According to Smith, the phenomenon of speculative excess has less to do with free markets than with high profits. “When the profits of trade happen to be greater than ordinary,” he said, “overtrading becomes a general error.”7 And rate of profit, Smith claimed, “is always highest in the countries that are going fastest to ruin.”8 Judging by how America invested in 2007 and voted in 2008 that would be us.
The South Sea Bubble, offering shares in a government monopoly on trade with the Orient, was the result of machinations by Britain’s lord treasurer Robert Harley, earl of Oxford, who was looking to fund the national budget deficit. The Mississippi Scheme, with securities backed by France’s land claims in North America, was started for the same reason by the French regent Philippe, duc d’Orléans, who gave control of the royal bank to Scottish financier John Law, the Charles Ponzi of his day. And the 2008 crisis was the product of interest rate manipulations by the Federal Reserve Bank under its chairman Alan Greenspan, for the same reason yet again.
John Law’s fellow Scots, who were more inclined to favor market freedoms than the English let alone the French, had already heard Law’s plan for “establishing a bank... which he seems to have imagined, might issue paper to the amount of the whole value of all the lands in the country.” The parliament of Scotland, Smith noted, “did not think proper to adopt it.”9
A single misconception allows overtrading folly to turn into speculative disaster, whether the overtrading involves commercial monopoly, Louisiana wilderness, tulip bulbs, dot-com stocks, or home mortgages. The misconception is that unlimited expansion of prosperity can be created by unlimited expansion of credit.
Wild flights of borrowing can be effected only with what Smith called “the Daedalian wings of paper money.”10 To produce enough of this paper requires either government or something able to put the arm on government the way modern financial institutions can. They are too ______ (pick your adjective) to fail. The U.S. government likes to peddle its powers. Financiers like to shop their influence. Smith pointed out, “The government of an exclusive company of merchants, is, perhaps, the worst of all governments.”11
Business people are innately no better than other people. Some may be as bad as politicians. But the political power of government is required to let business people do their worst. Given that power, it’s easy.
The plan that Adam Smith put forth for creating prosperity is more complicated. It involves all the baffling intricacies of human liberty. Smith proposed the frighteningly complex program of everybody being free—free of bondage and of political, economic, and regulatory oppression. Smith once told a learned society in Edinburgh that “Little else is requisite to carry a state to the highest degree of opulence but peace, easy taxes, and a tolerable administration of justice.”12
With Smith’s clear understanding of political inclinations in matters of adjudication, exaction, and war, we can guess the tone of sarcasm in which he spoke.
How would Adam Smith fix a mess such as the current recessionary aftermath of financial collapse? Sorry, but it’s fixed already. The answer to a decline in the value of speculative assets is to pay less for them. Job done.
We could pump the banks full of our national treasure. But, Smith said, “To attempt to increase the wealth of any country, either by introducing or by detaining in it an unnecessary quantity of gold and silver, is as absurd as it would be to attempt to increase the good cheer of private families, by obliging them to keep an unnecessary number of kitchen utensils.”13
We could send in the experts to manage financial institutions. But, Smith said, “I have never known much good done by those who affect to trade for the public good.”14
And we could nationalize our economy. But, Smith said, “The state cannot be very great of which the sovereign has leisure to carry on the trade of a wine merchant or apothecary.”15 Or run General Motors.
Opposition to the free market is forever expressed in outrage at capitalist success. Capitalism exploits workers, robs widows and orphans, and concentrates wealth in the hands of the rapacious few. Speaking as a capitalist, if only. Critics of the free market think of capitalists as being Donald Trump and the faceless, and therefore even more wicked, partners at Goldman Sachs. Were it true that the free market did nothing but breed flocks of Donald Trumps and packs of Wall Street grab-alls, it wouldn’t be just the left that’s out to get them. The rest of us would be hunting them for sport. But that’s not all the free market does, that’s not who capitalists are, and capitalism is by no means a product of the free market anyway.
To undertake a material project—whether it’s a Great Pyramid of Khufu, an Atlantic City casino, a hospital for widows and orphans, or a papier-mâché Gandhi puppet for the annual Peace Pageant at the Waldorf School—requires a fund of accumulated resources of some kind, no matter if it’s just paste and recycled paper. This is capital.
Capital can come from savings. Capital can come from borrowings. Capital can come from consideration given in return for proportionate ownership of the project in hand. Capital can come from paper money that a central bank has pulled out of its ass. Kings, republics, communist dictatorships, Microsoft, the Salvation Army, and Somali pirates all need capital, and they all discover ways to obtain it. Capitalism, so called, is when free people accumulate capital of their own free will for use on freely determined projects.
The fact of the matter is that most of these projects flop. Donald Trump, for example. Every property he touches seems to go to hell. “Fat Cat” would be the wrong epithet for Trump. If someone other than paroled former Enron accountants were keeping his books, he’d probably be shown to have a net worth less than that of your twenty-pound tabby who just shredded the drapes.
What’s good about the free market is that it allows capitalism to—so to speak—trump success. The free market lets capitalism fail. Think of all the wonderful moneymaking ideas people get—and you’ve probably had some of these ideas yourself: chocolate-covered hairballs to give your feline something yummy to cough up; a line of bottled water for dogs with flavors such as “Puddle,” “Pond Scum,” and “Toilet Bowl”; plastic garbage bags that solve the annoying which-side’s-up? problem by being open on both ends; scented candles for men—“Mandles”—that fill a guy’s home with smells of “Pool Hall,” “Old Dog,” “Gear Oil,” “Beer,” and “Frying Meat”; home colonoscopy kits; and FunScreen to protect children from dangerous exposure to fun. Use FPF 40 if the kid has a skateboard.
In a free market, people (notably my stock broker) invest money in these things and in businesses such as a chain of restaurants run by Wolfgang Puck’s younger, dumber brother, Hockey; an Orthodox Jewish Wilderness Outfitter whose guides specialize in catching gefilte fish on dry flies; a way to cash in on recession thrift with a day-old sushi bar; low-cost off-season foliage tours of New England featuring bus trips through Vermont in March; and a deal to mitigate the effects of both the mortgage lending crisis and climate change by buying all the Sub-Zero freezers from foreclosed McMansions and renting them as affordable housing to Polar Bears.
Imagine a world where all such schemes come to fruition. You’ve just imagined a cross between North Korea and Dubai. And you’ve just explained where those Bulgarian blue jeans came from.
Bad ideas can also happen in democratic societies where the full range of freedoms, including the freedom to fail, are presumed to exist. At the end of 2008 and the beginning of 2009 America conducted an economic intervention that kept businesses that were staggering around, intoxicated by overtrading, and blinded by MBA moonshine from falling down the manhole of liquidation.
The business of government is failure-proof. Social Security finances have, over the past thirty years, arrived at a condition that would make the most hardened trader of collateralized debt obligations blanch. America is on the verge of having a huge surplus of retirees. Government subsidies produce surpluses because subsidies always produce surpluses, the way they did with America’s subsidized whea
t and cheese. Subsidized surpluses, their prices fixed by law, do not respond to the usual methods (“Absolutely Final Going Out of Politics Sale!”) of clearing markets. What will we do with all the old people? We may have to—as we did with the wheat and cheese—donate them overseas in hope of aiding developing countries that lack age, wisdom, and the Early Bird Special at Denny’s.
Fortunately most of America is still allowed to fail. Economic failure, however, harms good business as well as bad. The arrogant and greedy come a cropper, but so do the innovators and visionaries. And this is fine too.
Per the Adam Smith analogy, Icarus, with youth’s ready affinity for new technology, sees all sorts of possibilities in flight. These elude his earth-oriented, sandal-tech father Daedalus, who just wants to get out of Crete. Icarus takes off on his own. He experiences the thrill of a soaring venture, briefly becomes a hot property, gets his wings singed, has a meltdown, and undergoes a rapid decline in personal fortune.
So it went with the Internet bubble, and so it had gone before with the railroads. Trains are another example of a visionary innovation that suffered a valuable fizzle. Railroad building was vital to America’s business expansion. But speculation in railroad stock offerings in the 1870s led to a dot-com of a crash. Good as railroads are, what if every proposed railroad had succeeded? Do we want a railbed in the driveway? Would it be convenient to take the train into the McDonald’s drive-through lane? It’s probably no coincidence that, shortly after the railroad bust, the automobile was invented.
A too visionary adoption of innovation can be disruptive, as the residents of Nagasaki could attest. Private developers of an atomic bomb would have realized that the device has detrimental side effects and exposes investors to numerous class-action lawsuits. Venture capital for the Manhattan Project would have dried up.
If, for instance, the Segway had been introduced in the visionary, innovative late 1990s, we’d be up to our handlebars in the things. Segways would be whizzing along our sidewalks, caroming off baby carriages, causing havoc among dog walkers, squashing the sleeping homeless, and forcing joggers to run for their lives. Teenage boys, with youth’s ready affinity for new technology, would hotrod the Segway. “Mall racing” would ensue with grisly accidents and loss of life or, anyway, toes. Congressional hearings would be held. The National Highway Traffic Safety Administration would get involved. Airbags, shoulder restraints, and “stand belts” would be mandated plus two extra wheels to ensure stability. The Segway, by now, would be a car.
As it is, the Segway was introduced in the more cautious and pragmatic early 2000s. Thus the Segway had a chance to prove itself on its own merits and become gradually integrated with the social fabric as a useful device for making law enforcement officers look ridiculous.
The free market teaches us a lesson in the value of failure. And, after all, it is not just the growth of an economy that depends on failure. So does the growth of a democracy.
In America, unlike, say, Zimbabwe, the political system is based on politicians being losers. John Quincy Adams swiped the White House from Andrew Jackson in 1824. Jackson had fought duels and Indians and the British, but Old Hickory chose to wait for a metaphorical bloodbath in 1828 rather than start a real one. Nor did the combative lawyer Samuel J. Tilden stoop to battle the crooked ascendancy of Rutherford B. Hayes in 1876. And after the Florida recount imbroglio of 2000 Al Gore conceded gracefully. More or less.
Only once—following the election of Abraham Lincoln in 1860—did prominent American politicians refuse to accept the blessings of failure. They started the Civil War, a terrible failure that’s kept our nation free and united ever since.
To failure we owe our form of government, and also our actual, physical form. Death was biology’s greatest invention. Without death there’s no you. I just keep dividing into endless replications, the whole bunch of myselves forging a lifestyle truly open to the criticism of being “all about me.”
Failure is obviously the key to Darwinian selection. Survival of the fittest can’t work if the unfit are still hanging around. There they go, dodging comet collisions, being chased by predators but always managing to escape, getting stuck in tar pits then extraditing themselves somehow, getting tar all over the place. It drives the fittest mad.
Failure is necessary to evolution but equally necessary to creationism. Picture Adam and Eve, after an eternity, all talked out, with the thrill of nudity long expired. Adam keeps mowing and dethatching and reseeding paradise. He’s given up golf. He doesn’t have the swear words for it. He futzes, putting the billionth coat of Thompson’s Water Seal on the fence around the Tree of Knowledge. Eve redecorates Eden. It’s Olympus this eon, Valhalla the next, then a modern, minimalist Nirvana. She changes all the names for the animals and stares at the fig tree, hoping for something new and stunning in this year’s leaf. The beasts of the field are tired of one another. The lion lies down with the lamb; the lamb snores. The serpent ends up eating all the apples himself. He’s too fat to go out and do any tempting. From this we’re supposed to fill a Bible?
It seems unfair that failure is essential to every aspect of freedom—economic freedom, political freedom, the freedom of existence itself. But freedom is not fair. Much can be made of the fact, I suppose. Personally, I’m immune to the complaint. I have a twelve-year-old daughter, Muffin. All I hear is, “It’s not fair! It’s not fair! It’s not fair!”
I say to her, “Honey, you’re cute. That’s not fair. You’re smart. That’s not fair. You were born in the United States of America. That’s not fair. Darling, you had better get down on your knees and pray to God that things don’t start getting fair for you.”
5
The Murderous Perverted Nuptial Bliss Method of Establishing Political Principles
We can formulate some powerful, free, and responsible ideas about government if we keep “Kill Fuck Marry” in mind.
But first, to clear the ideological air, let’s confess that there are no conspiracies that rule the world. There’s no universe-mastering cabal of capitalists, communists, Islamic fundamentalists, International Monetary Fund executives, Federal Reserve Bank governors, New World Order functionaries with their UN black helicopters, Trilateral Commission initiates, Freemasons, Bavarian Illuminati, Rosicrucians, Knights Templar, Mafia families, Chinese triads, Mexican drug gangs, Jesuits, or Google. And no, no, no, no, it’s not the Jews. They’d do a better job.
The presidential “Birther,” the 9/11 “Truther,” the JFK assassination “Grassy Knoller,” and every other conspiracy buff is announcing aloud: “The world is so stupid that even I can understand it.”16
All conspiracy theories are based on the assumptions that, first, any group of people numbering two or more can agree on anything for longer than it takes to get another beer from the refrigerator and, second, that they’ll keep their mouths shut. People are so liable to tell secrets that if, for example, people don’t have any embarrassing secrets to tell about themselves, they’ll make up some. No motivation is sufficient to induce mankind to be effectively secretive. The minute we have a secret we make a Tiger Woods of ourselves.
Then there are the supposed unconscious, involuntary, or automatic conspiracies that history engages us in, such as the Marxist class struggle. It’s over. The social class known as assholes won. The inevitabilities of dialectical materialism, of the march of progress, of globalization, the Internet, Francis Fukuyama’s End of History, and even climate change are fictions after the fact. This is not to say they aren’t true. It’s just to say that, with a little imagination, anyone can explain the course of human events from the minutest cause to the grandest effect: for want of a nail the shoe is lost, for want of a shoe the horse is lost, for want of a horse the rider is lost, for want of something to fill Poor Richard’s Almanac a proverb is swiped from seventeenth-century metaphysical poet George Herbert, and—for want of a better idea—Benjamin Franklin’s resulting prosperity and social prominence leads to independence for the thirteen
American colonies.
There are always groups of people upon whom to blame things: the Flemish if you’re a Walloon, the Walloons if you’re Flemish, both of them and the rest of the dorks in Brussels if you’re an EU citizen. But there’s no group of people upon whom to blame everything, except in a free and democratic society where we can, with confidence, blame everything on ourselves.
And what about ourselves? We’re individuals—unique, disparate, and willful, as anyone raising a houseful of little individuals knows. And not one of these children has ever written a letter to Santa Claus saying, “Please bring me and a bunch of kids I don’t know a pony and we’ll share.”
The great religions regard us as individuals, treating sin and salvation as individual matters, at least most of the time. There are occasional group discounts, such as with the Sixth Commandment. Thou shalt not kill—unless you all get together and attack the Canaanites. We Christians don’t say our prayers as if we were responding to random polling of the likely blessed with a plus or minus five percent margin of error on “Thy will be done.” Buddhists don’t have a graduated meditation rate that shifts the burden of enlightenment to those with greater assets in the sitter department. And Allah doesn’t welcome believers into paradise saying, “You weren’t a good Muslim, but you were standing in a crowd of good Muslims when you detonated the explosives in your suicide vest.”
Virtue is famously lonesome, and vice is pretty solitary for some of us too. We experience pain and pleasure individually, which is what showed President Clinton to be such a pigeon plucker when he told us he “felt our pain.” We forgave him because we were spared feeling his icky pleasures.
Making a statement of individuality is not the same as professing a philosophy of “individualism” with loud cries of “Me first!” Individuality is, like the free market, a measurement, not a moral argument. Individuals are the units we come in. Basing a political system on something other than individuals—communes, collectives, identity groups, Twitter-generated flash mobs, Grateful Dead followers still wondering where the heck to go—isn’t wrong, it’s stupid. It’s like having a counting system that goes: few, less, some, more, none. Even within a family people have to be treated as individuals, otherwise we stuff a tampon up Dad, give Mom a table saw for Valentine’s Day, and turn the toddler loose on the rider mower.
Don’t Vote Page 5
