Get Off the Pendulum: The Trap of Reactionary Thinking

When I was younger, I used to enjoy riding Pharaoh’s Fury at the Coastal Carolina fair. This big sphinx-headed boat swung back and forth on a mechanical arm, terrifying and thrilling the riders, and (in our imaginations) we thought about what it would be like if it went upside down – dumping us all out.

This ride is much like how most people and cultures do their thinking about values in politics, religion, and cultural norms. We swing in one direction, then another, then back again.

For a while one major viewpoint dominates. That viewpoint oppresses or annoys a strong minority until it eventually creates a strong reaction and a pendulum swing in the other direction. Cultural control comes into the hands of the new majority, which oppresses or annoys the new minority, and the cycle begins again.

You can see the pendulum in action in a society’s relationship with religion: when religion dominates, secularists react (see the antitheist movement), and when secularism dominates, religionists react (see the fundamentalist movement). I’d argue that the intensity of both antitheism and fundamentalism are driven by feelings of disenfranchisement and oppression (and therefore more vulnerable to lazy thinking) rather than *just* differences of opinion.

You can especially see the pendulum in action on norms around gender roles and masculinity/femininity. For a long time, men (they still do in most cases) held and abused power over women. Fortunately for everyone, some women got pissed off and produced feminism. At some point, the swing toward feminine empowerment began to (at least appear to) correspond with a deemphasis of masculinity and a deconstruction of the important social role of males and masculinity. That has produced another swing in the direction of revived masculinity – some fantastic, but some unhealthy and unhealthily angry with feminism. In any case, if this reaction succeeds, it may only trigger another swing back in the other direction.

You can see the pendulum on a macro scale as well as in the micro scale of individual thinking. Everyone seems caught up in one reaction or another to the swinging of the belief pendulum. Perhaps you’ve gone through changes in your own beliefs. How often were you shifting your beliefs because of a sense of annoyance, or boredom, or anger, or contempt?

Of course, thinking on a pendulum is stupid. Thinking based on reaction and based on majority/minority belief status blinds you to complexity and to the actual merits of arguments.

And unfortunately, unlike a pendulum limited by Newton’s laws, the pendulum of reactionary thought in politics and philosophy can continue to swing wider and further out with each cycle – until everyone falls out of the ride (to borrow the earlier metaphor).

There are alternatives.

If you use discernment, you’ll watch to separate out your reasoned beliefs from your reactionary/emotional/tribal ones. When you do that, you’ll be surprised how non-partisan and hard-to-categorize your beliefs become.

Maybe the left has good things to say about unjustly-acquired wealth. Maybe the right has good things to say about individual skill and responsibility in building wealth. Maybe the right answer includes and transcends (to borrow a phrase from Ken Wilber) both.

Maybe the feminists have good things to say about structural injustices toward women. Maybe the masculinists have something good to say about the importance of independent manhood.

Maybe the secularists can teach us something about being. Maybe the religionists can teach us something about the ground and sacredness of being.

When your beliefs can become this nuanced and non-tribal, you can be insulated from most of the worst effects of the social pendulum. But always watch out for what irritates you in others’ beliefs and actions. The irritation will always be there, but you can’t let it push you to change much in your values – or at all in the values that matter most.

Originally published at JamesWalpole.com.

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Yep, These People are Stone Cold Crooked

Did vice president Joe Biden threaten to withhold $1 billion in US loan guarantees from the Obama administration if the Ukrainian government failed to remove a prosecutor whose investigation targets included Burisma Holdings, a gas company on whose board Biden’s son, Hunter, sat? Yes. He’s publicly admitted it.

Did president Donald Trump pressure Ukraine’s president, Volodymyr Zelensky, to re-open corruption investigations into Burisma in general and the Bidens specifically? Yes. He’s publicly admitted it.

Let us briefly pause while partisan Democrats and partisan Republicans, supporters of Biden and supporters of Trump,  get the screams of “false equivalency!” out of their systems.

I’ll even entertain the notion. Maybe Joe Biden was just worried about corruption in Ukraine and not throwing his vice-presidential weight around to protect his son. Maybe Donald Trump is just worried about corruption in Ukraine and self-dealing by American politicians, rather than cynically abusing his presidential power to have foreign governments torpedo his political opponents.

OK, now let’s get back to the real world where, as Lord Acton wrote, “power tends to corrupt; absolute power corrupts absolutely.”

Or, as President Trump tweeted about his accusers, and has he’s established concerning himself over the course of decades, “these people are stone cold crooked.”

The basic facts of both sets of accusations are undisputed by the accused. What’s at issue is their motives.

Those with power (including one of its forms, wealth) tend to act to preserve that power. As the amount of power requiring preservation increases, so does the temptation to use that power in corrupt ways to protect and expand it.

The positions of president and vice-president/potential president, entail considerable power. Suspecting corrupt motives on Biden’s part, Trump’s part, or both, is not only not beyond the pale, it’s perfectly reasonable.

The emerging scandal may cost both Trump and Biden their 2021-2025 presidential ambitions. It could conceivably even cost Trump several months of his current term if the House impeaches and the Senate convicts (the former looks increasingly likely, the latter seemingly unlikely).

But the problem goes deeper than the ambitions or personal moral compasses of Donald Trump and Joe Biden. The problem is power itself. We’ve ceded far too much of it to politicians, and the executive branch in particular has co-opted far too much of what we’ve unwisely ceded to the state in general.

Neither Joe Biden nor Donald Trump should have ever had control over billions of dollars in aid to Ukraine’s government in the first place. If the US does dispense foreign aid (it shouldn’t), the job of the White House is to cut the checks as directed by Congress.

The US, after decades of creep toward dictatorship, is there. The executive branch has seized plenary power because Congress has failed to jealously guard its prerogatives and the Supreme Court has failed to zealously protect our rights.

The authoritarian dystopia into which we’ve fallen, not the specific details of a dictator’s or would-be dictator’s abuses,  is the problem. If we don’t solve it, we solve nothing.

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The Fault Is Not in Our Stuff But in Ourselves

Bruce Sacerdote‘s NBER Working Paper, “Fifty Years of Growth in American Consumption, Income, and Wages” provides a nice update on the measurement of CPI Bias.  The punchline should be obvious, but it’s great to hear such an eminent economist say it: “Meaningful growth in consumption for below median income families has occurred even in a prolonged period of increasing income inequality, increasing consumption inequality and a decreasing share of national income accruing to labor.”

Highlights:

Table 3 shows estimates of annualized growth rates in wages by decade. The first column shows growth in real wages using CPI deflation. This column show real wages fell by 0.8 percent per year during the ten years January 1975-January 1985 and fell by 0.6 percent per year during the ten years ended in 1995.10 In the subsequent two decades wage growth is positive 0.8 percent per year and 0.7 percent per year respectively.

The next three columns calculate growth in real wages using a) PCE adjustment, b) an assumption of 20% upward bias in CPI growth, and c) Hamilton/ Costa adjustment to CPI. The picture looks progressively more optimistic as we move from left to right. PCE adjustment still has negative wage growth in the first two decades (75-85 and 85-95) but the decreases in real wages are smaller. Hamilton/ Costa bias adjustment implies annual real wage growth of 1.4% during 1975-1985, .2 percent per year during 1985-1995, 1.4 percent during 1995-2005 and .8 percent in the most recent decade.

The table in question:

More:

Consumption for below median income families has seen steady progress since 1960. My preferred point estimates are based on CEX measures of consumption where the price index has been de-biased following Hamilton and Costa. These estimates suggest that consumption is up 1.7 percent per year or 164 percent over the whole time period. These estimates of growth strike me as consistent with the significant increases in quality and quantity of goods enjoyed by Americans over the last half century. And my conclusions are consistent with the findings of Broda and Weinstein (2008). Estimates of slow and steady growth seem more plausible than media headlines which suggest that median American households face declining living standards.

The bias adjusted estimates also provide a more positive outlook on real wage growth in the last 40 years than standard media headlines. PCE adjusted wages appear to have grown at .5% per year during 1975-2015 while the de-biased CPI adjusted wages grew at 1% per year over the same time period.

Key caveat:

Importantly these estimates do not tell us anything about why wages grew more slowly than GDP or why inequality increased. CPI bias does not explain decreases in labor’s share of income (Krueger 1999) or the associated rise in inequality (Pikkety and Saez 2003). Adjusting the price index downward leads to higher estimated real wage growth and higher estimated real GDP growth.

The big unanswered question:

What I do not address here is why Americans feel worse off if consumption is actually rising. There are at least four important explanations that may be at work. First, I am only examining consumption within very large sections of the income distribution and there may be specific groups (for example less than high school educated men) for whom consumption is actually falling. Second, it’s possible that the quality of some services such as public education or health care could be falling for some groups. Third, the rise in income inequality coupled with increased information flow about other people’s consumption may be making Americans feel worse off in a relative sense even if their material goods consumption is rising. Fourth, changes in family structure (e.g. the rise of single parent households), increases in the prison population, or increases in substance addiction could make people worse off even in the face of rising material wealth. A deep future research agenda would be to understand how America has lost its sense of optimism about living standards and whether the problem is one of consumption, relative consumption (relative to other people) or something entirely different.

My favorite candidate for “something entirely different”: false consciousness.  Most people embrace a dogmatic pessimistic ideology, and believing is seeing.  Hedonic adaptation amplifies the problem.  After all, it’s easier to deny that your standard of living is great than to admit that you’re unhappy despite your affluence.  The fault is not in our stuff but in ourselves.

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The Great Successor: Inside North Korea

I highly recommend Anna Fifield’s The Great Successor.  It’s full of information about not only the life of Kim Jong Un, but what’s happened inside North Korea since his ascent to the Red Throne.  Most readers will be shocked by her description of the North Korean hell-state, but that’s all old hat to me.  Here’s what surprised me in Fifield’s book:

1. Kim Jong Un didn’t just attend a fancy English-language school in Switzerland.  After his expat guardians – his maternal aunt and her husband – defected, Kim was actually switched over to a German-language Swiss public school.  Weird.

2. Kim’s top interest as a boy was basketball.  His eagerness to befriend American basketball stars really is the fulfillment of a childish dream.

3. “Kim Jong Il spoke in public only once, and then only a single phrase, during his entire seventeen years in power.  ‘Glory to the heroic soldiers of the Korean People’s Army!’ he said during a military parade in 1992.”  Kim Jong Un started giving lengthy public speeches almost immediately.

4. Kim Jong Un has deliberately fostered a revolution of rising expectations:

North Koreans “will never have to tighten their belts again,” the Great Successor declared when he delivered his first public speech, marking the occasion of his grandfather’s one hundredth birthday.  Kim Jong Un told the bedraggled populace that they would be able to “enjoy the wealth and prosperity of socialism as much as they like.”

5. Kim’s execution of his uncle Jang Song Thaek was part of a much larger purge.  “Dozens, perhaps even hundreds, of Jang’s associates disappeared around the same time.  Some of them were not just purged from the system but more likely executed.  Those outside North Korea at the time fled.”  Note: This probably means that the runners’ families were sent to slave labor camps or executed.

6. Just as Stalin stole Trotsky’s economic plan after purging him, Kim went on to implement Jang’s vision of watered-down Deng-style economic reforms.  The Communist elite now openly enjoys a much higher standard of living.  Some of this gain is trickling down to the commoners.

7. Kim Jong Un is eager to win over the millennial elite with capitalist luxuries and entertainment.  “It was fun to be a rich kid in Kim Jong Un’s North Korea.  The richest kid of all was making sure of it.”

8. Kim rushed to get a credible nuclear deterrent, then declared himself satisfied.  And his behavior seems consistent with his intentions.

Just a week before his summit meeting with South Korea’s President Moon, Kim Jong Un delivered a speech to a Workers’ Party meeting in Pyongyang in which he declared the “byungjin” or “simultaneous advance” policy to be over.  He no longer needed to pursue nuclear weapons – he had achieved them.  He declared an immediate end to nuclear tests and intercontinental ballistic missiles launches…

From now on, Kim Jong Un said, he would be focusing on a “new strategic line.”  He would be concentrating on the economy.  And for that, he would need an “international environment favorable for the socialist economic construction…

In 2013, he had boldly elevated the economy to level pegging with the nuclear program after decades of “military first” policy.  Five years later, almost to the day, he was unequivocally making economic development his top priority.

Before reading this book, I was already 85% confident that Kim Jong Un would rule North Korea for life.  Now I’d go up to 90%.  Despite his youth, he’s a skilled tyrant.  However, I’m not quite as pessimistic about the fate of the North Korean people.  Kim has dramatically relaxed the regime’s war on consumerism, and it is very hard to confine this rising abundance to the inner circle.  People who think Kim will give up his nuclear arsenal are dreaming (or lying); while he lives, the best nuclear outcome we can hope for is “Don’t ask, don’t tell.”  Kim may die young due to poor health; he might even be assassinated, though I doubt it.  When he dies, North Korea – and the world – will get to throw the dice one more time.  Until his death, however, Kim will stay the course.

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Is There a Market for an ISA Marketplace?

I love the idea of better and clearer markets in everything.

There already are markets in everything, but most lack clear information flow, have fuzzy incentives, and weak to no liquidity or money prices.

Individual earning potential is no different. There is so much that could be done to better allocate money across time slices to get capital to its highest time value location for individuals. When you need money isn’t always when you have it and vice versa. I’ve blogged before about a world where you can sell shares in yourself and securitize your future potential wealth.

But I want to know who would do it.

I want a marketplace where individuals can share their info and sell shares to one or many investors.

It’s gonna be hard to test the demand. It’s a new category and requires a lot of comfort with the idea, not to mention some parameters and assurances that legal issues won’t kill it. How to test quickly and easily if there are enough people who’d try it on both sides of the market?

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Codifying Our Worst Impulses: The Ideas that Started World War II

 

Yesterday was the 80th anniversary of the start of World War II, the deadliest violent conflict in human history.  Death tolls vary, but often reach 80 million souls.  What caused it?  Lists of proximate causes never end, but the only credible “root cause” is simply: ideas.  Three countries started World War II: Japan, Germany, and the Soviet Union.  While popular summaries rarely list the Soviets as initiators because Hitler double-crossed Stalin two years later, Molotov and Ribbentrop’s  so-called Treaty of Non-Aggression Between Germany and the Union of Soviet Socialist Republics was a Treaty of Aggression Against Poland, Finland, Latvia, Lithuania, Estonia, and Romania.  Don’t let anyone tell you otherwise.

What ideas led the leaders of Japan, Germany, and the Soviet Union to war?  The obvious answer is extreme nationalism – the view any action is morally praiseworthy if it advances the interests of your nation-state.  Heinrich Himmler said it best:

For the SS Man, one principle must apply absolutely: we must be honest, decent, loyal, and comradely to members of our own blood, and to no one else. What happens to the Russians, the Czechs, is totally indifferent to me… Whether other races live well or die of hunger is only of interest to me insofar as we need them as slaves for our culture; otherwise that doesn’t interest me. Whether 10,000 Russian women fall down from exhaustion in building a tank ditch is of interest to me only insofar as the tank ditches are finished for Germany.

…When somebody comes to me and says, I can’t build tank ditches with children or women. That’s inhumane, they’ll die doing it. Then I must say: You are a murderer of your own blood, since, if the tank ditches are not built, then German soldiers will die, and they are the sons of German mothers. That is our blood. That is how I would like to indoctrinate this SS, and, I believe, have indoctrinated, as one of the holiest laws of the future: our concern, our duty, is to our Folk, and to our blood. That is what we must care for and think about, work for and fight for, and nothing else. Everything else can be indifferent to us.

Almost everyone understands that Japan and Germany grew extremely nationalistic during the 1930s.  Few realize that the same holds for the Soviet Union as well.  Under Stalinism, anything that advanced the interests of the Soviet Union was the moral imperative – starting with the reabsorption of all the breakaway territories of the Russian Empire.

By itself, however, extreme nationalism need not generate war.  Rationally speaking, the best way to advance the national interest is with peace and consumerism.  The leadership of Japan, Germany, and the Soviet Union, however, all angrily rejected this bourgeois, “shopkeepers’” perspective.  Instead, they equated the national interest with the power and glory of the government – and angrily denounced Western “plutocracies.”

This was most obvious in the USSR, which deliberately eradicated the rich, business, and private property itself in order to build a totalitarian militarized society.  But Germany’s National Socialists had a similar vision.  Their goal was not to build an idyllic consumer society, but a mighty war machine.  Unlike the Soviets, however, the Nazis had the common-sense to harness the rich, business, and private property rather than destroy them.   As Hitler told Nazi defector Hermann Rauschning:

He had no intention, like Russia, of “liquidating” the possessing class. On the contrary, he would compel it to contribute by its abilities towards the building up of the new order. He could not afford to allow Germany to vegetate for years, as Russia had done, in famine and misery. Besides, the present owners of property would be grateful that their lives had been spared. They would be dependent and in a condition of permanent fear of worse things to come.

The same holds for Japan: Its leaders equated the national interest with the power and glory of the Japanese government, not the safety and prosperity of the Japanese people.  So while the Japanese government happily used the domestic rich and domestic business, it truly bled them dry during the war.  As Walter Scheidel explains in The Great Leveler:

Japan was once one of the most unequal countries on earth. In 1938, the country’s “1 percent” received 19.9 percent of all reported income before taxes and transfers. Within the next seven years, their share dropped by two-thirds, all the way down to 6.4 percent. More than half of this loss was incurred by the richest tenth of that top bracket: their income share collapsed from 9.2 percent to 1.9 percent in the same period, a decline by almost four-fifths.

However rapid and massive these shifts in the distribution of income, they pale in comparison to the even more dramatic destruction of the elite’s wealth. The declared real value of the largest 1 percent of estates in Japan fell by 90 percent between 1936 and 1945 and by almost 97 percent between 1936 and 1949. The top 0.1 percent of all estates lost even more—93 percent and more than 98 percent, respectively. In real terms, the amount of wealth required to count a household among the richest 0.01 percent (or one in 10,000) in 1949 would have put it in only the top 5 percent back in 1936. Fortunes had shrunk so much that what used to count as mere affluence was now out of reach for all but a very few.

What’s the right word for “equating the national interest with the power and glory of the government rather than peace and consumerism”?  There are many candidate labels  – “statism,” “romanticism,” “populism,” “communitarianism,” “anti-capitalism.”  But none is quite right, so we might as well stick with the label that activists who equated the national interest with the power and glory of the government have preferred throughout the 20th century: socialism.  Obviously, there are many kinds of self-identified socialists – including socialists who unequivocally seek a peaceful, consumerist society.  Historically, however, these are rare – and since I’m not a socialist, I say that “real socialism” equals “what most self-styled socialists do when they have power.” Whatever label you prefer, the key point is that all the regimes that started World War II praised the power and glory of the government to the skies – and brought traditional elites – the rich and business – to their knees.  Or their graves.

Before you join me in blaming World War II on nationalism and socialism, though, there’s an obvious objection: These ideas have been ubiquitous for ages.  My response: The emotional impulses behind nationalism and socialism – impulses like xenophobia and anti-market bias – are indeed long-lived and widespread.  Far more children dream of being warriors than merchants.  But the initiators of World War II turned these knee-jerk feelings into bodies of thought.  They codified humanity’s worst impulses into explicit, militant, self-conscious ideologies.  And they took their ideologies seriously enough to kill for them – and often to die for them.

Does this mean that every latter-day nationalist and socialist is morally comparable to the architects of World War II?  No; that’s absurd.  The reason for this moral non-comparability, though, is disturbing.  The rhetoric of modern nationalism and socialism remains grotesque.  Anyone who says “By any means necessary” is, by implication, saying, “If it takes 80 million deaths for us to win, then so be it.”  The saving grace of latter-day nationalists and socialists is that almost all of them are hypocrites.  They may say, “By any means necessary,” but thankfully few have the stomach for it.  As I’ve said before, if your ideas are bad, hypocrisy makes them less bad.

Still, I am dismayed by the renewed popularity of nationalism and socialism.  I don’t think World War III is coming this century.  If it does come, however, I will blame the nationalists and socialists who take their scary slogans to heart.

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