Bizarre Anecdotes at the Fed

At its May meeting, the Fed prepared markets for a rate hike that it never intended to result in an inevitable move when it announced the bias toward tightening. But the FOMC did end up raising the FFR in June, despite the fact that April’s jump in the core CPI appeared to be a one-off event rather than an indication that inflation had begun to accelerate. So why did the Fed act?

As the transcripts reveal, the Fed’s new instrument failed to affect markets in the way the Fed anticipated:

I was startled by the extraordinary market talk after we announced an asymmetrical directive following the May meeting. . . We might as well have raised rates at that point as far as I am concerned. . . . Indeed, what we are looking at is a long-term interest rate that is moving up because market participants think the Fed is going to move (Greenspan, Transcript, June, p. 88).

Thus, because markets were anticipating a rate hike, some saw the increase as preordained, arguing that raising the federal funds rate was “largely a foregone conclusion” (Boehne, Transcript, June, p. 44). Others, such as President McTeeter and Vice Chairman McDonough believed that conditions did not merit an increase and that the Fed should show restraint until such time as inflation appeared to resurface:

[T]he public and markets everywhere are waiting for us to pounce on growth and job creation and stifle them. Since I do not believe we should do that, I believe that our challenge is to clarify out strategy – first to ourselves, then to the public and the markets. . . . we should not be in a tactical position of being constantly poised to attack an enemy that does not appear visible to me. We need to find a way to tactical symmetry – to a position where we, the public, and the markets think we are watchfully waiting but not looking for windmills to knock down (McDonough, Transcript, June, p. 48).

Thus, while some felt compelled to validate the market’s expectations in order to maintain credibility, others believed that a rate hike was unwarranted in the absence of troublesome news on the inflation front. After much deliberation, the FOMC felt compelled to move, voting to raise the FFR 25 basis points at the close of its June meeting.

To justify the June increase, members argued that despite a drop in the core CPI, there were reasons to believe that inflationary pressures were mounting. Some truly strange anecdotes were offered as “evidence” of these pressures. For example, President Broaddus relayed the following story:

One of our economists [from the First District] has a close friend who has a house in the Boston area. The friend got an estimate last year for an addition to his house but didn’t have the work done. He got an estimate again just recently, a year later, and it’s up about 30 percent. That’s really extraordinary!” (Transcript, June 1999, p. 40).

And President Minehan shared the following:

The job market for summer teenage employment is strikingly good if my 17-year old and his friends are any indication of that market” (Transcript, June 1999, p. 37).

No one offered any tangible evidence of pipeline inflation. Yet the majority – many of whom felt ‘boxed in’ by the May directive – clearly wanted to raise the FFR. Ultimately, they justified their move for the record by offering anecdotal evidence and impassioned commentary about the importance of credibility and the need to fulfill market expectations.

References:

1. Bell-Kelton, Stephanie. “Behind Closed Doors. The Political Economy of Central Banking in the United States.” International Journal of Political Economy 35.1 (2006): 5-23.

 

Why didn’t Canada have a Banking Crisis?

The structure and performance of financial systems is path dependent. The relative stability of the Canadian banks in the recent crisis compared to the United States, where the recent crisis originated in the shadow banking system and spread to the universal banks, in our view reflected the original institutional foundations laid in place in the early 19th century in the two countries. The Canadian concentrated banking system that had evolved by the end of the twentieth century had absorbed the key sources of systemic risk—the mortgage market and investment banking—and was tightly regulated by one overarching regulator. In contrast the relatively weak and fragmented U.S. banking system that had evolved since the early nineteenth century, led to the rise of securities markets, investment banks and money market mutual funds combined with multiple competing regulatory authorities. The consequence was that the systemic risk that led to the crisis of 2007-2008 was not contained.

The historical origins of the U.S. system go back to the early national period when the states obtained the right to charter and regulate the banks. Supporters of Hamilton’s vision of an active federal government were able to charter the First and Second Banks of the United States, but opposition to federal control from a variety of sources including opposition from advocates of a narrow construction of the constitution, especially in the South, and opposition from the state chartered banks themselves, prevented the development of nationwide branching systems. Each state separately, jealous of its power to charter banks, prohibited branches of banks chartered in other states; an exclusion that was endorsed by the U.S. Supreme Court. The result was a fragile, crisis prone, banking system, but one that for all its weaknesses was deeply entrenched politically. Inadequate financing from a weak and fragmented banking system in turn led to heavy reliance on security markets for industrial finance. This may have contributed to rapid economic growth, but it also contributed to financial instability when stock market crashes and the failure of investment banks triggered financial panics.

Attempts were made to reform the system, but the fundamental structural weaknesses persisted. The national banking system was set up during the Civil War, but the state banks were allowed to continue, and to protect them the national banks were prevented from branching across state lines, resulting in America’s dual banking system. The Crisis of 1907 produced the Federal Reserve System, and the Crisis of 1929-33 produced Federal Deposit Insurance and an end to the gold standard. These were important reforms that contributed to stability, as did the rapid increase in federal debt in the portfolios of financial intermediaries during World War II. But despite these reforms the fundamental structural weaknesses of the U.S. financial system, a fragmented banking system regulated by a patchwork of regulatory agencies, survived intact. Although, some stability was achieved in the 1950s and 1960s, this system was undermined by the inflation of the late 1960s and 1970s. In the 1980s a weakened savings and loan sector collapsed with massive losses, but the crisis did not engulf the financial system as a whole. In this respect the Savings and Loan Crisis was more reminiscent of the troubles that affected, but were largely confined to, the savings bank sector in 1877-1878. Various reforms were put in place to deal with the savings and loan crisis, but again the fragmented banking and regulatory system remained in place. In short, even costly financial crises failed to generate sufficient political pressure for reform to overcome entrenched special interests.

The financial system recovered from the Savings and Loan Crisis and from a number of scares that might in different circumstances have triggered a panic: the Latin American Debt Crisis in 1982, the failure of Continental Illinois in 1984, the failure of Drexel Burnham (the junk bond investment bank) in 1992, and the failure of Long-term Capital Management 1998, among others. But the rapid growth of the “shadow banking system” in the late 1990s and early 2000s produced an environment in which major failures, although addressed by the Federal Reserve, ignited a panic. Opinions on the most important causes for the growth of the shadow banking system tend to diverge along political lines. The Report of the U.S. Financial Inquiry Commission (2011), reflecting the majority of Democrats on the Commission, attributed the growth of the “shadow banking system” to an ideological turn toward less regulated markets and political clout of regulated industries achieved through lobbying and campaign contributions. The dissenting Republicans put more weight on the Federal Reserve’s accommodative monetary policy and government housing policies.

What is clear is that the crisis of 2007-8 was…a return to the full-scale financial crises of the nineteenth century. Once again unregulated or lightly regulated sectors of the financial system, now dubbed the shadow banking system, proved to be the source of trouble. The details in terms of financial institutions and instruments were unique in 2008, but below the surface there were strong parallels with the nineteenth-century crises. True, prompt actions by the Federal Reserve and other agencies mitigated the damage. When a run on the MMMFs threatened, deposit insurance was extended, ending what might have been an extremely destructive run. Nevertheless, the macro-economic consequences of the crisis of 2008 rival those of the nineteenth-century crises. The Canadian story is very different.

The Canadian banking system began with note issuing branching banks which were more robust than their neighbours to the south. The system became stronger when double-liability was required to get a bank charter and as entry restrictions produced an oligopoly. By 1920 five large banks dominated the system and while new banks could enter the market they faced a formidable challenge in competing with the incumbents. Later in the twentieth century the Canadian chartered banks were able to absorb both the mortgage banks and investment dealers and become true universal banks. These institutions were regulated by an overarching regulator, OFSI, which basically contained the development of an unregulated shadow banking system and restricted the proliferation of securitization and off balance sheet entities. In terms of stability, to put it somewhat differently, the Canadian system benefitted from the “Grand Bargain” in which the Canadian banking oligopoly was protected from competition, especially from American banks, in return for tough regulation.

An attempt was made beginning in the 1980s to encourage the U.S. system to move in the direction of the Canadian system, but this did not happen. This reflected the legacies of the nineteenth century: a dual banking system, a strong shadow banking system, heavy reliance on financial markets, and multiple competing regulators. Even more basically it reflected longseated opposition to allowing the financial system to be dominated by a tightly regulated oligopoly. This opposition to the establishment of a British style oligopoly (which is embedded in the Canadian grand bargain) goes back to the beginnings of the Republic and once that option was rejected political economy considerations prevented it from ever being adopted.

References:

1. Bordo, Michael D., Angela Redish, and Hugh Rockoff. “Why Didn’t Canada Have a Banking Crisis in 2008?” The Economic History Review 68.1 (2014): 218-43. Web.

One law for itself

While Russian suspicions of the West are often unfounded as well as cynically manipulated by the government, they are not without foundation. Back in 1992, President George H. W. Bush declared in his State of the Union address that “by the grace of God America won the Cold War.” But Jack Matlock, the American ambassador during the breakup of the Soviet Union, argues that the end of the Cold War was no victory;  it was a delicately negotiated agreement that was supposed to benefit all sides and guarantee future cooperations. According to Matlock, the United States has all too often treated the new Russia as a loser, fomenting feelings of humiliation and revenge. Though no Putin apologist, he dares to argue that a lock of understanding of Russia and Russians could necessarily lead to a frigid cold war and a redemption of a nuclear arms race.

There was never any concrete promise that the West would not expand NATO, but there was a pledge not to take advantage of Russia’s weakness. Since then, Russians believe the United States, in particular, has done just that. The litany of Russian concerns include NATO’s expansion into Eastern Europe when there was not longer a Cold War. Then there was NATO’s bombing of Serbia, a fellow Slav and Orthodox country, without UN Security Council approval; the approval of Kosovo’s independence from Serbia despite U.S. support for maintaining territorial sovereignty in other instances; and the U.S. withdrawal from the Anti-Ballistic Missile Treaty and threats to station missile defenses in former Warsaw Pact countries. Russians also cite the invasion of Iraq without UN security Council approval; America’s participation in what they see as spurious democratic revolutions in Ukraine, Georgia, and Kyrgyzstan; and talk of expanding NATO to Georgia and Ukraine, both of which border Russia.

Plenty of people in the West, and some in Russia dispute all of this and say the real problem is that Moscow is becoming increasingly totalitarian and returning to its former dreams of empire. Given Russia’s economic challenges and failure to modernize, they argue, Putin is seeking out enemies abroad to cover up problems at home.

In 2014, Putin found the enemies he was looking for. After the U.S. – backed Ukrainian opposition overthrew the country’s pro-Russian president, tensions rose. The Ukrainian parliament passed a law that would rescind the Russian language’s official status, and while the act was vetoed, Putin was already geared up to destabilize the new government.

First, he annexed the Crimea, a historically Russian peninsula jutting out into the Black Sea that had been transferred to Ukraine in 1954. When Russia and Ukraine were part of one country, that move was largely symbolic, but once they parted ways, the status of Crimea rankled. The strategically critical Crimea has an overwhelming Russian population. Moscow was forced to rent facilities for its Black Sea Fleet, with the constant threat the lease would be revoked. This became a simmering flash point, and when Russia perceived that Kiev had become less sympathetic to it interests, with U.S. support, it acted quickly. After taking Crimea, Putin began sending weapons and troops to support Russian speakers in Ukraine’s industrial east who were looking for greater autonomy or secession…

…Those who came to Putin’s support, especially on the takeover of Crimea, composed a surprising range of people, including some who once called themselves “the opposition.” A member of the local elite I’ll call V is much more pragmatic than ferocious Russian nationalists like Irina Korsunova. He says yes to Crimea. Though he deems Putin’s interference in eastern Ukraine a disaster, he blames both Putin and President Obama  for setting the fire. In his view, the United States acted stupidly when it interfered in Ukraine without a nuanced approach and without any attention to how loaded the situation was. As he sees it, the United States supported a coup against an elected president. The president in question might have been corrupt and despicable, but such an action only strengthens the perception that the United States applies one law to itself and another to everyone else…Like the majority of Russians, he argues that impasse came about at least in part because the United States has perpetuated a security system in Europe that is based on the long-ago outcome of World War II, unnecessarily isolates Russia, and no longer fits today’s world. Well versed in current events in the United States, where his children study, he is still struck by American ignorance and arrogance, bristling at Washington’s readiness to condemn Russia for the same sins he believes America is known to commit.

References:

1. Garrels, Anne. Putin Country: A Journey into the Real Russia. New York: Farrar, Straus and Giroux, 2016. Print. 34-36.

W.E.B. DuBois on Booker T. Washington

Mr. Washington represents in Negro thought the old attitude of adjustment and submission; but adjustment at such a peculiar time as to make his programme unique. This is an age of unusual economic development, and Mr. Washington’s programme naturally takes an economic cast, becoming a gospel of Work and Money to such an extent as apparently almost completely to overshadow the higher aims of life. Moreover, this is an age when the more advanced races are coming in closer contact with the less developed races, and the race-feeling is therefore intensified; and Mr. Washington’s programme practically accepts the alleged inferiority of the Negro races. Again, in our own land, the reaction from the sentiment of war time has given impetus to race-prejudice against Negroes, and Mr. Washington withdraws many of the high demands of Negroes as men and American citizens. In other periods of intensified prejudice all the Negro’s tendency to self-assertion has been called forth; at this period a policy of submission is advocated. In the history of nearly all other races and peoples the doctrine preached at such crises has been that manly self-respect is worth more than lands and houses, and that a people who voluntarily surrender such respect, or cease striving for it, are not worth civilizing.

In answer to this, it has been claimed that the Negro can survive only through submission. Mr. Washington distinctly asks that black people give up, at least for the present, three things,–

First, political power,

Second, insistence on civil rights,

Third, higher education of Negro youth,– and concentrate all their energies on industrial education, and accumulation of wealth, and the conciliation of the South. This policy has been courageously and insistently advocated for over fifteen years, and has been triumphant for perhaps ten years. As a result of this tender of the palm-branch, what has been the return? In these years there have occurred:

1. The disfranchisement of the Negro.

2. The legal creation of a distinct status of civil inferiority for the Negro.

3. The steady withdrawal of aid from institutions for the higher training of the Negro.

These movements are not, to be sure, direct results of Mr. Washington’s teachings; but his propaganda has, without a shadow of doubt, helped their speedier accomplishment. The question then comes: Is it possible, and probable, that nine millions of men can make effective progress in economic lines if they are deprived of political rights, made a servile caste, and allowed only the most meagre chance for developing their exceptional men? If history and reason give any distinct answer to these questions, it is an emphatic NO. And Mr. Washington thus faces the triple paradox of his career:

1. He is striving nobly to make Negro artisans business men and property-owners; but it is utterly impossible, under modern competitive methods, for workingmen and property- owners to defend their rights and exist without the right of suffrage.

2. He insists on thrift and self-respect, but at the same time counsels a silent submission to civic inferiority such as is bound to sap the manhood of any race in the long run.

3. He advocates common-school and industrial training, and depreciates institutions of higher learning; but neither the Negro common-schools, nor Tuskegee itself, could remain open a day were it not for teachers trained in Negro colleges, or trained by their graduates…

…It would be unjust to Mr. Washington not to acknowledge that in several instances he has opposed movements in the South which were unjust to the Negro; he sent memorials to the Louisiana and Alabama constitutional conventions, he has spoken against lynching, and in other ways has openly or silently set his influence against sinister schemes and unfortunate happenings. Notwithstanding this, it is equally true to assert that on the whole the distinct impression left by Mr. Washington’s propaganda is, first, that the South is justified in its present attitude toward the Negro because of the Negro’s degradation; secondly, that the prime cause of the Negro’s failure to rise more quickly is his wrong education in the past; and, thirdly, that his future rise depends primarily on his own efforts. Each of these propositions is a dangerous half-truth. The supplementary truths must never be lost sight of: first, slavery and race-prejudice are potent if not sufficient causes of the Negro’s position; second, industrial and common- school training were necessarily slow in planting because they had to await the black teachers trained by higher institutions,–it being extremely doubtful if any essentially different develop- ment was possible, and certainly a Tuskegee was unthinkable before 1880; and, third, while it is a great truth to say that the Negro must strive and strive mightily to help himself, it is equally true that unless his striving be not simply seconded, but rather aroused and encouraged, by the initiative of the richer and wiser environing group, he cannot hope for great success.

In his failure to realize and impress this last point, Mr. Washington is especially to be criticised. His doctrine has tended to make the whites, North and South, shift the burden of the Negro problem to the Negro’s shoulders and stand aside as critical and rather pessimistic spectators; when in fact the burden belongs to the nation, and the hands of none of us are clean if we bend not our energies to righting these great wrongs.

References:

1. Of Mr. Booker T. Washington and Others

Edward Gibbon on Christianity, monasticism, and the collapse of the Roman Empire

Gibbon was not interested in religious doctrine, though he amused himself with its speculative refinements. But religion and Churches, he would admit, are a social and psychological necessity, and the particular forms which they take are important, for they can influence the progress or decline of civilization. Therefor the historical question he asked was, did the ideas of Christianity and the organization of the Church, as adapted to the Roman Empire, generate or stifle public spirit, freedom, and the advancement of knowledge and a plural society.

His answer was that they stifled it. If Christianity had first been established in independent city-states like those of Greece, perhaps its would have assumed a different and more useful form – as it eventually did in the communes of Italy and, more successfully, in the Protestant cities of Switzerland. But the very fact of its establishment by imperial power, as an ideological support to that power, made it subservient to a centralized, monopolist system whose organization and absolutism, in its own formative period, it imitated and sustained.

Of course there were exceptions. Occasionally, the organized Church of Rome would find itself the champion of freedom, and its clergy would show, or elicit, signal examples of public spirit. Thus Gibbon would pay a notable tribute to Pope Gregory the Great, whose antique Roman patriotism recreated the virtue of ancient Rome and gave to his city, deserted by its Byzantine overlords, a new lease of life. ‘Like Thebes or Babylon or Carthage,’ he writes, ‘the name of Rome might have been erased from the earth, if the city had not been animated by a vital principle. which again restored her to honour and dominion’; and later he praises the popes of the eight century, thanks to whom he can say that, although the temporal power of the popes ‘is now confirmed by the reverence of a thousand years,’ ‘their noblest title is the free choice of a people whom they had redeemed from slavery.’ However, in general, Gibbon believed that the Church was opposed to progress. By its very structure – by its adaptation to the centralized hierarchical system of the Constantinian Empire – it undermined the social basis of public virtue.

In particular, as a cause and symptom of corruption, Gibbon singled out monasticism. Some of his most brilliant chapters, and his most sustained irony, are reserved for the spread of this Egyptian plague, as he called it, over the Roman empire: for ‘the swarms of monks who arose from the Nile’ and ‘overspread and darkened the face of the Christian world.’ Monasticism, he wrote roundly, had, in a later age, ‘counter-balanced all the temporal advantages of Christianity.’ For monasticism, he believed, was parasitic not only on society but also on the Church, whose ‘temporal advantages’ – i.e., whose constructive social function – he would admit. It withdrew the resources of society, both human and economic, from that free and useful circulation on which progress depended. It condemned men to idleness, immobilized wealth, kept land in mortmain. And it positively undermined the very idea of civic virtue.

References:

1. Gibbon, Edward, and Hugh Trevor-Roper. The Decline and Fall of the Roman Empire. New York: Alfred A. Knopf, 1993. Print. xci-xcii.

 

Edward Gibbon on public virtue and the collapse of the Roman Empire

Indeed, from the beginning, his praise of the Antoine age is qualified: for he sees, even in that age, in the very structure of the imperial system, the seeds of its decay. For the centralized Roman empire, by its very definition, excluded a certain vitalizing principle necessary to the health of society. That principle was public spirit, what Machiavelli had called virtu.

‘That public virtue,’ writes Gibbon, ‘which among the ancients was denominated patriotism, is derived from a strong sense of our own interest in the preservation and prosperity of the free government of which we are members. Such a sentiment, which had rendered the legions of the Republic almost invincible, could make but a very feeble impression on the mercenary servants of a despotic prince.’ This animating principle of ‘public virtue,’ expressed in active participation in public life, is to Gibbon the great contribution of classical Antiquity, and its extinction, in imperial times, its transfer (as Machiavelli would say) to the ‘barbarian’ successor-states in Western Europe, is a major theme of his work. Later, dealing with Byzantine history, he makes the same point more explicit. ‘In the last moments of her decay,’ he writes, ‘Constantinople was doubtless more opulent and populous than Athens at her most flourishing era’ when a far lesser wealth was divided among far fewer citizens. But each Athenian citizen was a freeman who dared to assert the liberty of his thoughts, words, and actions – whose person and property were guarded by equal law; and who exercised his independent vote in the government of the Republic. Against this, ‘the subjects of the Byzantine empire, who dishonor the names both of Greeks and Romans, present a dead uniformity of abject vices which are neither softened by the weakness of humanity nor animated by the vigour of memorable crimes.’ It was on this account this account that Gibbon quickened his pace when dealing with Byzantine history. In Byzantium he could find no evidence of theMachiavelli’s virtu, and so he transferred his interest to the barbarians who had in their societies those seeds of growth.

How is this virtue born, how nourished, how stifled and killed? Essentially, it depends upon the discovery, cultivation, and systematic teaching of the natural dignity and equal rights of man. But since man, as Montesquieu had argued, is conditioned by his environment, and the ‘spirit’ of his institutions, there is always a danger that such ideas, which are not native everywhere, and are often inconvenient to rules, will be suppressed and extinguished by orthodoxy and interested power. For even if power is exercised by liberal rules, there is always the danger of illiberal successors. A Marcus Aurelius may be followed by Commodus. For this reason, Gibbon, though he may praise the virtuous emperors, cannot praise the system; and he adds that, even under the ‘Antonine’ emperors, excellent rulers though they were, the inherent vices of the system were positively aggravated by ‘two peculiar circumstances’ which exposed the subjects of the Roman empire to a condition ‘more completely wretched than the victims of tyranny in any other age or country.’ These two circumstances were the memory of past freedom and the universality of imperial power. ‘The division of Europe into a number of independent states…is productive of the most beneficial consequences to the liberty of mankind.’ The heretic, the nonconformist, could always find a base, and so ideas and experiments unwelcome, could always find a base, and so ideas and experiments unwelcome to present power could not be completely stifled. But the monopoly of the Roman emperors was absolute. They ruled effectively over the entire civilized world. ‘Wherever you are,’ said Cicero to the exiled Marcellus, ‘remember that you are equally within the power of the conqueror.’

Virtue therefore depends for assured survival, not only on a continuing tradition of freedom, but also on a plural society, on the division of power between separate authorities Ideally, it requires independent, competing states, preferably with different political systems; independent authorities within particular states; economic and intellectual competition. In the Roman empire these conditions did not obtain. There the emperor exercised a complete monopoly of power, and this monopoly, by stifling freedom, inevitably stifled all forms of progress. At one moment, Gibbons tells us, in the decline of the Western Empire, the emperor Honorius sought to devolve power in Gaul to provincial assemblies. ‘If such an institution, which gave the people an interest in their own government, had been universally established by Trajan or the Antonines, the seeds of public wisdom and virtue might have been cherished and propagated in the empire of Rome,’ which ‘under the mild and generous influence of liberty’ … might then ‘have remained invincible and immortal.’ But the Antonine had granted no such devolution of powers, and now it was too late. The over-centralization of the Empire had already stifled the spirit of freedom which alone could have revived it, and ‘the stupendous fabric yielded to the pressure of its own weight.’

For virtue, to Gibbon, is not as the Stoics, merely a private possession, enabling a man to bear with equanimity all the blows of fortune. It is essentially on active principle. It depends on freedom, demands freedom, and creates freedom. It also, since it nourishes science, forwards material progress. Conversely, monopoly of any kind is its enemy: monopoly of power, monopoly of wealth, monopoly of knowledge or of alleged access to truth. The centralized power of the imperial bureaucracy was one such impediment to virtue: by its mere structure ‘the empire of the Caesars undoubtedly checked the activity and progress of the human mind.’ The vast hereditary estates of the Roman landlords were another. So was the immobility of labour -the hereditary obligation of the Roman middle class as much as the hereditary serfdom of the early medieval peasant. Gibbon hated all forms of immobilization: mortmain of land, thesaurization of wealth, tied labour. So he would rejoice when the Crusades incidentally broke up the baronial wealth and power and would record without pain the sacrilegious dispersal of clerical wealth, ‘most wickedly converted to the service of mankind.’…

…Public spirit, public service – this to Gibbon, was the human motive force of progress; and it was nourished, in his view, by the kind of society which, in turn, it created and preserved: a plural, mobile society. It had created the city-states of Greece, the republic of Rome; and from those city-states and that Republic – not from the Roman Empire – the ideas had been born which were the intellectual means of its preservation. The centralization, the immobility, the monopoly of the Roman Empire had gradually destroyed that pluralism, stifled those ideas, and so progress had been retarded, public virtue had declined, and in the end an inert, top-heavy political structure had fallen to external blows which a healthier organism could have survived. For it was not the barbarians – ‘those innocent barbarians’ – who had destroyed the Western Empire. ‘If all the barbarians conquerors had been annihilated in the same hour, their total destruction would not have restored the empire of the West.’ It had been rotted from within.

References:

1. Gibbon, Edward, and Hugh Trevor-Roper. The Decline and Fall of the Roman Empire. New York: Alfred A. Knopf, 1993. Print. lxxxvii-xci.

 

 

Our national character is still in the making

From the point of view of a detached cosmopolitan spectator, our country may seem to have little to be proud of. The United States of America finally freed its slaves, but it then in- , vented segregation laws which were as ingeniously cruel as Hitler’s Nuremberg laws. It started to create a welfare state, but quickly fell behind the rest of the industrial democracies in providing equal medical care, education, and opportunity to the children of the rich and of the poor. Its workers built a strong labor movement, but then allowed this movement to be crushed by restrictive legislation and by the gangsters whom they weakly allowed to take over many locals. Its government perverted a justified crusade against an evil empire into a conspiracy with right-wing oligarchs to suppress social democratic movements.

I have been arguing that the appropriate response to such observations is that we Americans should not take the point of view of a detached cosmopolitan spectator. We should face up to unpleasant truths about ourselves, but we should not take those truths to be the last word about our chances for happiness, or about our national character. Our national character is still in the making. Few in 1897 would have predicted the Progressive Movement, the forty-hour week, Women’s Suffrage, the New Deal, the Civil Rights Movement, the successes of second-wave feminism, or the Gay Rights Movement. Nobody in 1997 can know that America will not, in the course of the next century, witness even greater moral progress

References:

1. Rorty, Richard. Achieving Our Country: Leftist Thought in Twentieth-century America. Cambridge, MA: Harvard UP, 1998. Print. 105-106.

Loyal to a dream country

The distinction between the old strategy and the new is important. The choice between them makes the difference between what Todd Gitlin calls “common dreams” and what Arthur Schlesinger calls “disuniting America.” To take pride in being black or gay is an entirely reasonable response to the sadistic humiliation to which one has been subjected. But insofar as this pride prevents someone from also taking pride in being an American citizen, from thinking of his or her country as capable of reform, or from being able to join with straights or whites in reformist initiatives, it is a political disaster.

The rhetorical question of the “platoon” movies-“What do our differences matter, compared with our commonality as fellow Americans?”—-did not commend pride in difference, but neither did it condemn it. The intent of posing that question was to help us become a country in which a person’s difference would be largely neglected by others, unless the person in question wished to call attention to it. If the cultural Left insists on its present strategy-on asking us to respect one another in our differences rather than asking us to cease noticing those differences-it will have to find a new way of creating a sense of commonality at the level of national politics. For only a rhetoric of commonality can forge a winning majority in national elections.

I doubt that any such new way will be found. Nobody has yet suggested a viable leftist alternative to the civic religion of which Whitman and Dewey were prophets. That civic religion centered around taking advantage of traditional pride in American citizenship by substituting social justice for individual freedom as our country’s principal goal. We were supposed to love our country because it showed promise of being kinder and more generous than other countries. As the blacks and the gays, among others, were well aware, this was a counsel of perfection rather than description of fact. But you cannot urge national political renewal on the basis of descriptions of fact. You have to describe the country in terms of what you passionately hope it will become, as well as in terms of what you know it to be now. You have to be loyal to a dream country rather than to the one to which you wake up every morning. Unless such loyalty exists, the ideal has no chance of becoming actual.

References:

1. Rorty, Richard. Achieving Our Country: Leftist Thought in Twentieth-century America. Cambridge, MA: Harvard UP, 1998. Print. 100-101.

Richard Rorty predicts Donald Trump

Many writers on socioeconomic policy have warned that the old industrialized democracies are heading into a Weimar-like period, one in which populist movements are likely to overturn constitutional governments. Edward Luttwak, for example, has suggested that fascism may be the American future. The point of his book The Endangered American Dream is that members of labor unions, and unorganized unskilled workers, will sooner or later realize that their government is not even trying to prevent wages from sinking or to prevent jobs from being exported. Around the same time, they will realize that suburban white-collar workers-themselves desperately afraid of being downsized-are not going to let themselves be taxed to provide social benefits for anyone else.

At that point, something will crack. The nonsuburban electorate will decide that the system has failed and start looking around for a strongman to vote for-someone willing to assure them that, once he is elected, the smug bureaucrats, tricky lawyers, overpaid bond salesmen, and postmodernist professors will no longer be calling the shots. A scenario like that of Sinclair Lewis’ novel It Can’t Happen Here may then be played out. For once such a strongman takes office, nobody can predict what will happen. In 1932, most of the predictions made about what would happen if Hindenburg named Hitler chancellor were wildly overoptimistic.

One thing that is very likely to happen is that the gains made in the past forty years by black and brown Americans, and by homosexuals, will be wiped out. Jocular contempt for women will come back into fashion. The words “nigger” and “kike” will once again be heard in the workplace. All the sadism which the academic Left has tried to make unacceptable to its students will come flooding back. All the resentment which badly educated Americans feel about having their manners dictated to them by college graduates will find an outlet.

But such a renewal of sadism will not alter the effects of selfishness. For after my imagined strongman takes charge,he will quickly make his peace with the international superrich, just as Hitler made his with the German industrialists. He will invoke the glorious memory of the Gulf War to provoke military adventures which will generate short-term prosperity. He will be a disaster for the country and the world. People will wonder why there was so little resistance to his inevitable rise. Where, they will ask, was the American Left?

References:

1. Rorty, Richard. Achieving Our Country: Leftist Thought in Twentieth-century America. Cambridge, MA: Harvard UP, 1998. Print. 89-91.

Top-down and botton-up Leftism

The history of leftist politics in America is a story of how top-down initiatives and bottom-up initiatives have interlocked.

Top-down leftist initiatives come from people who have enough security, money, and power themselves, but nevertheless worry about the fate of people who have less. Examples of such initiatives are muckraking exposes by journalists, novelists, and scholars-for example, Ida Tarbell on Standard Oil, Upton Sinclair on immigrant workers in the Chicago slaughterhouses, Noam Chomsky on the State Department’s lies and the New York Times‘s omissions. Other examples are the Wagner and Norris-Laguardia Acts, novels of social protest like People of the Abyss and Studs Lonigan, the closing of university campuses after the American invasion of Cambodia, and the Supreme Court’s decisions in Brown v. Board of Education and Romer v. Evans.

Bottom-up leftist initiatives come from people who have little security, money, or power and who rebel against the unfair treatment which they, or others like them, are receiving. Examples are the Pullman Strike, Marcus Garvey‘s black nationalist movement, the General Motors sit-down strike of 1936, the Montgomery bus boycott, the creation of the Mississippi Freedom Democratic Party, the creation of Cesar Chavez‘s United Farm Workers, and the Stonewall .. riot” (the beginning of the gay rights movement) .

Although these two kinds of initiatives reinforced each other, the people at the bottom took the risks, suffered the beatings, made all the big sacrifices, and were sometimes murdered. But their heroism might have been fruitless if leisured, educated, relatively risk-free people had not joined the struggle. Those beaten to death by the goon squads and the lynch mobs might have died in vain if the safe and secure had not lent a hand.

These loans were unheroic but indispensable. The Luce journalists of 1937 who filled the pages of Life magazine with pictures of the National Guard beating up striking United Automobile Workers were not taking many risks. Nor were the TV reporters who kept the cameras focused on Bull Connor’s dogs and cattle prods in 1961. But if they had not been there, and if a lot of secure and well-off Americans had not reacted to those images as they did, the UAW strike against Ford and the Freedom Ride through Alabama would both have been ineffectual. Somebody has to convince the voters that what the authorities are calling senseless violence is actually heroic civil disobedience.

References:

1. Rorty, Richard. Achieving Our Country: Leftist Thought in Twentieth-century America. Cambridge, MA: Harvard UP, 1998. Print. 53-54.