Free Market Fundamentalist

“Free market fundamentalist.” Funny little phrase isn’t it? I heard it on the radio this morning.  It co-mingles the invisible hand of God and the invisible hand of the free market – as if the universe had been created by the great clock-maker who wound it up and walked way. Adam Smith was actually trying to apply this image of natural forces to his thoughts about commerce.

Almost twenty years ago, I tried participating in my local government. I had just bought a house in a new development and discovered the city planners had done nothing by way of preparing for the population boom the building permits they granted would eventually cause. This was bad, but not enough to draw me out beyond my day-to-day concerns of providing for my very young children. Then I discovered a developer was applying for another permit for new construction, which would further burden the insufficient infrastructure of the area. They must have known residents would resist their application because they complied with the public notice requirements in much the same way a mime would entertain on a darkened stage.

Nonetheless, someone noticed and started talking about it. Within a day, a clear majority of the affected residents had signed a petition to block the permit. Remember, this was pre-internet. People walked the neighborhoods, knocked on doors and talked about the issue. Residents packed the planning commission’s public hearing; chiefly raising objections about the developer’s plan to extract value from the land without contributing to the infrastructure changes they necessitated. The residents were accused of being greedy and classist.  Their objections were dismissed. The planning commission approved the permits as if no discussion had taken place, no petition submitted.

I found the whole process discouraging and confusing. For years I thought perhaps I was actually viewing the problem from a greedy and classist perspective. The developers’ spun the homeowners’ objections as a fear that their high-density ‘affordable’ housing plans would lower existing home values. Now I understand this to be a classic example of projection. Had they not feared a reduction in home values themselves, they would have developed a balanced distribution of luxury and affordable housing from the start. I had taken the children with me to the hearing. Afterwards, I felt relieved they were too young to understand how democracy failed to work in that instance.

I was at the time a strong believer in free-market capitalism. What I didn’t understand at the time what that free-market capitalism is a myth. Individuals do not make informed economic decisions based on self-interest. First, individuals are rarely aware of all of the details surrounding their economic decisions. Second, individuals are sometimes coerced into making economic decisions against their self-interest. Finally, because we are human, we sometimes make economic decisions to benefit a third-party rather than ourselves.

I had also never considered capitalism a threat to democracy. For some, this threat is so obvious it does not bear discussing. For others, the discussion itself is threatening.  Capitalism is sacred and patriotic and I might just be a communist if I suggest otherwise.

Capitalism is a huge threat to democracy. For-profit entities must try to remove all barriers to profit maximization. Democratic governments, by nature, to protect constituents, regulate commerce and those regulations create barriers to profit maximization. The tension is built in. Unfortunately, economic power trumps populist concerns; most especially because economic power can be used to discredit or mask populist concerns.

The inertia of economic power is probably the reason we still talk about “invisible market forces” causing market corrections and assuring free trade. If you had considerable economic power that depended on the majority of people believing you deserved that power wouldn’t you invest in educating the population about the system (the science of economics) that affirms your economic power as justly conferred to you?

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Harassing the Homeless: A hidden facet of corporate wealthfare

OccupyMN.org reports “County Commissioners and Sheriff Stanek have threatened to close down the occupation of the People’s Plaza in Minneapolis.” And reference an article in downtownjournal.com describing the situation.

Margaret Hastings of Minneapolis, a self-described advocate for the homeless, said she supported the resolution and called it reasonable. She said the county has been practicing a double standard by allowing the protesters to sleep on the plaza.

“Homeless persons are not allowed to sleep out on the plaza,” she said. “The very inequality they talk about, they themselves are practicing.”

http://www.downtownjournal.com/index.php?&story=17633&page=65&category=92

One can only hope this comment was taken out of context. People supporting OccupyMN are not preventing homeless people from sleeping out in the plaza, the county is.

Homelessness is one of the issues that needs to be addressed in our country. It is shameful that anyone be abandoned to the elements in the richest country in the world.

It is not only shameful, it is absurd. Solving the problem is far less expensive for society than harassing the homeless on a daily basis then jailing or hospitalizing them during their times of extreme need.

In his collection of essays What the Dog Saw, Malcom Gladwell includes a discussion of ” ’Million-Dollar Murray’ [which] explores the problem of homelessness — how to solve it, and whether solving it for the most extreme and costly cases makes sense as policy.”

http://www.gladwell.com/dog/index.html

The problem is that solving homelessness offends our sense of fairness. Why must I work so hard when they get everything for free? We worry that everyone will stop working and then there won’t be any money to provide for the needy or anything else.

The truth of the matter is that we already generate more wealth than we as individuals need. We generate more wealth than we as individuals ever see. It’s not that our taxes are artifically high to support welfare programs, our incomes are artificially low because we are paid at capitalist rates, which support wealthfare. Unless you are one of the rare few employee-owners practicing true profit sharing, you probably have no idea how much wealth you generate.

The deeper problem is that solving homelessness takes away the element of fear that keeps many of us working so hard for so little in return.

Apologize, Make Amends, Move On

It’s not surprising that Herman Cain has been accused of sexual harassment. It would be surprising if he never harassed a women. It would be so gay. Men and women perceive sex differently. Men and women approach sex differently. I think men typically make the first move because they would be waiting a long time otherwise. Unwanted advances are inevitable. Inevitable, but not harassment. It’s not harassment until he refuses to accept that she isn’t interested and tries to leverage a power advantage to get what he wants.
I can’t imagine there is a man on the planet who has never made an unwanted advance or been perceived to have made an unwanted advance. I can’t imagine there is a man on the planet who hasn’t tried to leverage his maleness to some advantage. These things aren’t harassment until the threat of sexual coercion or economic exclusion emerge.
I have heard that men who view themselves as successful also tend to over-estimate their sexual attractiveness. Successful men make more unwanted advances because they can’t imagine their advances would be unwanted. Perhaps they are more often accused of harassment because the power differential makes the threat of coercion or exclusion stronger than ever they intended.
None of this matters. Human beings make mistakes. What matters is how we respond to them. A man who appears to request sex and accepts a woman’s refusal — even if he didn’t intend to request sex — this man does not get charged with harassment; this man does not settle out of court because it’s cheaper; this man doesn’t need to discredit that woman because nothing happened. People of integrity apologize when they offend and they seek outside themselves to ensure they continue to act with integrity.
Herman Cain probably did cross a line at some time in his past with one or more women. He is a heterosexual male. What matters is how he and other men are responding to this ‘news’. Personally, I don’t think any of the Republican candidates are credible and I don’t think Cain is a frontrunner. Allegations of sexual harassment do make great smoke screens though. The disturbing response from some extreme voices — that women accuse men of sexual harassment because they can’t succeed in the normal way — aren’t even germane.
We know Cain is not a man of integrity because he can’t handle a simple allegation of misconduct. Great, but what do we know about any of the other candidates? Will they continue to funnel money to the wealthy? Will they continue to use the military and paramilitary forces to protect the financial interests of large corporations? Will they continue the war on poverty-stricken families? Will they continue to belittle GLBT people in order to intimidate heterosexual men? Do any of them actually know how to govern?

Where’s the Win?

In a discussion about mortgages and foreclosure, someone commented that a system has to allow for failure if it is to have any chance of success. This is not unlike the theological argument that forced confession does not engender faith. Even more so, I think this is analogous to the idea that winning a competition is meaningless unless there was a real chance of losing the competition. It’s hard to boast if everyone wins.
I think the commentator was pointing to the genius of free market capitalism. All things being equal, the most industrious and effective people win. But all things are not equal and the ideology of capitalism is no more applied in the real world than the ideology of communism. They are interesting economic theories, but have little to do with the world we live in.
When groups organized around the principle of capital creation grow powerful enough, they change the rules to reduce the possibility of losing. An empty victory is still a victory because the capital continues to grow.
I think the commentator was missing the problem entirely.
Mortgage lenders stand to loose a tremendous about of money through foreclosure. Our country stands to loose a tremendous asset of patriotism through the loss of a sense of rootedness in the land. Corporations loose a level of dedication in their labor force rooted in the sense of indentured servitude a thirty year mortgage conveys.
What does an individual or family stand to loose through foreclosure? Is their sense of financial security better or worse without paying two and a half times the purchase price of a home that is worth only two thirds of that price? Will they have more or less to save for retirement and health care costs? Will they have more or less to save for their children’s education? Is it better or worse to be able to move closer to one’s workplace?
I think a system has to allow for success if it is to continue.

Why aren’t you Occupy-ing?

I’ve been talking to people about the various Occupy actions, with a particular focus on OccupyMN because that’s where I live.

I started with my parents. A playful tease. Yes, I am old enough to know better. Yes, I am old enough to feel embarrassed about having done this. My parents were born just as the Great Depression got underway — now you see why I feel a little embarrassed.

When I heard they were going to D.C., I asked if they’d be joining the protest.

Their first response was “what protest” — early days — Occupy Wall Street was only in it’s third week at this point. Even so, I was surprised because my parents are politically savvy news hounds. If the main-stream media have covered a topic, they know about it.

Their next response was, “Don’t be silly. We are too old for such things.” Never mind that my parents aren’t the protesting kind. They are more the pro-democracy, keen on honoring human rights, silent sentinels of the cold war kind of people.

Together since their youth, they have dedicated their entire adult lives to defending freedom. For thirty-two years, they served the U.S. Navy. Now they support a national heritage site, provide scholarships for the children of sailors, and volunteer at the polls.

It’s not their way to protest the unilateral reduction of their retirement contract. It’s not their way to protest the denial of basic civil rights to some of their children and grandchildren. They might talk about it. They will definitely vote about it. But you won’t find them on the streets carrying signs.

What about you? Are you just not the kind of person to take to the streets? Do you disagree with the message? Are you confused by the lack of message? Are you waiting for them to ‘land’?

If you haven’t connected with the Occupy actions, why not? Some of the responses I’ve heard are included below. Please add your thoughts too.

Mortgages are not Social Contracts

Mortgages are annuities, financial instruments, not social contracts. Familial relationships, households, are social contracts. Our closest bonds form the fabric of our social structure. Changes in one household ripple through other households. Unjust acts in one household damage other households. Generally, we pressure each other to behave honorably. Sometimes we ask one person to maintain their household structure even though they are being treated unjustly within it. Here I am referring to abusive relationships and the social censure the abused faces when trying to dissolve the relationship.

Mortgages are not social contracts. When one household borrows money to purchase a home, they are not promising to help their neighbors maintain the value of their own investments. If a store offered to charge a minimum price for an item so that they and other stores could make a profit, we’d call it price fixing. We’d say it was illegal — unless they were selling gas, but that’s another question for another time.

Mortgages are financial instruments, annuities, like savings accounts. A person might offer to let a bank hold, and use, their money in return for a small periodic fee. Typically the bank reserves the right to change that fee at anytime. If the fee, the interest rate, is too small, the person might move that money to another bank. Too bad for that person the Federal Reserve sets interest rates, but that’s another question for another time.

A bank might offer to let a person use their money in return for a small periodic fee. They don’t want the person to change the fee at will, so they ask the person to agree to pay a specified interest rate, or rates, for as long as they are using that money. Banks also know that they can’t just move their money from one person to another if the first person isn’t paying enough. The money typically isn’t there. So they secure their investment with physical property of equal or greater value. Essentially banks are buying a financial interest in a physical property.

Generally, if a store tried to substitute one item for another, say glass for diamond, we’d call it fraud. If a broker tried to sell financial interest in a company that didn’t exist, we’d call it fraud. If real estate is said to have a greater value than it does, we call it ____?

Banks have purchased financial interest in physical property of lesser value than their investment. Sounds like a bad business decision. One way to remedy this is to drop the bad investment and move to more profitable investments. That’s business. Another is to convince people the physical property is worth more than the investment. That’s fraud.

One way to convince people that the physical property is worth more than the investment is to attach emotional equity – a social contract – to it. Still fraud.