This edition of Musings finds us unable to make good on a commitment made in the last edition. We had intended to explore the reasons why the years following the last 40%+ Market donnybrook were so profitable for value oriented stock pickers. That this edition does not quite get around to this is solely a function of the audacity with which the putative ruling class has inflicted its whims on the rest of us over the past few weeks. These are trying times indeed for any investor with a predisposition and accumulated positive feedback to seek out the “silver lining”, the reason to hang in there and bet against the seeming end of the world.
Not too many weeks ago, we were promised hope, change, a restoration of ethics and transparency. (...and no tax increases if you make less than $200K/year. Is anyone still holding their breath on that one?) It has been a challenge of late to think about much of anything other than how all that is playing out. To be fair, many of us are indeed hopeful. We find ourselves hoping to wake up suddenly and realize that it was all just a bad dream. Spending more than a few minutes watching the billions become trillions (can gazillions be far off?) feels like nothing so much as a bad dream. I, for one, find myself hoping that there is at least a little something to Lite version (as opposed to Lunatic) of Global Financial Conspiracy Theory. At this point, it would be a blessed relief indeed to learn that so much of what we have had to endure (to the extent we can bring ourselves to watch or otherwise engage it) of late is in the main loosely orchestrated theatrics intended to facilitate the transfer of assets from the hapless multitudes into the pockets of the in-the-know. (Perhaps this is what that wily industry vet meant when he told us, during our first few weeks at the brokerage firm that would eventually be laid low by that intrepid derivatives pioneer Mr. Joseph Jett, that it was “all B--- S---!”) Fear and greed are the friends of the speculator who is deep-pocketed and in tune with whoever is calling the tune of the moment, the enemy of those who let strangers do their thinking for them. Would that it were only an enormous con game being pulled off by the coterie that put up the money for this new regime, as opposed to a size 15 EEE boot in the pants down the road to serfdom.
And what’s changed? Well, the numbers have certainly changed. It is stupefying to ponder for more than a moment or so where the gazillions are going to come from, where they are going to go and where they are going to end up (Clue to latter: find where the money that came pouring through the Internet under dubious guises during the late days of the election campaign actually came from). The names and faces stuck in at the primo spots in the trough of taxpayer largesse have certainly changed. But has the basic, sordid game of get while the getting is good and let the descendants of those classes who can still manage to perpetuate themselves pick up the tab, has that changed? Hell no, it has merely gotten more so. We got us a “stimulus package” that was wonked together by the minions of a woman whose formative years were spent at the knee of a Baltimore ward heeler. In the spirit of the “new bipartisanship”, the opposition party was allowed not so much as a peep of protest in the House process. This “package” was then sold to us by a chief executive who after “the second coming of the president who freed the slaves” wore a little thin, was made over by his media handlers into FDR redux.
So what exactly has happened to the spirit of “We have nothing to fear but fear itself”? Is this right here, right now any more scary-making than the world as it looked in January 1933? (Actually, there was plenty to fear at that time, even for those as financially well situated as the Roosevelt clan. Fear is a natural and normal reaction to danger, which is always out there and sometimes comes looking for you. The question which this leader stepped up to was whether his listeners would succumb to their natural fears or choose otherwise.) This time around, the putative leader of the non-tyrannical world invokes “catastrophe”, the strongest possible word for something bad happening, i.e. enormous and irreparable harm. We are left with no choice but to accept this bill, 1073 pages of “how its going to be for you suckers” that ABSOLUTELY NO ONE had read. Again, to be fair, somebody somewhere knows exactly what, why and what it will mean in terms akin to “it fell off the back of a truck” for many, many parts of it (see aforementioned campaign contributors). But no one knows what’s in this bill in a sense that is within shouting distance of democracy as manifested in town council meetings where, say, $300 for a new sign at the dump gets talked to death, or at least until an hour or so after everyone is wishing that the old guy in the Members Only jacket lived somewhere else (but the sign only goes up if the project was legitimate in the first place).
They call it a stimulus package, and what, how much and when exactly it is going to stimulate is already a well furrowed journalistic dirt patch. Again, my fair-minded nature informs me that despite the protestations of the economists I most respect, this is one highly stimulative piece of legislation. It will stimulate a resurgence of the Meddling Class that Clinton’s welfare reform had managed to tamp down at least a little. It is stimulating a lot of skilled workers and business owners with dim but visceral memories of when the overripe fruits of New Deal and Great Society programs were like so many banana peels on anyone’s path to prosperity to just say to Hell with it and downshift into a less materialistic but also less productive lifestyle. Others will migrate into that shadow economy that gets stimulated into existence whenever collectivism has been on the rise (see Italy, or the US circa 1979.) The creepy-crawlies who occupy the lower, actual-work-doing positions within that extortive enterprise we might call Tort USA, Inc. are certainly receiving memos stimulating them into action against newly minted “targets of opportunity” that our insurance premiums will be underwriting for the rest of our lives.
One also suspects that this “package” being doused with the lighter fluid of urgency and slipped onto our collective front porch is stimulating outrage among Republicans and dissonance among voters of an independent cast. Of the latter, you have to think there is a whole lot of “Is this what I voted for back in November?” going on. I strongly suspect that not a few registered Democrats, and not just the kind who might have preferred a Reagan to a Dukakis, have woken up in a cold sweat after a visit from that particular specter. If properly channeled, and if credible alternatives can be presented, reaction to this monstrosity will indeed stimulate the beginnings of a power shift in November 2010; especially if “We won” continues to be used as justification to “do as we damn well please”. Democracy based on mere plurality and unencumbered by the edifices of (note the lower case) republicanism has never been very effective or successful for very long. Indeed, it tends to piss people off to a degree that sometimes get messy in a sanguinary way (see ancient Greece, where the beta versions were tested).
So where does this wretched turn of events leave the investor? The operative question is not whether this is good or bad but is it as bad as it seems. Put another way, is “the end of the world and then some” already in the price of the stock? If it is, then even if it turns out that it’s “almost but not quite the end of the world”, the stock will eventually regress upward toward that reality. As I have written previously, a bet against the end of the world is always better than the alternative because of how problematic it is to collect on true “catastrophe”. There is also another truism that comes into play. As a practical matter, things almost never turn out to be as bad as they seem or as good at they seem. Of course there is a sense in which, yes, sometimes they do. The doctor’s X-ray, the ice forming on the wings and countless other situations come to mind. The Shoah (a.k.a. Holocaust) turned out a lot worse than it must have seemed to some even after the National Socialists had made it part of a taxpayer funded stimulus program of their own. But as a practical matter, for most of what goes on in that maelstrom of popular delusion we call the Market, this truism will almost always serve us well.
So just how close to the brink of “enormous and irreparable harm” might we be? Is it really that much worse than in early 1975, at the last Big Bear Market bottom? Is the political situation different in kind from when the Watergate scandal opened the door for that scurrilous crop of rascals that made up so much the Congressional class of 1974, or set the stage for the elevation of a sanctimonious peanut farmer to Commander in Chief? We won’t find out until November 2010 whether irreparable harm is being done to the functionality of that form of recourse we call midterm elections. Cultural indicators, where trend matters at least as much as level, are ambiguous, but wasn’t 1975 right about when disco was starting to ooze out into the mainstream? Internationally, disgrace at the hands of the hands of the Ayatollah was just over the horizon, and last helicopter out of Saigon was only a few months away. Contra the assurances of the pragmatists and other defeatists, this certainly does not appear to be the outcome of our latest military “line in the sand”.
How about economically? We keep hearing this is no Great Depression, but this is a bit of a straw man. I would rather compare it with localized situations of more recent vintage. Is the economy today worse than Houston in 1986, or Seattle in 1972 when Boeing was down for the count, or Pittsburgh when the Rust bowl rusted out? (And how did each of these down & outers look 10, 20, 30 years later?) For that matter, how well were countless towns tied to extractive industries in the Western United States doing before they were bailed out by Greenspan’s last bubble (recession in the Seventies, federal policy changes in the Eighties, friends of the spotted owl infesting the Lincoln bedroom quid pro quo in the Nineties)?
There are at least a couple respects in which the situation might be “worse”. We hear that Japan is experiencing its steepest drop in 35 years. But how surprised should we be, that a nation that has fewer consumers of its own with each passing week, and whose economy is reliant on its masterful ability to sell big ticket consumer goods into an increasingly “just-in-time” global economy, should see at least a quarter or two of abrupt slowdown? We are barraged with reports about layoffs, and the “skyrocketing” rise in the unemployment rate. We forget that shortages persist for some skills, and that many of the companies that are announcing headcount reductions are also continuing to make selective hires. It is a testimony to the increased litigiousness of our society that what used to be called the “trimming of deadwood”, the helping those who have retired-in-place or have otherwise deluded themselves into thinking they are gaming the system to move on to a higher calling, now takes the form of a 5% headcount reduction. (Think about what percent of a workforce turns over through normal attrition anyway, and 5% probably becomes almost nominal.)
I think what “this time” has going for it is that just as the aforementioned Houston, Seattle and Pittsburgh situations were depressions if you lived there but not so awful for the rest of us, this time we see depression being inflicted on both the financial services and media (certainly print and radio) industries. These industries also happen to be concentrated in locales where real estate values were ripest for a fall. Everyone in the greater NYC or LA megalopolis is in deep financial distress or knows someone who is. These two venues have an outsized share in setting the tone for what we call a national conversation. It’s like late 1987 and early 1988, when the gloom that followed the Market crash lingered over Manhattan and Boston long after it started to lift out in the goods producing parts of the country, only more so.
My advice at this juncture would be to remember that it is no crime to be wrong on an investment, but it is always wrong to despair. Despair is what many of our ancestors called a sin. It is not the same as “losing heart”, which can occur in the midst of any battle, unless we choose to let it become a permanent facet of who we are. It is a loss of hope, by which I mean a virtue as opposed to the mere emotion that some would pretend it to be, and life without hope is not worth living. Either things are going to eventually get better, or they are going to get a whole lot worse. If you are an investor, you look ahead and choose accordingly. If you cannot do this, you are not an investor, and should go do something else. As I see it, if you choose the former, you are presently placing at least nominal bets (there is no law that says you have to go “all-in”, ever) that equity values will recover over the next few years. The alternative, carried out to its logical conclusion, is that your time would better spent working on your bunker, checking the seals on all those canned goods and making sure you have good lines of fire in all directions. This will buy you at least a few extra weeks in event your “choice” was correct, unless you die of boredom or old age first.
The next edition will get to the previously promised exploration of what made the DJIA go from under 600 in December 1974 to nearly 900 by July 1975 and 1000 by February 1976. I will also describe my encounter with Ms. Erin Gray as she was just beginning her transition from fashion model into the actress who would play Col. Wilma Deering in “Buck Rogers in the 25th Century”. Stay tuned.
Tuesday, February 17, 2009
Friday, February 6, 2009
As J.M. Keynes Was Saying...
As intimated in the previous edition, I have been wrestling with the temptation to turn pessimistic about the Long Term Trend. Indeed, this present moment would be the third time that this normally “turn that lemon into lemonade” observer of human folly has been tempted to despair of a future that does not compare favorably with the past. The other two would have been at the midpoint of the Seventies and in early 1991. The former instance coincided with that time in life of trying to figure out what to do with the results of sixteen or so years of desultory education. The Seventies were a squalid and dysfunctional time, awash in the detritus of New Deal programs and their progeny, ideas which had certainly seemed like good ideas when the best and the brightest minds of the Ivy Establishment were proffering those versions of hope and change. Not a few of our peers were adamantly reticent to bring children into such a world, sentiments that fortunately (as we await the imminent arrival of a couple of more grandchildren) we did not quite buy into. (Apparently an endemic lack of the courage to reproduce is not unique to present day Europe and Japan after all). In the latter instance, too much was made of what seemed like a “fast forward Bull Market”. I was struck by the rapidity with which equity values had recovered from recession and the uncertainty posed by the initial phases of the Gulf War. Also troubling was the installation of a new co-presidency which juxtaposed claims such as “I tried it but I didn’t inhale” with the promise of “the most ethical Administration ever.” What good could possibly have been in store for us?
Of course, in both instances the Market found ways to look past the towering ugliness of the moment and produce outsized returns for practically anyone who had the courage to show up and play. That string of “fat years” for value investors in the latter part of the Seventies, a time when a peanut farmer turned President seemed to epitomize the spirit of the age, is particularly intriguing, especially in light of the way 2008 has treated investors so much like 1974. But it was also a part of that time when for almost twenty years, the EKG that is the long term trend of the Market (it is, after all, the perceived present value of the future fruits of a nation’s enterprise) departed from what viewed over the entire American experience has been a distinct upward skew. Pessimism ruled that age, as it threatens to again today. The experiences of the intervening decades have conditioned us to an optimistic perspective, but we are wondering if this might no longer be appropriate. This edition will explore the sense in which bearishness probably makes more sense than bullishness, as a means of establishing a framework for an effective and profitable tactical outlook in the weeks, months and years ahead.
That all things living will eventually see decay is probably not what Keynes had in mind when he reminded us that in the long run we are all dead, but it serves our purpose. While tactically speaking, a bet against the end of the world will be superior to the other side of that bet because it makes the same logical sense as Pascal’s Wager, the fact remains that anything that has been organized in any way, from cigars to civilizations, will eventually come undone. Over six-plus millennia, every civilization that flourished enough to leave a mark eventually declined and then disappeared (or nearly so). Why should ours be any different? We have a seemingly inborn bias against even recognizing this eventuality until, one supposes, it is so advanced as to be irreparable. This bias arises from ours being a New World nation that came into being at just the right moment to incorporate both pre-modern influences (e.g. ethics rooted in Calvinism) and the good fruits of that revolution in thought that called itself the Enlightenment. That Markets would fluctuate wildly to reflect to the wrenching uncertainties of the moment but always regress to an upward trending (at a rate exceeding the deterioration of purchasing power we call inflation) mean was indicative of the fact that ours was an ascendant civilization. At some point, this will no longer be true. Indeed, since the apex is probably only be visible in the rear view mirror, how do we have to wonder if it has not already arrived.
What Lincoln called “the silent artillery of time” has been at work for many generations. In every era, but especially during times that do not challenge us the way, say, the decade and a half the ended in 1945 did, a stultifying inertia works to insinuate itself into the social fabric. As peace and prosperity come to be seen as a normative experience to be taken for granted, people become less creative, less willing to take risks, and more interested in amusing themselves and in securing “rights” to that which makes them feel secure and comfortable. Widespread prosperity seems to beget a broader adoption of upper class mores, permeating the population with characters reminiscent of the dirtbag aristocrats depicted by the great satirists and novelists of the past. This is not the stuff of ascendancy. What’s tricky about this, though, is that such symptoms are almost always present. It is a matter of degree. Like a big oak tree with a bit of rot showing, the edifice might be stronger than any storm or wayward motor vehicle, or the rot within might be so pervasive that the next thing that bumps it will bring it crashing down.
I think that a good starting pointing for diagnosis and prognosis can be found in recognizing the duality of so much of Nature. Along with the positive and negative charges of chemistry & physics, male & female, light & dark, and entropy as opposed to the force we call “life”, there seems to be a duality at work in how humans interact. It arises between the inherent worth and dignity of the individual on the one hand, and collectivism (a.k.a. “the greater good” or “the soul of the hive”) on the other. The former might be understood as determined by either innate self-interest evolved out of a survival imperative, or derived from something transcendent and therefore in a sense non- negotiable, as in the words penned by Thomas Jefferson, “endowed by our Creator with certain inalienable rights.” The latter half of this duality has also drawn support from Evolution based theory, but invariably finds its impetus in rascals seeking to make some temporary advantage they have carved out more or less permanent. The tension between these two forces is unceasing. It was a resurgence of collectivism that made the Twentieth Century by far the most lethal; that these forces did not triumph (as seemed at times inevitable, even in 1976) was due to resistance imbued with a profound belief in the inherent dignity of the individual.
The United States of America has managed to be an ascendant civilization for as many generations as it has, despite factions, folly and having initially tolerated the systemic evil that was chattel slavery because our founders understood the unceasing tension of this duality. They recognized human nature for what it is (that a recent Inaugural address included a charge to “end tribalism”, which is nothing more than the human tendency to give preference where ties of blood and familiarity exist, is hardly encouraging in this respect) and while they saw and took pains to accommodate the tension between Faith and Reason, they did not see these two as antagonistic alternatives (Michael Novak addresses this splendidly in On Two Wings.) They also understood the importance of subsidiarity, a principle which holds that in the inevitable hierarchical structures of human affairs, and contra totalitarianism, entities in the higher strata, such as nations and kingdoms, should foster and otherwise serve those in the lower strata. (The natural conflict between subsidiarity and despotism defines innumerable disagreements today. Much of the venomous elite opinion aimed at the Roman Catholic Church is attributable to it being the foremost champion of subsidiarity, as well as its insistence on giving priority to the family, and not the state or the individual, as the primary unit in social hierarchy.)
As noted earlier, the fortuitous outcome of the Founders’ experiment in ordered liberty owes much to timing. A half dozen generations at least since that first wave of religious separatists and mercantile opportunists came ashore had passed when they got together and did their business. That evangelists like John Wesley and Ben Franklin’s good friend George Whitefield found such “fields ripe for harvest” is ample evidence that the early Puritan influence did not exactly have a stranglehold on mores and culture. It is reasonable to assume that the fact that there was a Great Awakening in the years leading up to Independence from the Old Order of Europe indicates a widespread though hardly universal willingness to acknowledge Authority greater than kings or princes. At the same time, a secular rejection of the tottering Old Order was gathering steam. It came to call itself the Enlightenment. This revolution has roots in the thinking (on scientific method) of Francis Bacon, but emerged as an alternative to ecclesiastical understanding in the work of Immanuel Kant. Prior to Kant, human longing for a future that would be less evil than the experienced present was typically understood, or at least articulated, in terms of “seeking the Kingdom of God”. This arguably innate trait (to the extent humans derive some sense of purpose and meaning from acting toward some identifiable end) always needs an outlet. The Old Order, which included a Church that had been for a time subverted by collectivist rascals of the sort previously noted, was decrepit and no longer capable of providing it in the Western World. (In the rest of the world, such human longings were subservient to the whims of whatever thugs or mandarins were in charge.) Kant unleashed the notion of “progress”, that limitless improvement by strictly material and human means was not only attainable but could be an end in itself.
Looking back, this “Enlightenment” proved to be a curious thing. It informed the thinking of a number of the founders at least as much as their nearly universal Christian heritage (belief and practice being another, endlessly controversial, matter), serving us well on the Western shore of the Atlantic. In France a few years later, it didn’t wear so well. I see a “good enlightenment” and a “not-so-good Enlightenment”. It was good that scientific methodology found favor, even with the faddishness that came along for the ride. The Old Order was very much in need of shaking up, having weathered the silent artillery of time itself. Where it soured and then some can be traced not only to its impulses being adopted by faddists, fanatics and popularizers, but in the very word itself. Perhaps I am overly influenced by Socrates (in the matter of the beginning of Wisdom) and George Orwell, who so adeptly portrayed the propensity of demagogues, dictators and their enablers to subvert the meaning of words to further their selfish ends. If it really was an “enlightenment”, in any noble sense of the word, I suspect they would have called it something else, something a little more humble.
As a matter of fact, it did take on a new name. A generation or so after Kant, the prophets Engels and Marx arrived on the scene. By the time they were done, “seeking the Kingdom of God” was understandable in thoroughly material and human terms, no longer coming from only from science but from politics. Marx had a great diagnosis of the evil of his day, but owing to his obtuseness with respect to human nature he had nothing to say about what to do once the old order had been brought down. He did mention an “intermediate” phase that, with an assist from Lenin, would proscribe human freedom until the “kingdom” was ushered in, but we all know how that turned out. The totalitarian form of socialism that quite quickly (in the objective sense, if you lived there or actively served in the fight against it certainly didn’t seem quick) found its way into the dustbin of history was not the new name I had in mind. What grew out of enlightenment thinking and thrives to this day is Progressivism, or progress for progresses sake.
It should no surprise that like Science and other constructs that have on balance served us so well, Progress could become an object of cult worship. We have recently seen a resurgence of this cult, and it is a troubling development. Among the hallmarks of civilizations losing their way would be the widespread (as in permeating beyond a single narrow class) worship of such false gods. The last time Progress enjoyed mainstream adulation began with the New Deal. Its failings were masked by the distractions of a World War followed by a mass impulse to get on with life. The passage of enough time to dim the memory of “how that turned out” opened the door for a last hurrah in the form of the Great Society programs. That the Market went basically nowhere from 1966 to 1984 was indicative of an unspoken consensus that the goddess Progress had failed and as such our civilization was in decline. We will visit the evolution and enshrinement of this bitch goddess in the weeks ahead. Our next edition, however, will explore why many astute stock pickers enjoyed stellar returns during the seven dismal years leading up to the 1982 Market bottom despite ample evidence pointing to “the end of the world as we know it”. Stay tuned.
Of course, in both instances the Market found ways to look past the towering ugliness of the moment and produce outsized returns for practically anyone who had the courage to show up and play. That string of “fat years” for value investors in the latter part of the Seventies, a time when a peanut farmer turned President seemed to epitomize the spirit of the age, is particularly intriguing, especially in light of the way 2008 has treated investors so much like 1974. But it was also a part of that time when for almost twenty years, the EKG that is the long term trend of the Market (it is, after all, the perceived present value of the future fruits of a nation’s enterprise) departed from what viewed over the entire American experience has been a distinct upward skew. Pessimism ruled that age, as it threatens to again today. The experiences of the intervening decades have conditioned us to an optimistic perspective, but we are wondering if this might no longer be appropriate. This edition will explore the sense in which bearishness probably makes more sense than bullishness, as a means of establishing a framework for an effective and profitable tactical outlook in the weeks, months and years ahead.
That all things living will eventually see decay is probably not what Keynes had in mind when he reminded us that in the long run we are all dead, but it serves our purpose. While tactically speaking, a bet against the end of the world will be superior to the other side of that bet because it makes the same logical sense as Pascal’s Wager, the fact remains that anything that has been organized in any way, from cigars to civilizations, will eventually come undone. Over six-plus millennia, every civilization that flourished enough to leave a mark eventually declined and then disappeared (or nearly so). Why should ours be any different? We have a seemingly inborn bias against even recognizing this eventuality until, one supposes, it is so advanced as to be irreparable. This bias arises from ours being a New World nation that came into being at just the right moment to incorporate both pre-modern influences (e.g. ethics rooted in Calvinism) and the good fruits of that revolution in thought that called itself the Enlightenment. That Markets would fluctuate wildly to reflect to the wrenching uncertainties of the moment but always regress to an upward trending (at a rate exceeding the deterioration of purchasing power we call inflation) mean was indicative of the fact that ours was an ascendant civilization. At some point, this will no longer be true. Indeed, since the apex is probably only be visible in the rear view mirror, how do we have to wonder if it has not already arrived.
What Lincoln called “the silent artillery of time” has been at work for many generations. In every era, but especially during times that do not challenge us the way, say, the decade and a half the ended in 1945 did, a stultifying inertia works to insinuate itself into the social fabric. As peace and prosperity come to be seen as a normative experience to be taken for granted, people become less creative, less willing to take risks, and more interested in amusing themselves and in securing “rights” to that which makes them feel secure and comfortable. Widespread prosperity seems to beget a broader adoption of upper class mores, permeating the population with characters reminiscent of the dirtbag aristocrats depicted by the great satirists and novelists of the past. This is not the stuff of ascendancy. What’s tricky about this, though, is that such symptoms are almost always present. It is a matter of degree. Like a big oak tree with a bit of rot showing, the edifice might be stronger than any storm or wayward motor vehicle, or the rot within might be so pervasive that the next thing that bumps it will bring it crashing down.
I think that a good starting pointing for diagnosis and prognosis can be found in recognizing the duality of so much of Nature. Along with the positive and negative charges of chemistry & physics, male & female, light & dark, and entropy as opposed to the force we call “life”, there seems to be a duality at work in how humans interact. It arises between the inherent worth and dignity of the individual on the one hand, and collectivism (a.k.a. “the greater good” or “the soul of the hive”) on the other. The former might be understood as determined by either innate self-interest evolved out of a survival imperative, or derived from something transcendent and therefore in a sense non- negotiable, as in the words penned by Thomas Jefferson, “endowed by our Creator with certain inalienable rights.” The latter half of this duality has also drawn support from Evolution based theory, but invariably finds its impetus in rascals seeking to make some temporary advantage they have carved out more or less permanent. The tension between these two forces is unceasing. It was a resurgence of collectivism that made the Twentieth Century by far the most lethal; that these forces did not triumph (as seemed at times inevitable, even in 1976) was due to resistance imbued with a profound belief in the inherent dignity of the individual.
The United States of America has managed to be an ascendant civilization for as many generations as it has, despite factions, folly and having initially tolerated the systemic evil that was chattel slavery because our founders understood the unceasing tension of this duality. They recognized human nature for what it is (that a recent Inaugural address included a charge to “end tribalism”, which is nothing more than the human tendency to give preference where ties of blood and familiarity exist, is hardly encouraging in this respect) and while they saw and took pains to accommodate the tension between Faith and Reason, they did not see these two as antagonistic alternatives (Michael Novak addresses this splendidly in On Two Wings.) They also understood the importance of subsidiarity, a principle which holds that in the inevitable hierarchical structures of human affairs, and contra totalitarianism, entities in the higher strata, such as nations and kingdoms, should foster and otherwise serve those in the lower strata. (The natural conflict between subsidiarity and despotism defines innumerable disagreements today. Much of the venomous elite opinion aimed at the Roman Catholic Church is attributable to it being the foremost champion of subsidiarity, as well as its insistence on giving priority to the family, and not the state or the individual, as the primary unit in social hierarchy.)
As noted earlier, the fortuitous outcome of the Founders’ experiment in ordered liberty owes much to timing. A half dozen generations at least since that first wave of religious separatists and mercantile opportunists came ashore had passed when they got together and did their business. That evangelists like John Wesley and Ben Franklin’s good friend George Whitefield found such “fields ripe for harvest” is ample evidence that the early Puritan influence did not exactly have a stranglehold on mores and culture. It is reasonable to assume that the fact that there was a Great Awakening in the years leading up to Independence from the Old Order of Europe indicates a widespread though hardly universal willingness to acknowledge Authority greater than kings or princes. At the same time, a secular rejection of the tottering Old Order was gathering steam. It came to call itself the Enlightenment. This revolution has roots in the thinking (on scientific method) of Francis Bacon, but emerged as an alternative to ecclesiastical understanding in the work of Immanuel Kant. Prior to Kant, human longing for a future that would be less evil than the experienced present was typically understood, or at least articulated, in terms of “seeking the Kingdom of God”. This arguably innate trait (to the extent humans derive some sense of purpose and meaning from acting toward some identifiable end) always needs an outlet. The Old Order, which included a Church that had been for a time subverted by collectivist rascals of the sort previously noted, was decrepit and no longer capable of providing it in the Western World. (In the rest of the world, such human longings were subservient to the whims of whatever thugs or mandarins were in charge.) Kant unleashed the notion of “progress”, that limitless improvement by strictly material and human means was not only attainable but could be an end in itself.
Looking back, this “Enlightenment” proved to be a curious thing. It informed the thinking of a number of the founders at least as much as their nearly universal Christian heritage (belief and practice being another, endlessly controversial, matter), serving us well on the Western shore of the Atlantic. In France a few years later, it didn’t wear so well. I see a “good enlightenment” and a “not-so-good Enlightenment”. It was good that scientific methodology found favor, even with the faddishness that came along for the ride. The Old Order was very much in need of shaking up, having weathered the silent artillery of time itself. Where it soured and then some can be traced not only to its impulses being adopted by faddists, fanatics and popularizers, but in the very word itself. Perhaps I am overly influenced by Socrates (in the matter of the beginning of Wisdom) and George Orwell, who so adeptly portrayed the propensity of demagogues, dictators and their enablers to subvert the meaning of words to further their selfish ends. If it really was an “enlightenment”, in any noble sense of the word, I suspect they would have called it something else, something a little more humble.
As a matter of fact, it did take on a new name. A generation or so after Kant, the prophets Engels and Marx arrived on the scene. By the time they were done, “seeking the Kingdom of God” was understandable in thoroughly material and human terms, no longer coming from only from science but from politics. Marx had a great diagnosis of the evil of his day, but owing to his obtuseness with respect to human nature he had nothing to say about what to do once the old order had been brought down. He did mention an “intermediate” phase that, with an assist from Lenin, would proscribe human freedom until the “kingdom” was ushered in, but we all know how that turned out. The totalitarian form of socialism that quite quickly (in the objective sense, if you lived there or actively served in the fight against it certainly didn’t seem quick) found its way into the dustbin of history was not the new name I had in mind. What grew out of enlightenment thinking and thrives to this day is Progressivism, or progress for progresses sake.
It should no surprise that like Science and other constructs that have on balance served us so well, Progress could become an object of cult worship. We have recently seen a resurgence of this cult, and it is a troubling development. Among the hallmarks of civilizations losing their way would be the widespread (as in permeating beyond a single narrow class) worship of such false gods. The last time Progress enjoyed mainstream adulation began with the New Deal. Its failings were masked by the distractions of a World War followed by a mass impulse to get on with life. The passage of enough time to dim the memory of “how that turned out” opened the door for a last hurrah in the form of the Great Society programs. That the Market went basically nowhere from 1966 to 1984 was indicative of an unspoken consensus that the goddess Progress had failed and as such our civilization was in decline. We will visit the evolution and enshrinement of this bitch goddess in the weeks ahead. Our next edition, however, will explore why many astute stock pickers enjoyed stellar returns during the seven dismal years leading up to the 1982 Market bottom despite ample evidence pointing to “the end of the world as we know it”. Stay tuned.
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