This week finds us contemplating a Market that got to last Friday good and ready for some kind of pullback. As it has rocked along to more than thirty percent above the intraday lows of just six weeks ago, whatever sell-offs have occurred have been brief and without conviction, the worst of being a drop of about 7% during the last few days of March. It has actually become enjoyable once again to visit one’s accounts at the end of the week, so much so that it is perhaps tempting to start thinking that it is normal for stocks to go up the way they have been doing. I suspect that the Market’s forward progress will start growing choppier in the weeks and months ahead, but it will be forward progress nonetheless.
The continual stream of headlines and editorializing about legislation aimed at reducing carbon dioxide (CO2) emissions has been a source of agitation for me of late. As I thought about what I might write on the subject, I dug up something I wrote a few years back: PEP Talk, May 1993. This Earth Day Edition: The Big Idea Goes from Red to Green seems to have coincided with my having read Paul Johnson’s The Intellectuals; hence the consideration of Big Ideas and their unintended consequences. It took a few pokes at a singularly tendentious book called Earth in the Balance. Sixteen years later it is hard to separate out the benefit of today’s hindsight from then contemporaneous efforts at assessing the sanity of it author. Alas, after he got sold down the river by the co-presidency under which he was then laboring, he secured a great gig as Chief Mouthpiece for a number of ventures that probably need the threat of imminent doom in order to really pay off. Another striking feature of that ancient PEP Talk was the fact that even then, an obvious and concerted effort to vilify the very word “carbon” had been under way for quite some time. This was troubling enough to write about then, and even more so now. Carbon is a benign element, so woven into the natural systems which sustain, indeed, define life that it should need no defense. We are, after all, carbon based life forms. Cycles of carbon and oxygen figure into every facet of life, yet we constantly hear it talked about like it was something evil. This unrelenting and wholly undeserved slander compels me to weigh in with a few words in defense of the stuff without which bread and beer would both be flat (actually, they would not exist at all).
Many objections could be raised to the seemingly methodical denigration of all things carbon, as well as the underlying issue of “human caused global warming”. Indeed, so much has been published of late contradicting the assertion by the aforementioned charlatan that “the argument is over” that it is a bit of a struggle to find a way of contributing anything that is remotely original. Fortunately, the “global warming crisis” is much akin to what Market Musings has sought to counteract since its inception: an attempt by some well situated parties, based on shoddy but plausible information, to induce other parties to take actions that they probably would not if they were capable of thinking more clearly. The mental skills which I have had to develop in order to assess the data that has bombarded my poor little brain for the past 7000 or so working days have left me very attuned to the “plausible but not quite true” (i.e., a finely calibrated BS detector). As such, the application of this discipline to the defense of “carbon” can be boiled down to two categories, epistemological and semantic, which will be addressed in turn.
But first, in a nod toward vouchsafing some semblance of intellectual integrity, it is necessary to acknowledge a subjective component to my objections to the Green Stampede. This is because there is much about the environmental movement in recent years that I find offensive. (By offensive, I don’t mean in the weak sense of the word to which it has devolved, which could mean anything that one chooses to allow to hurt one’s feelings. I mean it in a sense within hailing distance of how one’s body reacts to the sight and smell of a decomposing corpse, or the way virtually anyone reacts to gross and obvious injustice.) One does not even have to consider the soap-eschewing fringe elements who espouse dramatic de-population, for whom “people haters” is not too strong a term. No, “green” has become the basis of yet another variant of the all too human propensity to self righteousness. Dietrich Bonhoeffer wrote of “cheap grace”; in the “Hey look! I’m reducing my carbon footprint by wearing sandals made out of homegrown cabbage leaves, which I also use when I visit my flush-less toilet” crowd we find a kind of “cheap sanctimony”. A lifetime of enduring that occasional personage who transports self-righteousness like a bad case of B.O. preconditions one to a visceral reaction when confronted with environmental correctitude.
I also object to the Green Stampede on the admittedly less than objective grounds that it has given a bad name (if persistent dishonesty is grounds for a bad name) to that which I have always considered to be a virtue. Many of us did not need an Earth Day or an EPA to know that taking reasonable steps to avoid or minimize environmental damage and otherwise taking good care of whatever bit of the world is ours to look after is a good thing. It is hard for me to remember a time when I was not sorely tempted to think ill of people who litter, or operate vehicles with badly out of tune or otherwise failing engines. Much was done during the era of industrialization that did not take even a measured consideration of environmental consequences, which simply had to be remedied (To be fair to the earliest of them, we must acknowledge that the idea of running out of trees or salmon or even space must have been unimaginable.) But now it’s like those of us who want to be good stewards of the earth belonged to this nice little church that was taken over by a bunch of crazy people. For the past fifteen years, I have chosen to live in an exurban setting, in large part so as to maintain a close connection with this thing we call nature. It would be nice to be able to call myself an environmentalist, but far too much mischief making in the name of “saving the environment” has gone on for that to happen.
Much of what we hear and read about the need to “save the earth” collapses as soon as even a little epistemological rigor is applied. Epistemology is the study of knowledge, which among other things speaks to “how we know what we know”. (It was also the “E” in the acronym in PEP Talk.) What I have in mind here does not involve a college level course. It is more like having the habit of asking, “How do we know that?” Or, “considering the relative complexity of the subject, how can we pretend to know much of anything, let alone assert that the issue is settled”. The systems that affect climate are vast and complex, even unmeasurable (where does the atmosphere actually end?) compared with other systems that continue to humble scientists. Consider what we thought we knew about cell structure only sixty years ago. Or more prosaically, how about breakfast, or rather, what scientific consensus has held at different times as to whether things like coffee or eggs or carbohydrates are good for you or bad for you? Like climate, this subject boils down to understanding a system. The metabolism of simple substances by one species would seem to be simple and straightforward compared with an atmosphere. The shifts in medical opinion over the past couple of decades have humbled many who presumed to unlock its mystery. It is only possible to presume to have definitive “answers” about something as complex as climate if one has a prior commitment to something other than being on good terms with the truth.
The system whereby CO2 passes into and out of the atmosphere is one of many that sustain life. Just by looking at the sheer masses involved, I suspect it does not figure into temperature fluctuations as much as water cycling between liquid and vapor and sometimes solid. Another cycle involving nitrogen, which is by far the largest constituent of air, is very important to sustaining life but seems to have no discernible role in climate. The CO2 cycle is vastly complex but can be thought of in terms of a simple system once its complexity is acknowledged. In this simple system C02 is added from two sources and removed by one sump. The two sources are emissions from the earth itself (out of fissures, volcanoes, etc., which humans can do nothing about or even measure) and combustion (i.e., oxidation). For the purposes of assessing “human caused climate change”, combustion can be broken into three categories: animal metabolism (combustion of carbohydrates), natural combustion (wild fires and decay), and human activity such as industry, transportation and keeping warm. Combustion releases CO2 and water into the atmosphere. Photosynthesis has the opposite effect, using the energy from sunlight to suck CO2 out of the atmosphere and convert it to more highly complex hydrocarbons, some of which will be combusted but most of which ends up as that organic matter we call soil or at the bottom of the ocean. One gets the sense that very little thought has gone into just how ubiquitous this sump is. Let me break it down. Wherever you see green, or water (unless it has been chemically treated), and the sun is shining, photosynthesis is sucking CO2 out of the air. Apparently, it even goes on in ice if certain algae are present. If you look down from a plane and can see green or water, you are watching it happen. Even the rocks you see, unless it is Atacama or Sahara dry there, have lichens and such on them that are hard at work sucking up carbon.
Now consider the relentlessness and ubiquity of photosynthesis and the very short time that the human component of combustion has been at or near its present level. It would seem that if this system were not dynamic (i.e., responsive to change) as opposed to static (not responsive and so vulnerable to upset) that the human source would simply have to be insignificant. This is because if human activity has suddenly, after millions of years of being nonexistent or insignificant, become a source significant enough to overwhelm the sump, then for the millions of years prior to its presence becoming meaningful the sump would have been outstripping the sources. It is unlikely, given the sheer size of the system, that human activity has managed to perceptibly affect the amount of photosynthetic activity. More likely, the system is more dynamic (i.e., responsive to potential upset) than we begin to understand. In other words, it has ways of handling stresses that are beyond our ken.
That the earth is as big as it is relative to humanity brings us to another form of epistemological mischief. The purveyors of junk science seem to be very fond of preying on rampant innumeracy (i.e., the inability to make quantitative assessments). Two particular forms come to mind. The first would be that sense of proportion that comes with a grasp of “orders of magnitude” (a.k.a., powers of ten). Is 100 tons of something big? If it lands in your backyard, it certainly is. Within a system whose mass is measured with a dozen-plus zeros, not so much. A “part per trillion”, which some instruments can now detect, is like an olive in a martini the size of Lake Superior. I don’t mind admitting that my hair started to hurt as I wrestled with all those upper case digits like “ten to the 14th” trying to get a grasp on about how much the atmosphere, or even a cubic mile of it, weighs. (Its mass is something like 510 million square kilometers, the surface area of the earth, times however many kilometers you want to go up.) It’s hard work keeping all the zeros straight, so most people won’t even try, and prevaricators know this. When someone throws big-seeming numbers at you without any proportion, they are not trying to inform you, they are probably trying to fool you.
A similar bit of mischief revolves around a lack of appreciation for diminishing returns. As in, it is less work to get the first 90% of the dirt off the floor than it is to get the last 1%, let alone 0.001%. Everyone understands “low hanging fruit”. Pretty much everyone esteems that which is “clean” and “healthy”, but diminishing returns set in here just as in practically everything else. Truth be told, we have made tremendous, readily observable progress in improving the environment. It was definitely worth it to install sewage treatment systems, or to develop and install technologies that removed 97%+ of the sulfur and particulate matter from coal-fired power plants. Acid rain was palpable if not incontrovertible, but effectively eliminating it turned out to be a good investment. Eliminating 97% of what is still there probably would not be. This seems to be lost on those who tell us that we owe it to “the children” to spend whatever it takes to make the world as clean as possible (those kids are going to pissed about how much our fantastical thinking ended up costing them.)
The final objection which I will register is inspired by the writer Mr. George Orwell. Some people seem to think that because one of his best selling stories was set in what was then the future (1984), he should be judged by how that future turned out. This is bunk. Orwell was all about the mischief, indeed horror, that can be wrought, in any time, by playing fast and loose with the meaning of words. He was deeply affected by his involvement in the Spanish Civil War, the experience of which turned out to be very much at odds with the elite consensus that had misled him into going there and risking his life in it. One supposes that like any proficient writer he cared a lot about the meaning of words. He was clearly offended (in the old-school sense of the word) by the incongruities between the language and the intentions of those whose lust for power was insatiable. It was probably from his fable-like Animal Farm that I first surmised that when someone uses a neutral word, like “carbon” in a negative way over and over again, alarm bells should go off in your head. Carbon has been denigrated now for a very long time. I was hearing, in 1986, in a torturous argument favoring a certain species of owl over human activity (a species that we now know was being diminished by a propensity to cross breed with another species), about old-growth trees as “carbon sumps”. As with any such Big Lie, we would do well to question the motives behind it. “Make the lie big, make it simple, keep saying it, and eventually they will believe it.”
In conclusion, there are simply too many “tells” surrounding this decades-in-the-making con job for prudent people to go along with it. Future generations will likely look back and see “human caused global warming” as just that. I would not be surprised, though, if for a few years “plausible if not quite true” is more than enough to keep any number of “green” enterprises prospering. There is certainly room for further innovation with respect to how we might better handle or minimize the use of substances that are actually noxious and/or harmful. For the speculative minded, this is the stuff of opportunity (adept speculation being more about what “seems” rather than what really is.) I am also optimistic that a “silver lining” in the fog of slander that surrounds carbon might be found if “carbon reduction” helps the US nuclear power industry recover from its thirty year bad dream. Any serious effort to reduce the combustion of hydrocarbons for energy simply must include this safe, clean and reasonably priced alternative. Nuclear power produces about 20% of the electricity the US uses, coal about 50%. These proportions should probably be about the other way around. They will probably get there over the next few decades, but thanks to the “threat of global warming”, it could happen a good bit faster than it would have otherwise.
Wednesday, April 22, 2009
Tuesday, April 7, 2009
Class Warfare
This edition of Musings finds many us basking in the warm glow of moderately re-inflated net worth, but at least a little bit nervous about the “so far, so fast” nature of the Market’s advance off of the March 9 low. By my intraday measure, it coincides quite neatly with the rally that carried it off of its November 21 low until January 6. We should not be surprised if in the weeks and months ahead the Market finds ways to pause, stutter and otherwise unsettle us. The potential energy that powers decompression inevitably spends itself, most likely before the fuel of improving fundamentals has ignited in a meaningful way. That said, I find it increasingly likely that March 9 did indeed demark a moment of Maximum Pessimism, the likes of which I suspect my generation is unlikely to ever experience again.
My efforts to draw on history as a way of understanding all of this “uncharted territory” we have supposedly entered continue to remind me that there really is nothing new under the sun. Since I last wrote about the late Seventies, I dug up a very illuminating book that I had read during grad school. Written in 1978, A Time for Truth is essentially William Simon’s account of his service as Secretary of Treasury and what seems to have been Energy “czar”. In vivid detail and the tones of one trying to rally his countrymen to the defense of all he held dear, it was quite the wake-up call. (I remember also seeing a PBS series based on Milton Friedman’s Free to Choose.) The reader has to constantly remind himself (noticing how small the dollar figures were, as in “..and this Agency spent almost $25MM…” helps in this regard) that he was not writing about our present situation. The very chapter titles are redolent with the seeming spirit of 2009: Freedom v. Dictatorship, Dictatorship in Microcosm (about government’s role in mismanaging the energy industry into a crisis) and Disaster: Visible and Invisible. At the time I had been only dimly aware of how close both New York City and the UK economy were to failing (being quite preoccupied with more proximate concerns). This book made it clear just how potentially catastrophic those situations had become. A leisurely skim would be a useful tonic for anyone suffering under the delusion that we are presently, in every sense of the words, in “uncharted territory”.
Perhaps what impelled me to reach back into the shelves was a sense that, okay, history repeats itself, but some things do change. I wanted to flesh out what might really different this time, besides the dollars having shriveled since when a pitcher of beer might be had for less than $1, minimum wage was $2.35 and having $1MM meant you were rich. Musings has already touched on a few. The ubiquity of what we call “news” and the incessant need of its purveyors to “out-shrill” each other, as opposed to what three channels provided for a couple hours at the end of the day, springs readily to mind. This has to have had some effect in exacerbating the emotional currents which define markets. I think it also matters that “investing” is much less a spectator sport than it was a generation ago. I remember hearing Sir John Templeton in April 1984 predicting a sort of peoples’ capitalism, in which in the years ahead share ownership would become much more the norm. It was hard to imagine at that time just how important 401ks and such would become to so many households. Market volatility strikes much more deeply into whatever sense of security these households might have than it would have then. This has the potential to make demagoguery that much more efficacious. It renders plausible, to a people who seem ever more given over to subjective considerations of reality, that capitalism and those who champion it have failed us.
The one concept within Simon’s assessment of the situation a generation ago that struck me as most apropos to today was his discussion (attributed to Irving Kristol) of what was called the “new class”. Herein we find a seemingly endless struggle of the age, the perceived outcome of which sets the direction of the long term trend of the Market. It is class warfare, but not along lines that “class” is commonly understood. Writing in the WSJ in May 1975, Kristol noted that this “new class is not easily defined but may be vaguely described. It consists of a goodly number of these college-educated people whose skills and vocations proliferate in a ‘post industrial society’; scientists, teachers and educational administrators, journalists and other communicators, psychologists, social workers, city planners, bureaucrats..”. He goes on to note that this class does not “control the media, they are the media, just as they are our educational system, our public health and welfare system, and much else..”. He notes that this class is not interested in money so much as in power, “power to shape our civilization-a power which, in a capitalist system, ought to reside in the free market. This “new class” wants to see much of this power redistributed to government, where it will then have a major say in how it is to be exercised.”
Reinforcing for us that then as now, there is nothing new under the sun, he notes, “..One used to call this group “the intellectuals”, and they are the ancestors of our own “new class”, very few of whom are intellectuals but all of whom inherit attitudes that have flourished among intellectuals for more than a century and a half. This attitude may accurately be called “elitist”- though people who are convinced they incarnate “the public interest”, as distinct from all the private interests in a free society, are not likely to think of themselves in such a way. It is basically suspicious of, and hostile to, the market, precisely because the market is vulgarly democratic- one dollar, one vote.”
I think what the Market has struggled with over the past few months (and, more prospectively, for the past ten years) is a resurgent “new class”. Just as there is nothing really new about “New Age” (is that expression even used anymore?) Kristol intimates that the new class is not exactly new. What was new in 1975 is more so today, that what had been mere coteries had reached out to each other and found ways to collaborate and grow their numbers to a degree that registers as a class. It seemed to be working for them going into the Seventies, but as Paul Johnson has pointed out, the whole collectivist project had lost confidence by the end of that decade. Every day in every way, one could look around and see that despotism hard and soft had been found wanting. Most of the world was good and ready to give freedom a chance, which led to a couple of decades of a rising tide lifting most of the boats that came to be thought of as normal. We should not be surprised that the passage of thirty years has caused the lessons learned during what Johnson called America’s Suicide Attempt to wear a little thin and given this “new class” a bit of purchase to reassert itself.
The Market knows that freedom and prosperity have enemies, and it is trying to decide if these preconditions can be adequately defended against a resurgent enemy class. Viewing the matter superficially, one is tempted to despair, as the various components of Kristol’s new class have put down roots and broadened their constituencies. It is as if the old “Establishment” has been redefined. However, I am not so sure that much like the Soviet Union twenty years ago or the newspaper publishers, what, maybe three year ago, what seem to be towering monoliths might actually be tottering edifices riddled with dry rot. Corruption takes its toll just as easily when the operative lust is for power or approbation as when it is for money. I think that this enemy at the gate looked a whole lot more formidable in January and February, when it was like a distant horde coming over the hill for the first time. Everyone within the walls of our great city got a little weak in the knees. Then as they started to have to actually execute maneuvers, the Market saw that however vast this horde seemed to be, its victory was far from assured, and courage was renewed.
“Know Your Enemy” It seems almost countercultural of late to even talk in terms of having enemies. I mean, why can’t we all just get along? The fact of the matter is, though, is that there are sizeable blocs of people who for whatever psychological, ideological or otherwise convoluted reason are resentful of other peoples’ good fortune. The Politics of Resentment are ageless. Whenever such people gain an upper hand that cannot be remedied by electoral process, a reversion to Hobbes’ “brutish, nasty and short” ensues. Kristol’s “new class” is a fair enough way to characterize this, but I suspect the makeup of this “class” can be clarified. I see it as an amalgam of three interest groups. The largest and so most politically important might better be called the Meddling Class. It would seem to consist of those who are given over to that lust for power that impels them to want to boss other people around (if only by imposing rules, regulations and thought-codes). This is true to an extent, but I strongly suspect that the big headcount is more about “rice bowls” and “place”. By this, I mean that however earnestly many of these folks might have started out, as the slog of life wears on, a spiffed up form of serfdom, variously called tenure or seniority, gradually takes hold. (Exhibit A would be that institution we call Education, which over the past generation has done an enviable job of securing for its members a sweet and seemingly intractable place at the trough of taxpayer largesse. And now, there is movement afoot to make this entity, untouched for over a century by anything resembling what the private sector calls restructuring, an even more voracious incinerator of what would otherwise be household discretionary income.) The Meddling Class is not just a place for those for whom it is important to look good and feel good while doing good (important as this is in an age of radical subjectivism). If you toe the line your moderately comfortable place on the plantation will be assured. In Modern Times, Paul Johnson described how when what used to be called “the Establishment” had lost its clout, it opened its ranks and promoted those who had complementary interests (i.e., political power). These burgeoned into the Meddling Class. The remnants of said Establishment, whoever they are, would be a second component of the enemies of “one dollar, one vote vulgarity”.
I am inclined to think that the third and most intriguing enemy of capital is a subset of capital itself. Nikita Kruschev’s prediction that capitalism would provide the rope for its own hanging had a seed or two of truth in it. It would be the height of naivety to suppose that among the personages who populate the heights of finance there are not at least a few who will make a deal with anybody if the believe there is gain to be had, even if that other party wishes them ill if not dead. A misplaced sense of invulnerability is part of the Master of the Universe syndrome. Among the speculators we call hedge fund operators, and those remnants of the Establishment who sit astride the most established of corporations, one sees a certain Neo-mercantilist leaning. What greed addled Master of the Universe wouldn’t want to see more and more of the most important decisions rendered by persons with whom he (or one of his high-dollar factotums) has formed a close, personal relationship? If one finds themselves in such an advantageous position, one very rationally seeks to defend and enhance it, even if they call themselves a capitalist. So what we are getting is that the Meddling Class brings the votes while the Neo-Mercantilists pony up the funds. They might not actually want to see the engine of prosperity rendered feeble, indeed they have become accustomed to enjoying its fruit, but to the extent to which they crowd out, disadvantage and otherwise discourage those who might be called the Productive Class, that is the effect.
My expectation is that the Market will continue to fitfully decompress until the passage of time brings us closer to that referendum that is midterm elections. Then it will strain the poll data for clues as to whether the enemies of capital and their enablers have rediscovered the cleverness with which they seized power, or squandered their political capital, alienated the independents and aroused what had been the somnolent elements of their opposition. (For what it’s worth, I lived for twelve years in the 20th District of New York, East Chatham to be exact. They are presently awaiting absentee ballots to determine the outcome of an otherwise deadlocked election. We are told to wonder “if the Republicans can’t win here, where can they win?” Based on the demographic shift that gathered speed between 1994 to 2005, towards a sort of giant outdoor theme park for “second home” city people (at least a couple of whom I have overheard on the train talking of voting at both residences) it should have been a slam dunk for the Democrat.) It surely won’t get there in a straight line, but I think the Market could easily be up another 20%+ from here (DJIA: 7935) over the next twelve or so months. Then we will probably be looking at one tough call.
My efforts to draw on history as a way of understanding all of this “uncharted territory” we have supposedly entered continue to remind me that there really is nothing new under the sun. Since I last wrote about the late Seventies, I dug up a very illuminating book that I had read during grad school. Written in 1978, A Time for Truth is essentially William Simon’s account of his service as Secretary of Treasury and what seems to have been Energy “czar”. In vivid detail and the tones of one trying to rally his countrymen to the defense of all he held dear, it was quite the wake-up call. (I remember also seeing a PBS series based on Milton Friedman’s Free to Choose.) The reader has to constantly remind himself (noticing how small the dollar figures were, as in “..and this Agency spent almost $25MM…” helps in this regard) that he was not writing about our present situation. The very chapter titles are redolent with the seeming spirit of 2009: Freedom v. Dictatorship, Dictatorship in Microcosm (about government’s role in mismanaging the energy industry into a crisis) and Disaster: Visible and Invisible. At the time I had been only dimly aware of how close both New York City and the UK economy were to failing (being quite preoccupied with more proximate concerns). This book made it clear just how potentially catastrophic those situations had become. A leisurely skim would be a useful tonic for anyone suffering under the delusion that we are presently, in every sense of the words, in “uncharted territory”.
Perhaps what impelled me to reach back into the shelves was a sense that, okay, history repeats itself, but some things do change. I wanted to flesh out what might really different this time, besides the dollars having shriveled since when a pitcher of beer might be had for less than $1, minimum wage was $2.35 and having $1MM meant you were rich. Musings has already touched on a few. The ubiquity of what we call “news” and the incessant need of its purveyors to “out-shrill” each other, as opposed to what three channels provided for a couple hours at the end of the day, springs readily to mind. This has to have had some effect in exacerbating the emotional currents which define markets. I think it also matters that “investing” is much less a spectator sport than it was a generation ago. I remember hearing Sir John Templeton in April 1984 predicting a sort of peoples’ capitalism, in which in the years ahead share ownership would become much more the norm. It was hard to imagine at that time just how important 401ks and such would become to so many households. Market volatility strikes much more deeply into whatever sense of security these households might have than it would have then. This has the potential to make demagoguery that much more efficacious. It renders plausible, to a people who seem ever more given over to subjective considerations of reality, that capitalism and those who champion it have failed us.
The one concept within Simon’s assessment of the situation a generation ago that struck me as most apropos to today was his discussion (attributed to Irving Kristol) of what was called the “new class”. Herein we find a seemingly endless struggle of the age, the perceived outcome of which sets the direction of the long term trend of the Market. It is class warfare, but not along lines that “class” is commonly understood. Writing in the WSJ in May 1975, Kristol noted that this “new class is not easily defined but may be vaguely described. It consists of a goodly number of these college-educated people whose skills and vocations proliferate in a ‘post industrial society’; scientists, teachers and educational administrators, journalists and other communicators, psychologists, social workers, city planners, bureaucrats..”. He goes on to note that this class does not “control the media, they are the media, just as they are our educational system, our public health and welfare system, and much else..”. He notes that this class is not interested in money so much as in power, “power to shape our civilization-a power which, in a capitalist system, ought to reside in the free market. This “new class” wants to see much of this power redistributed to government, where it will then have a major say in how it is to be exercised.”
Reinforcing for us that then as now, there is nothing new under the sun, he notes, “..One used to call this group “the intellectuals”, and they are the ancestors of our own “new class”, very few of whom are intellectuals but all of whom inherit attitudes that have flourished among intellectuals for more than a century and a half. This attitude may accurately be called “elitist”- though people who are convinced they incarnate “the public interest”, as distinct from all the private interests in a free society, are not likely to think of themselves in such a way. It is basically suspicious of, and hostile to, the market, precisely because the market is vulgarly democratic- one dollar, one vote.”
I think what the Market has struggled with over the past few months (and, more prospectively, for the past ten years) is a resurgent “new class”. Just as there is nothing really new about “New Age” (is that expression even used anymore?) Kristol intimates that the new class is not exactly new. What was new in 1975 is more so today, that what had been mere coteries had reached out to each other and found ways to collaborate and grow their numbers to a degree that registers as a class. It seemed to be working for them going into the Seventies, but as Paul Johnson has pointed out, the whole collectivist project had lost confidence by the end of that decade. Every day in every way, one could look around and see that despotism hard and soft had been found wanting. Most of the world was good and ready to give freedom a chance, which led to a couple of decades of a rising tide lifting most of the boats that came to be thought of as normal. We should not be surprised that the passage of thirty years has caused the lessons learned during what Johnson called America’s Suicide Attempt to wear a little thin and given this “new class” a bit of purchase to reassert itself.
The Market knows that freedom and prosperity have enemies, and it is trying to decide if these preconditions can be adequately defended against a resurgent enemy class. Viewing the matter superficially, one is tempted to despair, as the various components of Kristol’s new class have put down roots and broadened their constituencies. It is as if the old “Establishment” has been redefined. However, I am not so sure that much like the Soviet Union twenty years ago or the newspaper publishers, what, maybe three year ago, what seem to be towering monoliths might actually be tottering edifices riddled with dry rot. Corruption takes its toll just as easily when the operative lust is for power or approbation as when it is for money. I think that this enemy at the gate looked a whole lot more formidable in January and February, when it was like a distant horde coming over the hill for the first time. Everyone within the walls of our great city got a little weak in the knees. Then as they started to have to actually execute maneuvers, the Market saw that however vast this horde seemed to be, its victory was far from assured, and courage was renewed.
“Know Your Enemy” It seems almost countercultural of late to even talk in terms of having enemies. I mean, why can’t we all just get along? The fact of the matter is, though, is that there are sizeable blocs of people who for whatever psychological, ideological or otherwise convoluted reason are resentful of other peoples’ good fortune. The Politics of Resentment are ageless. Whenever such people gain an upper hand that cannot be remedied by electoral process, a reversion to Hobbes’ “brutish, nasty and short” ensues. Kristol’s “new class” is a fair enough way to characterize this, but I suspect the makeup of this “class” can be clarified. I see it as an amalgam of three interest groups. The largest and so most politically important might better be called the Meddling Class. It would seem to consist of those who are given over to that lust for power that impels them to want to boss other people around (if only by imposing rules, regulations and thought-codes). This is true to an extent, but I strongly suspect that the big headcount is more about “rice bowls” and “place”. By this, I mean that however earnestly many of these folks might have started out, as the slog of life wears on, a spiffed up form of serfdom, variously called tenure or seniority, gradually takes hold. (Exhibit A would be that institution we call Education, which over the past generation has done an enviable job of securing for its members a sweet and seemingly intractable place at the trough of taxpayer largesse. And now, there is movement afoot to make this entity, untouched for over a century by anything resembling what the private sector calls restructuring, an even more voracious incinerator of what would otherwise be household discretionary income.) The Meddling Class is not just a place for those for whom it is important to look good and feel good while doing good (important as this is in an age of radical subjectivism). If you toe the line your moderately comfortable place on the plantation will be assured. In Modern Times, Paul Johnson described how when what used to be called “the Establishment” had lost its clout, it opened its ranks and promoted those who had complementary interests (i.e., political power). These burgeoned into the Meddling Class. The remnants of said Establishment, whoever they are, would be a second component of the enemies of “one dollar, one vote vulgarity”.
I am inclined to think that the third and most intriguing enemy of capital is a subset of capital itself. Nikita Kruschev’s prediction that capitalism would provide the rope for its own hanging had a seed or two of truth in it. It would be the height of naivety to suppose that among the personages who populate the heights of finance there are not at least a few who will make a deal with anybody if the believe there is gain to be had, even if that other party wishes them ill if not dead. A misplaced sense of invulnerability is part of the Master of the Universe syndrome. Among the speculators we call hedge fund operators, and those remnants of the Establishment who sit astride the most established of corporations, one sees a certain Neo-mercantilist leaning. What greed addled Master of the Universe wouldn’t want to see more and more of the most important decisions rendered by persons with whom he (or one of his high-dollar factotums) has formed a close, personal relationship? If one finds themselves in such an advantageous position, one very rationally seeks to defend and enhance it, even if they call themselves a capitalist. So what we are getting is that the Meddling Class brings the votes while the Neo-Mercantilists pony up the funds. They might not actually want to see the engine of prosperity rendered feeble, indeed they have become accustomed to enjoying its fruit, but to the extent to which they crowd out, disadvantage and otherwise discourage those who might be called the Productive Class, that is the effect.
My expectation is that the Market will continue to fitfully decompress until the passage of time brings us closer to that referendum that is midterm elections. Then it will strain the poll data for clues as to whether the enemies of capital and their enablers have rediscovered the cleverness with which they seized power, or squandered their political capital, alienated the independents and aroused what had been the somnolent elements of their opposition. (For what it’s worth, I lived for twelve years in the 20th District of New York, East Chatham to be exact. They are presently awaiting absentee ballots to determine the outcome of an otherwise deadlocked election. We are told to wonder “if the Republicans can’t win here, where can they win?” Based on the demographic shift that gathered speed between 1994 to 2005, towards a sort of giant outdoor theme park for “second home” city people (at least a couple of whom I have overheard on the train talking of voting at both residences) it should have been a slam dunk for the Democrat.) It surely won’t get there in a straight line, but I think the Market could easily be up another 20%+ from here (DJIA: 7935) over the next twelve or so months. Then we will probably be looking at one tough call.
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