In this case, it is Rep. Barney Frank. Of Wall Street bonuses, he says, "There should be a moratorium on bonuses." Just who is Barney Frank to tell private American businesses how much to pay their employees?
Well, he is the spokesman for their new minority owner, the federal government. As Chairman of the House Financial Services Committee, he gets to tell these companies what to do. So does any other politically ambitious petty bureaucrat and tyrant who wants to loudly score political points at these companies' -- and the American economy's -- expense.
What unleashed these ignorant clown-bullies on America's leading corporations is their partial nationalization orchestrated by President Bush, Treasury Secretary Paulson, and endorsed by Republicans and Democrats in Congress.
The real price of the $250 billion partial nationalization of America's leading financial firms will be much larger than just this dollar amount. We are only seeing the first signs of it now. Barney Frank and his minions are just fashioning the bibs to their bellies. Their feasting on America's leading banks and investment banks -- starting with Goldman Sachs, Morgan Stanley, JP Morgan, and Citibank -- has just begun.
Barney Frank claims to pay the bill for this dinner, but it is all of us who will pick up the tab. How much will it cost, not just in money, but in terms of our freedom?
Monday, October 27, 2008
In this case, it is Rep. Barney Frank. Of Wall Street bonuses, he says, "There should be a moratorium on bonuses." Just who is Barney Frank to tell private American businesses how much to pay their employees?
Saturday, October 25, 2008
The article below is reprinted with permission from the Ayn Rand Institute. My comments follow.
Greenspan Has No Free Market Philosophy
October 24, 2008.
Washington, D.C. --Opponents of the free market are giddy at Alan Greenspan's declaration that the financial crisis has exposed a "flaw" in his "free market ideology." Greenspan says he is "in a state of shocked disbelief" because he "looked to the self-interest of lending institutions to protect shareholder's equity"--and it didn't.
But according to Dr. Yaron Brook, executive director of the Ayn Rand Center for Individual Rights, “any belief Greenspan ever had in truly free markets was abandoned long ago. While Greenspan long ago wrote in favor of a truly free market in banking, including the gold standard that such markets always adopt, he then proceeded to work for two decades as leader and chief advocate of the Federal Reserve, which continually inflates the money supply and manipulates interest rates. Advocates of free banking understand that when the government inflates the currency, it artificially increases prices and causes booms in certain sectors of the economy, followed by inevitable busts. But not only did Greenspan lead the inflation behind the dot-com bubble and the real estate boom, he blamed the market for their treacherous collapses. Greenspan should have recognized that what he wrote in 1966 of the boom preceding the 1929 crash applied here: ‘The excess credit which the Fed pumped into the economy spilled over into the stock market--triggering a fantastic speculative boom.’ Instead, he superficially blamed ‘infectious greed.’
“Should it be any shock that Greenspan now blames the free market for today's meltdown--rather than the Fed's policies, which fueled an inflationary housing boom, which rewarded reckless lenders and borrowers from Wall Street to Main Street? Greenspan didn't mention the word ‘inflation’ once in his testimony.
“Whatever Greenspan's economic philosophy is, it is not anything resembling a free market.”
Galileo Blogs comments:
I agree with this editorial. Greenspan's testimony on Thursday and his track record in government, particularly as Federal Reserve chief, reveal that he has abandoned a proper economic understanding of capitalism, if he ever had one to begin with. It is difficult to imagine that the man who wrote an article in the 1960s advocating gold-backed money issued by private banks entitled, "Gold and Economic Freedom," in Capitalism: The Unknown Ideal is the same man who flooded our economy with cheap money (such as 1% interest rates), and then failed to acknowledge that such cheap money is the root cause of both the Internet and the housing bubbles.
Instead, he humbly sat before a Congressional witch-hunt committee and joined the chorus in declaring that "self-interest" is the cause of the economic meltdown. What explains Greenspan's meltdown? That is what I will explore here.
Greenspan's congressional testimony and the statements in his recent autobiography show that that it is unlikely that the man who penned the article, "Gold and Economic Freedom," ever properly grasped the principles of capitalism and the moral principles that underlie it, or else he abandoned those principles long ago.
In his autobiography, Greenspan made two interesting revelations. First was the ostensive reason he gave for abandoning the edifice of Objectivism, the philosophy developed by Ayn Rand, which he also advocated in the 1960s. His reason was that he could not understand how capitalism could be financed through voluntary means, i.e., without coercive taxation. The second revelation is Greenspan's declaration that everyone is motivated by a desire for the admiration of others. I will show how both of these views of Greenspan shed light on the collapse of his legacy which reached its apotheosis in the excoriation he faced on Thursday at the House hearings on the financial crisis. To start, I will sketch some elements of Objectivism.
Objectivism is the only philosophy that provides a proper moral foundation for capitalism. That foundation consists of the morality of rational self-interest, which is based on a scientific examination of the requirements of man's survival. Underlying the approach is a commitment to reason, the method of using logic and the evidence provided by our senses to learn what is true. Reason requires the ability to think in principles. (I recommend Ayn Rand's books, The Virtue of Selfishness and Capitalism: The Unknown Ideal, for further explanation. In particular, I recommend the articles in those books entitled, "The Objectivist Ethics," "Man's Rights," "What is Capitalism?", "The Nature of Government," and for the discussion that follows below, "Government Financing in a Free Society.")
The method of thinking in principles is what Mr. Greenspan apparently failed to properly learn. A principle, once properly understood, applies to all instances of a phenomenon. A key principle in Objectivism is the right to property. Properly understood, this means that any person who trades for or creates wealth, gets to keep it. No one, including government, has the right to violate the rights of a property owner by using force against him to take or harm his property or person.
Because government cannot use force against its citizens, this means that it is immoral for government to forcefully expropriate property through taxation, regulation, or any other means. No society truly respects the rights of its citizens if its government employs coercive taxation.
This argument begs the question that apparently tormented Greenspan of how government can possibly finance its expenses through a voluntary means. Ayn Rand answered this question in her short essay entitled, "Government Financing in a Free Society." Ayn Rand makes the case that a government can be practically financed through voluntary means, but only if government had already been shrunk down to its legitimate functions. This means that government would only be spending money on the legitimate functions required to protect individual rights, namely the police, the courts, and the armed forces.
In the context of today's government, this means abandoning all forms of "income transfers" and welfare spending, including Social Security, food stamps, agricultural and business subsidies, "pork barrel spending," and so on. All of these programs entail violating the rights of some individuals as their property is stolen from them and then transferred to other individuals. This widespread government theft that must stop before a system of voluntary financing could even be contemplated.
The reason is not that hard to understand, and partially involves simple arithmetic. Government spending today consumes between 40% and 50% of gross domestic product. Such a heavy burden can only be financed through the expropriatory process of taxation. No voluntary system could work, nor would anyone be willing to make it work, if nearly half of his income went to fund every chiseler, con-artist, widow, orphan, sick person, and corrupt businessman around him. But if all such spending were eliminated, government expenditures would be an order of magnitude less expensive. They would probably consume just 1%-3% of gross domestic product. However, this state of affairs could only happen after a successful revolution in thinking has taken place over the span of decades, just as the original American Revolution did not happen until many decades after the first ideas underlying it were advocated.
This is the state of affairs that must exist for voluntary financing to work. Ayn Rand made this eminently clear in her article. Greenspan was part of a circle of students of Ayn Rand's in the 1960s. He spoke to her often and could have questioned her if any part of her argument was unclear.
Yet in his autobiography he blithely dismisses the edifice of Objectivism because of this single issue. His dismissal is off-handed. Unspoken but implied in his dismissal are the words, "But of course, how silly is it that anyone can take such an idea seriously." Well, anyone who has studied Ayn Rand's writings, seen or heard her speeches, or were so fortunate as to have known her in person, knows just how seriously Ayn Rand took all of her ideas.
Instead, what Greenspan reveals by his comment is that he did not take her ideas seriously, or perhaps more accurately, he did not take her ideas properly. By properly, I mean that he did not fully understand Objectivism as an integrated system of principles. The methodological essence of Objectivism (or any true body of thought), is that it is a statement of principles. Proper principles are validated by reference to facts and to each other.
Bearing that in mind, the issue of government financing is one of the last principles, i.e., the one furthest removed in time from all other aspects of her philosophy. It is almost an act of science fiction imagining at this point in time to demand that every last detail of a system of voluntary financing of government be worked out now before every other aspect of laissez-faire capitalism has been validated and put into practice.
The point is not that such a system of financing is impractical. It is practical. The philosophic case for it has been made, and the essence of its practicality is clear. For details read Ayn Rand's article, but I will just mention two points. First, with government properly confined to its legitimate roles, it would require very little money to be financed, compared with either the gargantuan level of today's government spending, or compared to the enormous productive potential of a future laissez-faire capitalist economy that would finance it. A future laissez-faire economy would be many times wealthier and more productive than today's hampered mixed-economy, and could easily provide the small amounts required to operate government's legitimate functions.
Second, Ayn Rand proposes at least one effective mechanism that would easily fund such a relatively small burden. That method is a simple fee paid for government enforcement of contracts. It would be calculated as a small percentage of the value of contracts. Enforcement of contracts is a core function provided by government in its role as protector of property rights. Such a voluntary fee, paid by those who want government to enforce their contracts, could fund all of government, including the courts and jails, and even a military.
Case made on this issue of the far future; today it is time to focus on more immediate issues such as the case for capitalism and against government intervention, which includes government manipulation of money (as discussed in Greenspan's article, "Gold and Economic Freedom") and all other interventions.
But Greenspan in his autobiography stated that he was unsatisfied with Ayn Rand's argument for voluntary financing of government, and this is the reason why he abandoned Objectivism.
Taking him at his word, this is a failure to properly understand and think in principles. If Greenspan were convinced of all the prior and more fundamental arguments for reason, and then for rational self-interest, and then how rational self-interest forms the moral base for capitalism, and then how capitalism is the only moral and practical social-economic system for man -- if he were convinced of all that, then how could he abandon it because he had reservations about Ayn Rand's thoughts regarding the voluntary financing of government, an issue that is last in this hierarchy of principles?
If Greenspan properly thought in principles, and properly understood the principles of capitalism, he would never have committed such an incredible thinking error.
Greenspan's failure to think in principles is revealed by the other comment he made in his autobiography. He said that everyone is essentially motivated by a desire for admiration by other people. Again, if he understood The Fountainhead and Atlas Shrugged, he knew that this idea is exactly what Ayn Rand denounces. Ayn Rand makes it clear that a person should be motivated solely by his evaluation of what is in his rational self-interest. Therefore, a person must have integrity for his principles. Therefore, the only admiration a person may value is that from people he himself admires, i.e., people who share his values.
But in his autobiography Greenspan states that one seeks the admiration of others, implying that the admiration of "the public" is a good thing. From which members of the public does he want his admiration, from the congressmen who grilled him at Thursday's hearing, such as Representative Henry Waxman? These are the same men who unbelievably denounced "deregulation" as the cause of the current economic crisis (which was actually caused by regulation), and who have demanded (and enacted) caps on the salaries of executives as part of the solution because "greed" and "selfishness," according to them, are the true causes of this crisis. Are these the people from whom Greenspan seeks admiration? Or is it from magazine editors, such as the Newsweek editors who placed him on the cover of their magazine as a member of "The Committee to Save the World"? Or, is it from Bob Woodward, the author of the glowing biography that calls him Maestro? Are these people, all of whom have always thought capitalism and self-interest are dirty words, the ones he wants admiration from?
Ayn Rand has colorful characters such as Peter Keating and Ellsworth Toohey in The Fountainhead, and James Taggart in Atlas Shrugged, and many others, who demonstrate in negation that a person must be of self-made soul. Just where is the soul of Greenspan?
In the final analysis, I believe that Greenspan never did properly think in principles. As a result, he allowed flawed ideas to gradually creep into his thinking so that the young man who circulated with Ayn Rand and wrote his brilliant economic essays in the book, Capitalism: The Unknown Ideal, never really grasped those ideas, and eventually allowed their opposite to germinate in his mind. The particular name of Greenspan's failure to think in principles is pragmatism.
The result of Greenspan's pragmatism was the sad spectacle of this seemingly broken 82 year old man knuckling under to the ignorant Congressional bullies. These are the same bullies who used their podium to hound many great, and not-so-great, captains of industry. They are the same bullies who hounded yesterday the man who could have been their defender. He is the man who either sold his soul, or never properly built it, and therefore gave it away in the pursuit of admiration from those who read Newsweek and vote for Representative Waxman. Yesterday, he sat crucified by these same people.
If I display contempt for Greenspan, it is only because I am jealous of someone who had such an unparalleled opportunity to learn from the great thinker Ayn Rand, and who squandered it and ultimately did worse. He sat at the foot of the congressional inquisitors and agreed with them that "self-interest" is the cause of the current crisis. In that moment, one can almost envision him holding a tattered newspaper in the rain, with a dirty boot print stamped over the face of someone he once claimed to have admired. However, instead of that being Gail Wynand holding the newspaper image of Howard Roark in the movie version of The Fountainhead, it is someone else kneeling in the rain holding a tattered newspaper. A different face appears on the front page.
One must never sell his soul, but to avoid doing that, one must build it on a foundation of properly understood principles.
Monday, October 20, 2008
Enjoy this compendium of 20 of the world's tallest buildings under construction or planned for completion over the next few years.
My favorites are these:
(1) The Burj Dubai. At half a mile in height, it bears an uncanny resemblance to Frank Lloyd Wright's "The Illinois" proposal for a mile-high skyscraper. I have a print of Frank Lloyd Wright's superb drawing for this never-built skyscraper hanging in my study.
(2) Chicago's The Spire. I heard that work on this 2,000 foot tall residential skyscraper has been temporarily suspended due to the weakened economy. I can accept that setback, but not the regulatory one that nearly knocked this building out. I look forward to the resumption of economic growth eventually propelling the Spire skyward over Chicago.
(3) This is my favorite building, Marina 101. It evokes the rugged, honest skyscrapers of Louis Sullivan in my favorite city of skyscrapers, Chicago. Bracketed by the tall buildings around it and the warmth of the ocean and marina in front of it, it stands as a tall sentinel protecting its surroundings.
The two ugliest buildings are appropriately located in Moscow and Mecca, Saudi Arabia.
In the classic shape of an ancient mausoleum, or a pedestal for human sacrifices, this new Moscow pyramid promises to rise in the capital of the new Soviet state which, in its old and new incarnation, has caused the deaths of so many people.
In the spiritual heart of the land of nihilistic belief will rise this concoction, which could only have been inspired by that great fictional architecture firm of Francon & Keating in the novel The Fountainhead.
Although some of the grandest buildings are rising in the Middle East, the semi-capitalist leaders of the world economy including America, Hong Kong, South Korea (and arguably China) are also building some of the world's tallest new buildings. I cheer them higher!
Saturday, October 04, 2008
A jury in Nevada convicted O.J. Simpson yesterday of armed robbery. In a poetic reminder of O.J.’s horrendous crime long ago, the verdict came in 13 years to the day that O.J. Simpson was acquitted of murdering his ex-wife, Nicole Brown Simpson, and her friend, Ron Goldman. Although overwhelming evidence confirmed O.J. Simpson’s guilt in those murders, including blood in his car and O.J.’s confessional statements, a largely black jury acquitted him.
The acquittal was unjust and shocking; the reaction to the acquittal was equally shocking. In New York City people feared racial riots before the verdict. Fearful, huddled groups of commuters stood in long bus lines in the middle of the afternoon to escape the city. Because most of the buses were scheduled for end-of-work pick-ups, there were not enough of them. People had to wait in long lines standing on the streets for hours fearing for their physical safety at every moment.
After the verdict, groups of blacks were dancing in the streets, while whites were perplexed and dismayed. Suddenly, people who had seen each other just moments before as individuals to be judged by their own, individual characters, saw each other instead as members of a racial collective. On that day, what mattered was not who you were, but the color of your skin.
That day also provided shocking evidence of how much damage the vital principle of individualism has suffered in this country. Groups of people saw justice in racial terms. For many blacks (and many whites), the essential fact in the O.J. Simpson trial was that blacks had been enslaved and persecuted in the past. Therefore, acquitting O.J. was a justifiable act of revenge for all those years of persecution.
Lost in this illogic is that O.J. Simpson is a single man, and Nicole Brown Simpson and Ron Goldman were single individuals. It was O.J. who murdered them and Simpson and Goldman who were his victims. By appealing to the false standard of “group justice,” justice was denied for each of these individuals. “Group justice” meant that O.J. Simpson would not be punished for his crime.
Collectivist thinking is not just the province of racism. Marxist collectivists also deny our individuality and see our identity solely in terms of belonging to the class of “the rich” or “the poor.” Thus, it is okay to “soak” the rich to “give” money to the poor. Isn’t that the essence of the government’s subsidy of “poor” homeowners over the years that led to our current financial crisis?
As we think not just about this financial crisis but about all matters of justice, remember that the essential unit is the individual. On that basis, I applaud yesterday’s verdict in the O.J. case and commend the prosecutor, judge, and jury. Although O.J. has not been punished for the crime he committed nearly 15 years ago, he is going to jail and that is where he belongs. Yesterday, the primacy of individual justice was affirmed. In that sense, this verdict reverses the grave injustice committed 13 years ago.