New York Review of Books: Grand Old Marxists

[Winehole23]

A specter is haunting the Republican National Convention—the specter of ideology. The novelist Ayn Rand (1905–1982) and the economist Friedrich von Hayek (1899–1992) are the house deities of many American libertarians, much of the Tea Party, and Paul Ryan in particular. The two thinkers were quite different, subject to much misunderstanding, and, in Hayek’s case, more often cited than read. Yet, in popularized form, their arguments together provide the intellectual touchstone for Ryan and many others on the right wing of the Republican Party, people whose enthusiasm Mitt Romney needs.


The irony of today is that these two thinkers, in their struggle against the Marxist left of the mid-twentieth century, relied on some of the same underlying assumptions as Marxism itself: that politics is a matter of one simple truth, that the state will eventually cease to matter, and that a vanguard of intellectuals is needed to bring about a utopia that can be known in advance. The paradoxical result is a Republican Party ticket that embraces outdated ideology, taking some of the worst from the twentieth century and presenting it as a plan for the twenty-first.



Romney’s choice of an ideologist as his running mate made a kind of sense. Romney the financier made hundreds of millions of dollars in an apparent single-minded pursuit of returns on investment; but as a politician he has been less noted for deep principles than for expediently changing his positions. Romney’s biography was in need of a plot and his worldview was in need of a moral. Insofar as he is a man of principle, the principle seems to be is that rich people should not pay taxes. His fidelity to this principle is beyond reproach, which raises certain moral questions. Paying taxes, after all, is one of our very few civic obligations. By refusing to release his tax returns, Romney is likely trying to keep embarrassing tax dodges out of public view (http://www.nybooks.com/blogs/nyrblog/2012/aug/22/romneys-taxes-poke/); he is certainly communicating to like-minded wealthy people that he shares their commitment to doing nothing that could possibly help the United States government. The rationale that Ryan’s ideology provides for this unpatriotic behavior is that taxing rich people hinders the market. Rather than engaging in activist politics, such as bailing out General Motors or public schools, our primary responsibility as American citizens is to give way to the magic of the marketplace, and applaud any associated injustices as necessary and therefore good.


This is where Ryan comes in. Romney provides the practice, Ryan the theory. Romney has lots of money, but has never managed to present the storyline of his career as a moral triumph. Ryan, with his credibility as an ideas politician (http://www.nybooks.com/blogs/nyrblog/2012/aug/16/romneys-choice/), seems to solve that problem. In the right-wing anarchism that arises from the marriage of Rand and Hayek, Romney’s wealth is proof that all is well for the rest of us, since the laws of economics are such that the unhindered capitalism represented by chop-shops such as Bain must in the end be good for everyone.


The problem with this sort of economic determinism is that it is Marxism in reverse, with the problems of the original kind. Planning by finance capitalists replaces planning by the party elite. Marx’s old dream, the “withering away” of the state, is the centerpiece of the Ryan budget: cut taxes on the rich, claim that cutting government functions and the closing of unspecified loopholes will balance budgets, and thereby make the state shrink. Just like the Marxists of another era, the Republican ticket substitutes mythical thinking about the economy for loyalty to the nation.
http://www.nybooks.com/blogs/nyrblog/2012/aug/28/grand-old-marxists/

[Winehole23]

The attempt to add intellectual ballast to Romney’s career pulls the ticket downward into the slog of twentieth-century ideology. Hayek’s Road to Serfdom, which in its better passages is a paean to modesty in economics, is read by leading Republicans as the formula that intervention in the free market must lead to totalitarianism. This is a nice confident story, with a more than superficial resemblance to the nice confident Marxist story that a free market without intervention would bring revolution (http://www.nybooks.com/articles/archives/2010/sep/30/captive-minds/). Like Marxism, the Hayekian ideology is a theory of everything, which has an answer for everything. Like Marxism, it allows politicians who accept the theory to predict the future, using their purported total knowledge to create and to justify suffering among those who do not hold power. Ayn Rand is appealing in a more private way because she celebrates unbridled anarchic capitalism: it magnifies inequality and brings pleasure to the wealthy, who deserve it for being so wonderful, and pain to the masses, who deserve it for being so stupid. Hayek thought that we should hesitate to intervene in the market because certainty about economic matters was impossible; Rand thought that the law of the jungle was itself a rather good (and sexy) thing.

[Winehole23]

Rich Republicans such as Romney are of course a small minority of the party. Not much of the Republican electorate has any economic interest in voting for a ticket whose platform is to show that government does not work. As Ryan understands, they must be instructed that their troubles are not simply a pointless contrast to the gilded pleasures of the man at the top of the Republican ticket, but rather part of the same story, a historical drama in which good will triumph and evil will be vanquished. Hayek provides the rules of the game: anything the government does to interfere in the economy will just make matters worse; therefore the market, left to its own devices, must give us the best of all possible worlds.

[Winehole23]

Which is the more redistributionist of our two parties? In recent decades, as Republicans have devoted themselves with laser-like intensity to redistributing America’s wealth and income upward, the evidence suggests the answer is the GOP.

The most obvious way that Republicans have robbed from the middle to give to the rich has been the changes they wrought in the tax code — reducing income taxes for the wealthy in the Reagan and George W. Bush tax cuts, and cutting the tax rate on capital gains (http://accf.org/wp-content/uploads/2012/04/1204-15-ACCF-Special-Report-on-Capital-Gains_FINAL.pdf) to less than half the rate (http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213) on the top income of upper-middle-class employees.





The less widely understood way that Republicans have helped redistribute wealth to the already wealthy is by changing the rules. Markets don’t function without rules, and the rules that Republican policymakers have made since Ronald Reagan became president have consistently depressed the share of the nation’s income that the middle class can claim.



Part of the intellectual sleight-of-hand that Republicans employ in discussions of redistribution is to reserve that term solely for government intervention in the market that redistributes income downward. But markets redistribute wealth continuously. In recent decades, markets have redistributed wealth from manufacturing to finance, from Main Street to Wall Street, from workers to shareholders. Rules made by “pro-market” governments (including those of “pro-market” Democrats) have enabled these epochal shifts. Free trade with China helped hollow out manufacturing; the failure to regulate finance enabled Wall Street to swell; the opposition to labor’s efforts to reestablish an even playing field during organizing campaigns has all but eliminated collective bargaining in the private sector.



The conservative counter to such liberal cavils is to assert that the market increases wealth, which will eventually descend on everyone as the gentle rains from heaven. Decrying such Keynesian notions as unions or federally established minimum wages, hedge fund guru Andy Kessler recently argued (http://online.wsj.com/article/SB10000872396390444100404577641280041366306.html) in the Wall Street Journal that “it is workers’ productivity that drives long-term wage gains, not workers’ wages that drive growth.”


But Kessler assumes — and this is the very essence of the “trickle-down” argument — that workers reap the rewards of productivity gains. Believing and asserting that requires either ignorance or willful denial of economic history. The only time in U.S. history when workers substantially benefited from productivity gains was the three decades that followed World War II, when median household income and productivity gains both increased by 102 percent (http://library.fes.de/pdf-files/id-moe/08922-20120302.pdf). Not coincidentally, that was also the only period of genuine union power (http://www.washingtonpost.com/opinions/what-happens-if-america-loses-its-unions/2012/06/12/gJQA1d7UYV_story.html) in U.S. history, and the time when the tax code was at its most progressive. During the past quarter-century, as progressivity was lessened and unions diminished, all productivity gains have gone to the wealthiest 10 percent (http://www.nber.org/papers/w11842), according to research published by the National Bureau of Economic Research. In 1955, at the height of union strength, the wealthiest 10 percent received 33 percent of the nation’s personal income. In 2007, they received 50 percent, Economic Policy Institute data (http://www.epi.org/publication/unions-decline-inequality-rises/) show.



If that’s not redistribution, I don’t know what is.
http://www.washingtonpost.com/opinions/harold-meyerson-the-party-that-truly-believes-in-redistribution/2012/09/25/c5877b7a-0740-11e2-afff-d6c7f20a83bf_story.html

[Winehole23]

Yet, in fact, governments throughout our history — Republican and Democratic — have used taxes and transfers to subsidize the poor with money from the better off. At the end of the administration of George W. Bush in 2008, taxes and government spending trimmed the Gini index — a common measure of inequality that ranges from 0 when everybody has the same to 1 when a single person hogs everything — to 0.444, from 0.579, according to the Congressional Budget Office.



Redistribution by government doesn’t always fit our expectations. President Reagan was indeed set against a broad redistribution of wealth. By the time he left office, the federal government was doing far less to close the gap on income inequality than when he arrived.



Since then, however, there have been some surprising turns. President Bill Clinton, for instance, redistributed less than his predecessor, George H. W. Bush. When Mr. Clinton took the reins of government in 1993, taxes and transfers reduced the Gini index measure of inequality by 23 percent, according to the budget office. When he left office in 2000, income inequality was much greater than when he started. Yet government closed the gap by only 21 percent.



Even George W. Bush did more. He slashed taxes on the rich and tried to privatize Social Security (http://topics.nytimes.com/top/reference/timestopics/subjects/s/social_security_us/index.html?inline=nyt-classifier). But by the end of his administration, taxes and government spending closed the income gap by 23 percent.
http://www.nytimes.com/2012/09/26/business/obama-and-romneys-redistribution-debate-has-a-gray-area.html?pagewanted=all&_r=0

[Winehole23]

http://graphics8.nytimes.com/images/2012/09/26/business/26porter-graphic/26porter-graphic-articleInline.jpg

[Homeland Security]

I've read Hayek. The author of the New York Review of Books either hasn't actually read Hayek, or finds it more advantageous to argue against a strawman dressed like Hayek.

Most of Hayek's economic theories are wrong. They fail to predict the business cycle correctly. Milton Friedman has said as much.

Hayek's best work is in political theory. The NYRB author lies in saying that Hayekism is a "theory of everything." I found his philosophy to be pretty limited. Its primary application is against the British move towards actual socialism -- as in actual state control of part of the means of production -- especially following World War II. Its application to American politics is just by analogy.

The claim that Hayekism needs "a vanguard of intellectuals" just like Marxism strikes me as a lie. The political theorists are not the "vanguard." Marxism relies on the vanguard to make decisions about resource allocation in a planned economy during the transition to pure communism. In Hayekism, those decisions are supposed to be widely dispersed in a market economy.

A corporate state such as we have today, be it "right-" or "left-wing" depending on what happened in the last "election," where an oligarchy makes the vast majority of economic decisions, has much more in common with Marxism than anything Hayek envisioned.

Claiming that Hayek represents "right-wing anarchism" is another lie. If you actually read him, you see, for example, that he his quarrel is not with the redistributionist welfare state nor with taxation per se. His argument is that a centrally planned economy is inefficient, destroys wealth, and requires curtailment of freedoms to ameliorate its inefficiencies. That far, he makes sense. He goes too far when he says that a state that curtails freedoms necessarily will attract power-hungry thugs who push the state towards brutal totalitarianism. While I think that is much more likely in a very large and diverse country with a highly complex and integrated economy like the United States, it certainly did not happen in the small, homogeneous Scandinavian social democracies, and thus probably would not have happened in Britain, the primary audience for his writing. When conservatives cite Hayek to argue against tax rates themselves as opposed to intrusive tax policy, they misinterpret what he said. Hayek is not Laffer and not Friedman.

The author implies that reliance on the philosophies of Rand and Hayek is something new on the right. This is nonsense. Their views underpinned the 1970's revolution in the UK Conservative Party that ushered in Margaret Thatcher, and held currency with Ronald Reagan starting in the 1960's. Their ideas have been part and parcel of modern conservatism since its inception and their influence wanes and waxes based upon current events.

The Washington Post author begs the question that working-class prosperity in the postwar periods was because of the influence of unions and of a progressive tax code. I would assert that American dominance from 1945-1971 was the result of World War II's having devastated the infrastructure of almost all the other industrialized nations whose economies might have rivaled the U.S.'s, and those other nations needing 25 years to rebuild and catch back up. During that period, if you wanted a finished good, you probably needed to get it from the United States. Unskilled labor here was at a premium because things could only be made here, and somebody had to make them. That hasn't been true for a long time, first since the other industrialized economies rebuilt, and then since so many developing nations have industrialized. Unskilled labor is worth the global rate now, which won't support the standard of living to which most Americans are accustomed. The good old days are never coming back, no matter what politicians might promise. The rabble will have to accept a lower standard of living. Since they are unlikely to do so willingly, it will take stamping them in the face with a jackboot so they understand they have no other alternative.

I think this is par for the course for the board's alleged "thoughtful conservative" to post a torrent of misleading leftist pap.

[Homeland Security]

The Gini coefficient is at best a proxy for what those driving public policy should be interested in. Economic equality per se is not necessarily a good thing, for example in most of the communist countries where most people were equally poor.

The goal should be to have as many people as possible exceed a predetermined "reasonable" standard of living, which includes things like a decent place to live, food security, access to health care, access to education, etc. Sound like leftie goals? Sure, but keep reading. In order to make those things available, the nation needs to have a certain level of wealth. Wealth has to be created through value-added work. Statist systems are poor at incentivizing value creation; they tend to take wealth for granted, for example, or make other fallacies such as ascribing value to work itself, regardless of whether or not it is productive (a major flaw in Marxism). They tend to ignore how tax policies incentive or disincentivize resource allocation behavior (made all the worse by their keen understanding of how tax policies incentive behavior for social engineering). They pick "winners" and "losers" in the economy, i.e. they make assumptions about what decisions will add value over wide swaths of the economy based upon incomplete or oversimplified information -- or worse, based upon wishful thinking about how they would like the world to be rather than how it is. Cumulatively, these decisions destroy wealth and create a negative feedback loop where the welfare benefits the statists allegedly wish to provide become ever more elusive and require ever greater economic intervention to achieve. In the meantime, those in power help themselves to the first cut of the nation's resources they control. Though their goal of leftist "positive rights" stays ever elusive, they live quite well during the pursuit.

"Right" and "left" aside, America has gone very far in the statist direction, complete with its very own "vanguard" or political and cultural elites and corporatists. Experience says they will not yield their power and wealth willingly; violence is necessary to extract them. In America, these people are predominantly white and culturally liberal. It will be necessary to kill a large number of these people, at least enough so that the remainder get the message that their days are over.

[Winehole23]

I think this is par for the course for the board's alleged "thoughtful conservative" to post a torrent of misleading leftist pap.it struck me as a bit too pat and polemical, which was why I posted it. hoping for replies and maybe some discussion on redistribution. you delivered. nice takedown, nice exposition. much appreciated.

if there's one point of emphasis I agree with, it's that the right has latched onto man as homo economicus. with more or less dire prospects for traditional conservatism and mankind.

[Winehole23]

also, as a matter of political style anarcho-capitalism and the lumpen-Hayekianism you justly lampoon are very much in vogue. you know, drowning the baby in the bath water and all that.

[Homeland Security]

The leftie urge to raise capital gains taxes is an example of how they either just don't get it or don't care. We really, really, really want wealthy people to invest their riches as capital rather than just holding onto it or blowing it all on shoes and hats. We want to incentivize that behavior.

Appealing to class envy and then proposing to raise the capital gains tax rate makes no sense. If you have a super-rich guy who lives modestly and puts all his wealth into job-creating enterprises, Americans tend to like that guy. If you have a super-rich guy who blows all his wealth on houses, cars, parties with strippers, etc., Americans tend to think that guy is a fool. If you want to raise taxes on the rich, raise taxes on their consumption, not their investment. But consumption taxes are villified as "regressive." Then devise a system to make them progressive.

[Winehole23]

sounds reasonable to me

[Homeland Security]

I think a graduated VAT in exchange for reduced payroll and income taxes would be a wonderful idea. Tea Partyists decry it as letting the camel get his nose in the tent. Whatever; we already have sales taxes, and a VAT isn't all that different.

Too many Tea Partyists share the same ideology as the client groups of the left, which is basically, "give me free shit." Nothing more complicated than that is driving the ideology. The only difference I see is that whereas the left wants more and more free shit, the right wants the existing shit to get freer and freer. California has been operated according to these two principles for decades.

People get the government they deserve. People who trade freedom for promises of free shit earn their inevitable chains.

[symple19]

The leftie urge to raise capital gains taxes is an example of how they either just don't get it or don't care. We really, really, really want wealthy people to invest their riches as capital rather than just holding onto it or blowing it all on shoes and hats. We want to incentivize that behavior.

Appealing to class envy and then proposing to raise the capital gains tax rate makes no sense. If you have a super-rich guy who lives modestly and puts all his wealth into job-creating enterprises, Americans tend to like that guy. If you have a super-rich guy who blows all his wealth on houses, cars, parties with strippers, etc., Americans tend to think that guy is a fool. If you want to raise taxes on the rich, raise taxes on their consumption, not their investment. But consumption taxes are villified as "regressive." Then devise a system to make them progressive.

Interesting point. Makes a lot of sense