowest rung of the ladder
of manufacturing consent (being influential) and of the individuality of profit. This may explain
why communist countries never advance. They are just too tribal.
While Herman/Chomsky are not strictly speaking talking about countervailing powers, you
cannot help but notice the similar tensions and dialectic that must exist within this hierarchy.
This is because Galbraith is talking about the interaction of competing groups, while
Herman/Chomsky are talking about power within a single group. Thus, CFOs, advertisers,
media, critics (flak) certainly do interact as countervailing powers, but within the
Herman/Chomsky schema, they also interact in a hierarchical manner in any large group with
suitable organization (bureaucracy or administration).
XXX TWO FOOTNOTES
Language and Groups
The language of groups seems particularly primitive and a note from the origins of language may
help us understand what they are doing and may also help us work with them. The following is
mere speculation and not published matter on the subject but it helps illustrate a point. If it leads
you to want to know more about the subject I would recommend Derek Bickerton’s, The Origins
of Language for insight on the matter and a full bibliography.
In that book, Bickerton argues that just as there is a two stage process in the language of children
today, so is there a two-step progress in the development of language in the species. For him, the
two stages are first, a stage where a child or a primitive tribe speaks only in one or two words or
fixed phrases, and second, a stage that seems to come out of nowhere with full grammar
including complex sentences.
There was a tribe of pigmies in New Guinea who were reported by other tribes to exist, but they
were never found. The interesting thing about them in these reports was that they could
understand speech but could not use it except in group chants of just a few words.
In arguing that group psychology and the failure of communism are due to primitivism, we are
forced to wonder if this new guinea tribe was still completely tribal like a child at the two word
stage mentioned in the previous paragraph and that this is the reason that group speak is so
primitive. Perhaps in the tribal part of the brain there is no grammar, just words and memorized
phrases and no ability to relate them. This would explain why certain words, conjunctions for
example, are a problem for maintaining group-speak. If a group is saying hunt hunt hunt or lynch
lynch lynch or Go bears, it is loath to hear someone say, usually in a drawn out way,
“becaaaaause?” “aaaanndd? And so forth as though the entirety of their speech bubble has been
deflated.
Tribalism
A few phrases on the history of anthropology what was known at marx time and then familial
relations and patriarchal matriarl etc – don’t forget those on matrilateral matriarchy and sexual
anarchy. And strangely, the word “no.”
Hierarchy of power
Mind of God
Moses/Ten commandments (where is it written!?! Where is it written in stone!?!)
Job and his daughters (first feminists)
Academic (Ph.D.)/author
Talent (sports/art/martial arts)
Voter
Citizen
Constituent
Farmers/Weavers/Builders
Governor
Lieutenant governor
President
Senator
Congressman
MD
JD
Military
MA MS
Teachers
Artisans/artists/sports/
church/fraternity/sorority
Skilled labor
Unskilled labor
Govt assistance
Homeless
Usurpers/betrayers/pretenders/slanderers/innuendo mongerers/ gossips, and pretenders/ to power
Feel free to move about in any you belong to but stay primarily with your highest.
Essay 4: Summary of Freud’s Group Psychology and the Analysis of the Ego.
“If a man does not keep pace with his companions, perhaps it is because he hears
a different drummer. Let him step to the music which he hears, however measured
or far away,” Henry David Thoreau.
Along with a knowledge of Economics, the FoFIP theory, and the sources and exercise of power,
it is still necessary to have a basic understanding of the nature of a group and group dynamics.
For this, I will use Freud’s, Group Psychology and the Analysis of the Ego.
We’ll start with what he says of the field of investigation, Group Dynamics.
Group psychology [ … ] is concerned with the individual as a member of a race,
of a nation, of a caste, of a profession, of an institution or as a component part of a
crowd of people who have been organized into a group at some particular time for
some definite purpose. p.4.
History, Le Bon et alii
Freud begins with a brief description of the history of the subject, some of which he will later
accept and some of which he will improve upon.
Freud quotes Le Bon in the following:
The most striking peculiarity presented by a psychological group is the following.
Whoever be the individuals that compose it, however like or unlike be their mode
of life, their characters, their intelligence, the fact that they have been transformed
into a group puts them in possession of a sort of collective mind which makes
them feel, think, and act quite different from that in which each individual of them
would feel, think, and act were he in a state of isolation. There are certain ideas
and feelings which do not come into being, or do not transform themselves into
actions except in the case of individuals forming a group. The psychological
group is a provisional being formed of heterogeneous elements which for a
moment are combined, exactly as the cells which constitute a living body form by
their reunion a new being which displays characteristics very different from those
possessed by each of cells singly,” p 7 in Freud.
Freud comments that Le Bon the uniqueness of individuality disappears as does there
distinctiveness from one another vanishes. Ethnocentricity or racial consciousness arises, and
what is individual the collective. 7
A group is extremely gullible and prone to influence, it has no ability to criticize and truth and
untruth are confused. , A group thinks in images whose connection to reality is never conformed
by anyone reasonable. “The feelings of a group are very simple and exaggerated. So that a group
knows neither doubt nor uncertainty.”
A group immediately thinks in extremes; if a suspicion is voiced, the group immediately
transforms it into an absolute certainty. The slightest trace of anger is immediately transformed
into rage. 13-14
Groups have no real interest in truth. Groups live by and are desperate for images and illusions.
They prefer the unreal to the real as in the phrase, “It’s not reality; it’s the perception of reality.”
What is untrue moves them as much as the true and tend not to distinguish between reality and
unreality. p 16-17.
Groups, even gangs need leadership. As Freud says, “A group is an obedient heard, which could
never live without a master. It has such a thirst for obedience that it submits instinctively to
anyone who appoints himself its master.” But that master must meet the group with the same
qualities and goals of the group, but must have a stronger will and be “held in fascination” by a
strong faith and understanding of the goals of the group in order to get the faith of the group in
return. The group has no will of its own (that having been submerged with all of individuality),
so the leader must have a powerful, dominating will which the group can accept from him.
[Sharpton/Jackson are good examples],
An individual when participating in a group becomes particularly susceptible to the emotion of
that group (sports, applause at the theatre or a political rally, etc.), and at the same time his,
intellectual abilities are significantly reduced. P 26
In short an individual is hypnotized in group membership as he becomes more and more a
member. The imitation of the other members of the group out of intimidation or a desire to fit in
leads to the individual “under the power” of the group and particularly of the group leader.
Suggestion and Libido
The power of suggestion, the main means of effecting hypnosis plays a major role in group
formation. Just as a subject in an on-stage demonstration of hypnosis will behave quite contrary
to his ordinary, individual self, so the members of a group come under the suggestion of the
group and participate emotionally as do the other members.
Because of this tendency to joining groups and becoming less of an individual in so doing, both
today and throughout history, Freud concludes that this is a natural and fundamental aspect of
human psychology.
Freud turns to his theory of libido to explain the suggestion and the hypnosis that causes and
individual to change so significantly. He provides a definition of “libido” for just this purpose,
and I quote that at length
Libido is an expression taken form the theory of the emptions. We call by that
name, the energy, regarded as a quantitative quantity (though not at present
actually measurable), of those instincts which have to do with ‘love.’ The nucleus
of what we mean by love naturally consists (and this is what is commonly called
love, and what the poets sing of) in sexual love with sexual union as its aim. But
we do not separate from this -- on the one hand, self-love, and on the other, love
for parents and children, friendship and love for humanity in general, and also
devotion to concrete objects and to abstract ideas. 29
“We will try our fortune then, with the supposition that love relationships (or to
use a more neutral expression, emotional ties) also constitute the group mind.” 31
Since groups are definitely held together by a power of some kind, Freud concludes that
that power must naturally be love, the same force that holds anything together. And if
individuals are willing to give up their distinctiveness and allows the group and the leader
of the group to influence him by suggestion, it must be because he feels the need to be in
harmony with them, either out of intimidation and fear or out of a desire to join and
participate in that group,
The near universal use of the term brother or bro by men’s groups of all sorts or men in
mixed groups and the use of sister in sororities illustrate this. The words fraternity and
sorority are taken from the Latin for brother and sister.
as in longing for proximity, and self sacrifice
After arguing that the power that holds a group together is love, and that an individual’s
willingness to give up his distinctiveness is a desire to be in harmony with the groups he joins,
Freud then gives two examples to demonstrate his position, church and military. He calls these
sorts of groups, “artificial” because they are not family based. XXX
Church and Military
While Galbriath includes a wide variety of instutions to illustrate his theory of countervailing
powers, Freud uses only the Church and the Military to illustrate his theory of Group Dynamics.
He begins by distinguishing between two types of groups:
Natural Group (held together by natural ties): family, race, tribe, nation.
Artficial Groups (requiring force to keep them together): military, church, gangs.
He also further separates groups as leaderless (rioters, sports fans) and those with leaders.
Unlike anthropologists, who study primitive and rather small natural groups, Freud uses very
large and highly organized artificial groups to illustrate the effects of suggestion and libido in a
group rather than on an individual as in the previous section. For this illustrsation he choosse
churches and armies.
Both churches and armies are artificial groups because they are held together by some degree of
force: for churches, excommunication or the fear of hell; for military, dishonorable discharge,
demotion, prison, and even execution. Thus these artificial groups unlike natural groups, use
force to hold them together, and for the most part, there is no choice in participation by the
members (unlike sports teams).
As in the previous section on suggestion and libido, he argues that love (sexual encounters,
handshakes, like, loyalty, etc) are all the products of various degrees of love (even gang members
call each other brother), and he calls the energy underlying these various degrees of love, libido.
These are both groups with leaders, and the libido causes bonds (like glue) between the members
and the leader, the caring father figure or elder brother, and between the members themselves.
They are thus doubly bound, once to the leader and secondarily, to the members.
In a church, and he finds the Catholic Church to be a good example, the leader is Christ as father
figure or elder brother whose love radiates through all the members of the church and He is
loved in return in an exchange of love, in which the suggestion and the hypnosis comes through
the mutual bonding effect of love. The members are also bound to each other in their mutual
attachment, behaviors and beliefs the organization.
In an army, the commander-in-chief is the leader and he is concerned (love, like) and loving as
the father figure of the army. The members return this military style love and loyalty to the
leader and to each other forming the bond in peace and war and maintaining the chain of
command.
Even though the Catholic Church has a heiarchy, it is not a chain of command like the army
because of the democratic nature of their hierarchy, every one is equal in their share of the love
of Christ. In the military the hierarchy is not democratic in its ranks.
It is the bond to the leader which first forms the bonds among the members. Later it is their
mutual support and loyalty.
That is, Freud argues that both members and leaders are both doubly bound such that distrust in
the leader can be repaired by the members and low morale among the members can be
ameliorated by the leader.
With both groups, there are penalties for leaving and benefits for staying as well as a strong
cohesion (bond) between members and leaders and members among themselves. And this
libidinal cohesion as stated before is the glue that makes it more difficult to leave even with the
harsh penalties for leaving as well as that which makes the group prone to the suggestions of the
leader, Christ and his interpreters, the clergy, and commander-in-chief and his chain of command
where each step down on the heirearchy of command is a group unto itself.
An individual’s lack of individuality in a group is due to the powerful emotional tie and doubly
so in leader and members, it is easy to see the cause of the reduction of individuality and his
ability to buck the power of the group even if it disagrees with his personal beliefs.
Freud further indicates that this can be seen through the observation of panic, much clearer in an
army than in a church. Given any groups gullibility and their lack of interest in the truth, if
someone shouts, “The general has lost his head,” the bonds to the leader and to the members
breaks and the soldiers take flight. This was seen in General Schwartzkopfs successful attack in
Iraq. He had his troops hollow out the middle of the Iraqi troops and when about half of them
were gone, a general panic broke out.
Freud says that this sort of panic and the dissolution of a church is less clear. However, if I am
not too far off his example, the “God is dead,” beliefs caused by the discoveries of the last few
centuries have caused a panic among the churches and the confusion we see today is the result of
that panic. For example, the popularity of right wing radio and the shouting back and forth
between the announcers and the audience are the result of a general crisis of faith and a war
between scientists and the religious, both sides trying to proselytize or convert the other.
Identification
He illustrates this by looking at the early libidinal attachment of a child to the parent of the
opposite sex illustrated by the child’s desire to imitate that parent and to be and do everything
they do. In this situation, the parents have tremendous influence over the child and the child’s
suggestibility.
He claims these early ties demonstrate particularly what he means when he says that love is the
basis of suggestion, the abandonment of individuality to a leader and that identification
(imitation) with the leader of the group and its members is an adult version of the same thing and
that this watered down version of the sexual instinct is in fact the glue that holds groups together
and causes a desire for membership and a susceptibility to suggestion and hypnosis.
Let’s put this all together:
Having looked at power and group dynamics we will be better able to lobby for the FoFIP in a
grassroots manner. We have seen that Capitalist economics is relatively easy and we saw that
communism, Utopian as it was, is the opposite of Capitalism. We can also say capitalism is the
thesis, communism the antithesis and perhaps the FoFIP as the synthesis of the two as a whole
new stage of economics for the world.
The proposal of the FoFIP theory of linguistics requires no revolution. In fact it doesn’t even
require a vote, all that is required is to put together an organization to provide the measure and
the index and to keep adding research to it until the benefits are sufficiently clear. From there we
can trust the voters who are in favor to vote for things that will help and to pressure legislators to
put appropriate bills on the table. As time goes on, we can raise money and create a lobby to
benefit the middle classes based on this research and the FoFIP.
Neither Capitalism nor communism has succeeded in defeating the rich get richer and the poor
get poorer world of economics. By taking the focus off of both the rich and poor and the war
between and put it instead on the middle class by keeping an accurate track of the FoFIP and
how many are receiving it, we can stop the war between the rich and poor return the power to the
voters and middle classes as the founding fathers intended.
The founding fathers recognized that both the predation of aristocracy and the never ending
lowering of the bar of collectivity (a primitive electorate) have to be regulated. Both the safety
net and corporations are regulated and always will be but the financial and educational advantage
of the wealthy will always give them an edge if we do not correct this through a much enhanced
tracking of the FoFIP.
Laissez faire, the free market, and free enterprise can only be ensured with such regulation. The
founding fathers had no sense of a safety net but they did have a good view of the need to
regulate corporations. In acknowledging their vision, we can look at the regulations they
proposed as a long term goal, particularly the requirement that corporations cannot own stock in
other corporations and from there refresh the United States in the vision of the founding fathers
with a non-violent, second revolution of votes not bullets. Fuck China,
A corporation has no will of its own and therefore cannot be a person or make sane decisions
about stocks.