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Capitalism vs. democracy

from David Ruccio

I have been arguing for some time on this blog that contemporary capitalism faces a profound legitimation crisis. It has failed to deliver on its promises, and therefore is being calling into question.

As it turns out, Martin Wolf, the chief economics commentator at the Financial Times, has also sounded a warning about the ongoing legitimacy crisis. But for him it’s a bit different. The problem, as he sees it, is the tension between democracy and capitalism.

A natural connection exists between liberal democracy — the combination of universal suffrage with entrenched civil and personal rights — and capitalism, the right to buy and sell goods, services, capital and one’s own labour freely. They share the belief that people should make their own choices as individuals and as citizens. Democracy and capitalism share the assumption that people are entitled to exercise agency. Humans must be viewed as agents, not just as objects of other people’s power.

Yet it is also easy to identify tensions between democracy and capitalism. Democracy is egalitarian. Capitalism is inegalitarian, at least in terms of outcomes. If the economy flounders, the majority might choose authoritarianism, as in the 1930s. If economic outcomes become too unequal, the rich might turn democracy into plutocracy.

Historically, the rise of capitalism and the pressure for an ever-broader suffrage went together. This is why the richest countries are liberal democracies with, more or less, capitalist economies. Widely shared increases in real incomes played a vital part in legitimising capitalism and stabilising democracy. Today, however, capitalism is finding it far more difficult to generate such improvements in prosperity. On the contrary, the evidence is of growing inequality and slowing productivity growth. This poisonous brew makes democracy intolerant and capitalism illegitimate.

One can find plenty to pick apart in Wolf’s story, starting with the idea that there’s a “natural connection” between democracy and capitalism. There’s nothing natural about it, although clearly there is a historical relationship—complex, fragile, and contested—between democratic political structures and capitalist economies.

But Wolf does understand that today’s capitalism is global:

Left to themselves, capitalists will not limit their activities to any given jurisdiction. If opportunities are global so, too, will be their activities.

And while Wolf forgets or overlooks the fact that capitalism has been global from the very beginning, he demonstrates his awareness that the disappointing recent performance of global capitalism (“not least the shock of the financial crisis and its devastating effect on trust in the elites in charge of our political and economic arrangements”) has once again created tensions between capitalism and democracy. One source of tension is the rise of a global plutocracy (“and so in effect the end of national democracies”), the other is the rise or illiberal democracies or outright dictatorships (“in which the elected ruler exercises control over both the state and capitalists”).

Wolf is most worried about the danger to democracy, and therefore has come around to the view that the continued pursuit of international trade agreements (like the Trans-Pacific Partnership and the Trans-Atlantic Trade and Investment Partnership), which “tightly constrain national regulatory discretion in the interests of corporations,” needs to be curtailed and rethought.

The alternative, of course, is to safeguard and strengthen the future of democracy—in which, in Wolf’s words, economic policy can be “orientated towards promoting the interests of the many not the few”—by doing away with capitalism itself.

  1. September 8, 2016 at 9:46 pm

    Thank you David: Wolf’s column caught my attention as well. I see him as a weathervane for – am I being too generous with this characterization – “enlightened” capitalist thought? What would be next, a dialogue between him and Yanis Varoufakis, since Yanis has been writing about the tensions between democracy and Neoliberalism since I first came across his work at Naked Capitalism years ago – 2012 was when I first saw two essays by him there. Who might arrange such an exchange, and where – at one of the famous forums in England? Oxford? A role for the World Economics Association, to beat the American Economic Association to the draw (they would never go near Yanis…) ?

  2. September 8, 2016 at 9:53 pm

    Dani Rodrik call it “a trilemma” – out of nation, democracy, and globalization, you can have any two.

  3. September 8, 2016 at 10:08 pm

    Vladimir: checking Dani’s menu above, I notice that “full employment” wasn’t listed; I interpret that, though, as not being an “oversight.” Trump’s menu had a robust choice, triple-starred, “New War in the Middle East” under the Military Keynesian group; Hillary, a modest pick under “Infrastructure Infusement,” billed as the greatest domestic spending program since the end of WWII, but I haven’t seen it vetted by the quants against the Space Program or Eisenhower’s National Defense Highway program…err…I mean the Interstate Highway system. Infrastructure work divvied out from the existing corporate and “union” structure (the building trades, the most conservative part of what’s left of the AFL-CIO, are safe havens for something like this, make sure it won’t get distributed too widely…) is much safer than a labor market interferring CCC or WPA, though. My Congressman, John Delaney, a former hedge funder, funds his infrastructure proposal by tax breaks conferred upon the nearly $1 trillion in corporate profits floating above foreign landscapes…exactly the type of structure Elizabeth Warren warns us against.

  4. September 8, 2016 at 11:09 pm

    Sure that is OK. But nothing will help much unless you bridle globalization.

  5. Alan
    September 9, 2016 at 3:42 am

    Is ‘capitalism’ really the problem? In any social system –capitalistic, socialist, or whatever–there will be be a tendency for factions to arise that gain an advantage that will allow them to subvert institutions and laws to their own ends. It’s hardly a feature unique to capitalism.

  6. robert locke
    September 9, 2016 at 7:26 am

    “Historically, the rise of capitalism and the pressure for an ever-broader suffrage went together”

    This is not accurate. If we think of the 19th century as the great age of capitalism, then capitaltism was only democratic in countries where the democratic revolutions had preceded it in the 18th century. R R Palmer pinpointed the Atlantic centered world when he wrote about the age of the democratic revolution (read his book) and Alfred Cobban in his histories of France pointed out that the French Revolution was not about the industrial revolution but a social revolution. Marx was wrong. Those countries in the 19th century outside Anglo-Saxonia who engaged in capitalism, organisiertes Kapitalismus in Germany for instance, had no age of democratic revolution before emerging as the great and most dynamic capitalist economy in Europe in 1914. People can only think that capitalism and democracy go together if they make the Anglo-Saxon model, a convergence model, THE MODEL. Germany, Japan, and China did not and we’ll never understand the modern world and its possibility if we stay in the Anglo-Saxon straight jacket. If we do, we’ll be constantly surprised and unable to explain the dynamics of the world economic now centered in Asia. Nor would we waste so much time investigating an economics that developed out of Anglo-Saxonia..

  7. September 10, 2016 at 10:02 am

    Capitalism is not necessary for trade in commodities, services, and even money. Such trading situations (call them markets if you like) can be established, protected, and regulated by the democratic governments being constructed in Europe in the 18th and 19th centuries. In fact, these governments are excellent vehicles for competitive dealings, customer and business protection, and functional banking. The medieval way of life could handle none of these. As medieval society ended some saw the potential for accumulation of a volume of wealth unimaginable in that society. The new philosophy of rationalism and the emerging physical sciences could be applied to wealth creation. So begins the process to make society and its rules to suit the needs of these capitalists. In the words of Harold Laski in “The Rise of European Liberalism,” “The capitalist begins, therefore, his task of transforming that culture to suit his new purposes. To do so, no doubt, he has to proceed piece-meal; and, of course, he is not successful until he has defeated a resistance which, all in all, may be said to have lasted three centuries. He seeks to establish his right to wealth with the minimum interference from social authority of any kind. In that effort, broadly speaking, he has to pass through two great phases. On the one hand, he seeks to transform society; on the other, he seeks to capture the state. He seeks to transform society by adapting its habits and customs to a milieu suitable to his purpose. He seeks to capture the state because, thereby, he has, at long last, in his hands the supreme coercive power of society and may consciously use it for his ends. He justifies his effort by persuading his fellows— not without a considerable dose of coercion in the persuasion— that in the pursuit of wealth for its own sake social good is necessarily involved. The man who becomes rich becomes a social benefactor by the mere fact that he becomes rich. That is the essence of the new spirit. That is the central clue to the great adventure of modern times.” Laski’s cynicism may go a bit too far. But I think he’s correct describing capitalism as a wholly self-serving and anti-democratic philosophy and way of life. Democracy and capitalism have always been in conflict. They cannot be reconciled. One must triumph and one must be destroyed. At the current time the destruction of democracy is well underway.

  8. robert locke
    September 10, 2016 at 2:00 pm

    “Democracy and capitalism have always been in conflict. They cannot be reconciled. One must triumph and one must be destroyed. At the current time the destruction of democracy is well underway.”

    If you live in a democratic society, let us say Jacksonian democracy, in a land of small farmers and businessmen, capitalism and democracy are not at odds. With the rise of big money and managerial hierarchies, the conflict appeared and is inevitable. The destruction of democracy is indeed well underway.

    But I thought we were talking about the world, not just the peculiarities of American society. The Chinese have always had an autocratic government, but that has not stopped them from having a dynamic economy, authoritarianism and entrepreneurialism go hand in hand. I don’t think Chinese see any contradiction here, nor did Germans or Japanese, only Americans do and that is because democracy preexisted the concentration of wealth in big banks, financial firms, and global enterprises.

    Am I agreeing with you, Ken?

    • September 11, 2016 at 7:10 am

      Jacksonian society was certainly not capitalist. But it was democratic in a Jeffersonian sense. Capitalism cannot function within such populist oriented decision making. As for capitalism and democracy around the world I think the template of their incompatibility still applies. The situations you mention each have their own history. China from the earliest times was made up of two basic elements. Ruthless autocratic dynasties; perhaps necessary considering the external threats to China. Confucianism. Developed in ancient china, a philosophy stressing virtue, good governance and merit based promotion for government offices. Emperors and officials were to be virtuous and effective, models for their subjects. However, even with enlightened Confusion government, with virtuous examples for the people, the ancient Chinese dynasties tended to be bureaucratic and very strict. Democracy really does not fit here. But neither does capitalism. This lack of fit is a real problem for the Chinese Communist Party. Germany’s an interesting case. Never really able to get its act together. Forced in one direction or another by the Romans, the Holy Roman Empire, the Prussians, etc. By the time Germany was reconstituted after World War 2 there was little left except democracy. From that a Germanic form of capitalism evolved. You’ve described better than I can. I disagree with one of your conclusions. You contend that the contradiction between democracy and capitalism does not exist in China, Japan, Germany, etc. because democracy preexisted the concentration of wealth in big banks, financial firms, and global enterprises in these places. But democracy also preexisted these things in America. Remember Jefferson’s picture of America as a small farm/business, direct democracy, limited/small government nation. But Jefferson was overruled by wealth. The historian Richard Hofstadter once commented that the United States is by fate the richest nation the world had ever seen. Land, forests, mining, rivers, etc. so great that failing to become wealthy was impossible. Even opposition from some of the founders couldn’t stop it. The love of money took over and democracy in America was doomed. It’s made a few short-lived comebacks but nothing permanent.

      • robert locke
        September 11, 2016 at 8:31 am

        “You contend that the contradiction between democracy and capitalism does not exist in China, Japan, Germany, etc. because democracy preexisted the concentration of wealth in big banks, financial firms, and global enterprises in these places”

        .Sorry Ken, some confusion here. I contend just the opposite. People who live in societies that had not democratized before age of massive capitalistic industrial-urban transformation (late 19th century) do not yearn for a democractic-lliberal society because they never had one and don’t need one to industrialize.

        In Germany, Bismarck and Prussia defeated representative government while Germany was quite an economic backwater (1862-63); THEN under an autocratic Second Empire (1871-1914) Germany rapidly transformed itself into a dynamic modern industrial society. To the extent that Germany after WWII (or Japan) liberalized has more to do with the uniqueness of historical events, i.e., losing WWII. And don’t tell me that the defeat of Germany has to do with the superiority of liberal-democratic societies triumphing over dictatorship. I once got fired from a job during the McCarthy era (for being a Soviet sympathizer) because I said that the Soviet Union, not the Americans, tore the heart out of the German Wehrmacht in WWII. The Germans had already effectively lost the war to the Soviets before we even landed in Normandy. Historical truth did not triumph here.

        As for China. The problem the Communist party faces has always been demographic, how to take a huge population of mostly desperately poor people, and turn them into a people of plenty. Americans never faced a problem like that, they had plenty of land and materiel riches and a need for people to develop them. I think that Chinese people mostly accept the idea that the chaos of a democracy would undermine the Party’s rather remarkable achievements in the economic order during the past decades.

      • September 11, 2016 at 9:48 am

        Sorry, my error. In terms of liberal democracy you are correct. It is not the answer for everyone. Plus many either don’t want it or distrust it in practice. Plus being relieved of making decisions or governing is sometimes intoxicating. You are correct a democratic society is not required for capitalism or industrialization to be successful.

        The German history you cite seems spot on. Sorry for the firing. Now if you had said the same thing 10 years before you would have been hailed a reporter of great integrity. But the history didn’t change in those 10 years. The Red Army, after suffering nearly a million casualties systematically annihilated the German Armies in Russia over a two year period. This literally tore the heart out of the capability to resist of the remaining Germany Armies.

        You are correct that many in China fear any sort of change could undermine what has been accomplished in standard of living and wealth. But still many are also upset by the continuing increase in corruption and promotion and wealth based on family or political connections rather than work and merit. This too they see as a threat to the continuing work to decrease poverty and low living standards. There are all sorts of chaos.

      • robert locke
        September 11, 2016 at 4:02 pm

        “many [in China] are also upset by the continuing increase in corruption and promotion and wealth based on family or political connections rather than work and merit.”

        I agree and this is a great challenge to the durability of any regime, whether autocratic or liberal. The 19th century Germany autocracy managed to create a regime in which work and merit was treasured more than political connections based on family and wealth; in an army that set the world standard for planning and study in the officer corps and a bureaucracy that was not corruptible. (after 1914 this changed).

        This is the challenge to the Chinese Communist Party that must stifle the chaos of corruption within the autocracy in order to continue to decrease poverty and low living standards.

        Certainly the chaos of a liberal capitalism that serves the interest of the top 1 percent is not much of an alternative enticement to serious communists.

  9. September 10, 2016 at 5:26 pm

    You remember, of course, Samuelson responding to Ulam’s request to name one non-trivial breakthrough of economics (of capitalism). By the way, response was in three years – do you know that? So free trade is one of the very basics of capitalism. But, from XVIII to present, economics has not noticed that the total trading balance of a country is its national “common good”, with consequences as we have now. Which right away “shifts the paradigm”.

    • September 11, 2016 at 7:34 am

      My original contention still stands. Capitalism is unnecessary for setting up a business, selling and trading, or earning a reasonable profit. Democratic government can make possible and oversee all of these. In fact, I’ve often felt that capitalism inhibits markets and buying and selling. Creating and operating a business is relatively simple. Capitalism adds many layers of unnecessary theory and political battles to this relatively simple process.

      I have an electronic copy of Laski’s book. But thanks for the question.

  10. September 10, 2016 at 8:02 pm

    Ken, I hope that you have an electronic version of Laski and did not enter that quotation by hand.

  11. September 11, 2016 at 3:20 pm

    We have to save the mankind. First, from ecology. Second, from any regimes that can send “black marias” at night to your doors. Don’t tell nonsense about poor Chinese ‘s life being improved. They lived that way for thousands years and survived. Now they are urbanized. Oy wey. Gangs, prostitution. syphilis, etc. 12-hour work at factories with pennies a day.

    And I know what I am talking about. I am one of not many people in the West who survived not only the Holocaust (which killed almost all of my family) but also the USSR 1937 purge, with a “black maria” coming to our apartment with fatal outcome. (That is when I said – I will get out. It took me 36 years.)

    As for WWII – sure, Soviet army did a lot. But tanks were made from American steel. And Churchill was right about the iron curtain. Who did what in WWII stopped to be the most important thing.

    Now about saving the mankind. You cannot easily change democratic political systems. The weakest link now is globalization. So let us concentrate on that.

    • September 12, 2016 at 5:00 am

      Whatever you think of the Chinese regime the fact is over 100 million Chinese now have access to drinking water, sufficient food, shelter, and medical care that did not in 1960. Yes the regime is autocratic and despotic. Kills and persecutes many of its own citizens. But is no more a threat to world stability and peace than Russia or the UK.

      As for World War II most historians agree that the USSR shattered German Armies and the German military in general before the D-Day invasion. I won’t go as far as some and say the USSR won the war for the allies, but it’s clear the USSR made possible the Allied victory. Without the USSR the war in Europe could have lasted another 2-5 years, or maybe longer. Again, not denying in saying all this that Stalin was an autocratic dictator and all around oppressor and murderer of his own people.

      I agree that globalization is the club neoliberal politicians, economists, and the rich are using to beat the life out of democracy. Quite successfully. But the link is not an essential one. Globalization can be carried out democratically and without neoliberalism, if we choose to. How to choose that option is the issue we face.

      • robert locke
        September 12, 2016 at 8:56 am

        When I taught 20th century history, I told my students that the Soviet Union won the Second World War by 1944 over Germany, but the US won 1945, which permitted them to dominate the postwar World.

      • September 12, 2016 at 11:50 am

        I’ve never taught. But in testimony I’ve used the example of the USSR’s performance in WW2 many times.

  12. dave taylor
    September 12, 2016 at 11:18 am

    Vladimir, thanks for the biographical detail, especially of the USSR purge of 1937. I was just born, then, but following the slump here in the UK, all my grandparents had already died.

    The slump was worsened by the Gold Standard trying to put an “honest face” on the dishonest money which had run riot in Wiemar Germany, and following rejection of Keynes’ bancor in 1944, enabled (what Robert merely “allowed”) the US “to dominate the postwar World” through seigniorage on its petrodollar. , The destabilisation of this in the 1970’s led to destabilisation of the money markets, portmanteau insurance of accumulated wealth via dishonest derivatives, and globalisation of business ownership: hence to absentee political management and the undermining of local (national) policy determination. So where you say “The weakest link now is globalization”, I say the weakest link is the CAUSE of that: dishonest money”. I entirely agree: “let us concentrate on that”.

    • September 12, 2016 at 11:48 am

      Need a little help. What are you referring to with the phrase “dishonest money?” I understand creating and using money as a political and cultural tool. I also understand money as used in labor and marketing situations. But am not familiar with the phrase “dishonest money.”

  13. September 12, 2016 at 1:56 pm

    First, I never was denying the enormous contribution of the USSR in winning the war. I am just saying that for you Stalin just was one of those autocrats. For those that were there he was a sadistic vampire. You had a bad apple McCarthy and you were fired for a innocent statement. But for the similar statement about America you would get under Stalin no less than 10 years of hard labor in Siberian mines. In 1953 he wanted to deport all Jews to a small piece of Far East, with pogroms and everything. Thank God he was poisoned.

    I survived after war only because I worked 1946-1956 in the fish industry of Sakhalin and Kuril Islands. They needed good people there and did not arrest there.

    After the war, it was Stalin, who instantly changed everything by grabbing Eastern Europe. In geopolitics, as in everything else, forget the past, think only about the future. Innocence may become too naive and too dangerous.

    Second, I disagree about China. Read J Mearsheier The Tragedy of Great Power Politics, read Navarro The Crouching Tiger. Annual double-digit military budget increases. South China Sea behavior. Sooner or later, there will be confrontation. JM – The most important moment of the century.

    Every autocratic regime is a volcano. Sooner or later, there comes a bad guy, and it erupts.
    Brezhnev was stable, and I was in top ranks of Soviet math economics. But I risked life to get my family out. Now look at Russia in 1980s-2010s. And nobody knows what happens next. China is no exception. Volcano will erupt.

    Third, I am not for shooting the trade out. I just want to eliminate the USA trade deficits. Too bad for the USA. And too good for Chinese military.

    • robert locke
      September 12, 2016 at 4:02 pm

      Vladimir, My wife’s grandfather, a Pole died at Auschwitz, her other grandfather on her father’s side was murdered by the Bolsheviks during the era of War Communism, her father spend 20 years in the Gulag and the rest of his life fleeing from terror squads with his family finding refuge in the Soviet Republics before he, and his wife and children, managed in 1957 to emigrate to Poland. I tell this story to some extent in my wife’s biography, Discovering Vera. So I’m well aware from family history, what the French call petite histoire, and grande histoire, which I have studied professionally, that McCarthyism was mild suffering compared to totalitarianism. When WWI broke out, we who studied its origins learned that the French Republic was just as eager to go to war as autocratic powers. What I find particularly dangerous today is not autocracy, which I, of course unlike Trump do not embrace, but the inability of Americans to adjust to the idea that they do not and cannot dominate the world like they did in 1945. Make America Great Again is dangerously anachronistic. .

    • dave taylor
      September 12, 2016 at 5:04 pm

      “Every autocratic regime is a volcano. Sooner or later, there comes a bad guy, and it erupts”.

      Yes, this is one of the reasons for preferring functionally local democracy. In the context of the Scottish desire for independence from England (though not Europe), I’ve recently been learning about the Edict of Nantes in 1598 requiring mutual tolerance after 30 years of religious war, and a Catholic Louis XIV of France expelling Huguenos (many to England) after revoking it in 1685. Fearing a repeat when Louis’s Catholic cousin became James II of England and James VII of Scotland, a “Glorious Revolution” led by William of Orange, financed by a Bank of Amsterdam secured only by the goodwill of its citizens, evicted James from England and Ireland and “taught the Scots a lesson” with the Massacre of Glen Coe in 1692. (https://en.wikipedia.org/wiki/Glorious_Revolution). In 1689 an anti-Catholic Bill of Rights had created a parliamentary Constitutional Monarchy, in 1690 the French defeated the English navy and in 1694 a private Bank of England to rebuild it and initiate the industrial revolution (https://en.wikipedia.org/wiki/Bank_of_England#Founding), led to Anglo-Scottish union in 1707 (https://en.wikipedia.org/wiki/William_Paterson_(banker)#Darien_scheme).

      All that because after 87 years Louis XIV (or his wife) were unacquainted with religious wars. What is worrying is to see our own youngsters being denied even recent history and brainwashed into seeing war as just a game.

      In response to Ken (Sep 12, 11.40 am) being unfamiliar with the term “dishonest money”, he should perhaps try googling it, which will lead him to Joe Plummer. In my case it has been derivative from the Goldsmith’s Fraud becoming a Banker’s Fraud as the gold has become negligible, thus the problem lies in dishonest money and the solution in honest money. This is all derivative, anyway, from promotion of Fool’s Gold for worshippers of the Golden Calf.

  14. September 12, 2016 at 7:36 pm

    Robert, great to know that we are in the same boat. The only thing I disagree with you is that America is the only remaining bulwark of democratic world order. So we have to make it (and its allies) great again. Maybe unipolar world again. Not by 45 percent tariff, sure.

    Some Frenchman said several centuries ago that (approx) bad people are amazed that good people can have good brains. I have that quotation somewhere.

    • September 13, 2016 at 7:29 am

      I can only imagine about your experiences during and after the war. I have no experiences to fall back on for understanding.

      I majored in Russian Area studies for my 2nd masters degree, with a minor in China. Russian actions since 2000 are quite standard. Putin merely wants to reassemble the Russian Empire (as expanded by the USSR). Like the US returning to the hegemony it had in the 50s and 60s it’s not possible for Russia to do this. But neither the US nor Russia want to acknowledge these realities, much less accept them. China remains, even under the Communist Party the Middle Kingdom. A divine state destined to rule the world. Again, not a realistic goal and certainly not one the Chinese can gain with military force. Putin may indeed explode or maybe implode someday. But not the Chinese leadership. Their leadership selection process is the most organized and methodical I’ve ever witnessed. We’ll find out in the next few years as the economy of China slows to a crawl and foreign policy becomes very complex and tenuous just how flexible and durable that process is.

      Since neoliberalism was largely an American invention as the US economy continues to decline and internal disputes in the US expand neoliberalism will begin to lose favor quickly. I suspect by 2020 it will be gone as an organizing dogma for the US and for most of the rest of the world. Will the Beijing Consensus replace the Washington Consensus? Don’t think so. I expect a new consensus now emerging in the newest big economies (Brazil, Singapore, India, etc.) will begin to assert itself by 2020 or sooner. Now will the big three – US, China, Russia – be able to accept the change? Don’t know.

      Dave, thanks for the information on “dirty money.” I’ve read Plummer’s book. Any other histories I could look at?

      • robert locke
        September 13, 2016 at 9:06 am

        This is not a passive state; if we want a different outcome from those offered by neoliberalism, corrupted autocracies, etc. we’ll have to fight for it. I’ll be 85 in February and am trying to exert as much leverage as possible in favor of a stakeholder outcome in what Dave calls “a functional local democracy.”

      • dave taylor
        September 13, 2016 at 11:58 am

        Robert, at a mere 80 in January I am glad to have your example and this reassurance we are on the same path.

        Ken, on “dishonest [sic] money”, are you interested in the concept or the origin of the phrase? On the evidence, with bankers financing the media, it can be dangerous to call a spade a spade, and not only whistle blowers but even establishment figures like John Buchan, who even casually refer to the historic position of Jews in finance, have become conspicuous by their absence in second hand book shops. In the 19th century, William Cobbett and John Ruskin survived prison and censorship respectively only by publishing the own books so successfully that putting them down would’ve made martyrs of them. I have thus had to form my own judgement by “reading between the lines”. I found Adam Smith in WoN denouncing “the pernicious practice of raising money by circulation” without mentioning that that is what the banking system does, and why banks periodically crash. He argues rather that other people doing it is a problem for the banks!

        You want the dirt on dishonest money? Try reading farmer Cobbett’s “History of the Protestant Reformation in England and Ireland” if you can find a copy. It shocked even me! But first read Cobbett’s account of the field work which led to this, his famous “Rural Rides”, in which he observed ruins at first hand and pondered what had been lost. The chapter on Ryall, eight miles from my home, is particularly to the point.

      • September 13, 2016 at 12:43 pm

        Robert, I like stakeholder thinking. As a regulatory it’s the way we approached most regulatory issues. It’s also the preferred negotiations approach in regulation. But in the US at least the stakeholder negotiations are almost always voluntary. If a party feels they have a strong legal case they may take the issue at hand to court, hoping to skip stakeholder negotiations.

        Thanks, Dave. I’m looking to understand the history of the phrase and its use. I have a copy of Cobbett’s book. Any others?

        Vladimir, about the closest I’ve ever come to 1984 was El Salvador in the 1970s. I went there to visit friends at the Embassy. Walking the streets one night I was corned by what I assume was a “death squad.” The leader of the group made it clear they intended to kill me. They assumed I guess I was a student since I had spent the day at the university. I’m not one to wait for an invitation so I leveled my service issue .45 and let them know I’d start the party. They yelled a few expletives in Spanish and left. Negotiating is good. Negotiating with the help of a .45 is better.

        I’m not certain a single hegemonic regime always makes things better. The UK was hegemonic for 200 years. Some things improved. Others did not, or got worse. And US hegemony since the the fall of the USSR is certainly a mixed bag. US invaded two countries with which it was not at war, attacked the old USSR by proxy, and expanded a missile shield in Europe that destabilized the whole region.

  15. September 13, 2016 at 10:02 am

    Ken, for Americans 1984 really is just a dysutopian abstraction novel that is read in high school. For me, it is not. First and foremost, I fear its threats, both external and internal.

    I really like China. They are said to ask each other, What is your glorious age? Whatever little I know about the ancient Chinese philosophy is very interesting. Some pieces of it even might complement some simplistic ideas of the Western world, but political and social paradigms do not blend easily. (And when Zhou En Lai (don’t know the spelling) was asked about whether the French Revolution provided good results, he answered It’s too early to judge.) But China’s military is still worrisome. A Crouching Tiger. A dormant volcano still is a volcano.

    What I disagree is about is impossibility of a single hegemony as required by HST. The world needs a single sheriff. Look at the South China Sea. And this must be America and allies. And we must think how to get there painlessly.

  16. dave taylor
    September 14, 2016 at 11:56 am

    Ken, as I’ve already explained, the interesting history of the phrase “dishonest money” is of its non-use, there being a good explanation of such “unparliamentary language” at https://www.theguardian.com/notesandqueries/query/0,5753,-2245,00.html. It is individual people who are usually accused of dishonesty, but this only on one side in courts of Law!

    English words and phrases are, of course, constructed, with roots able to convey meaning by association in different contexts. Here the roots of ‘dishonest’ are ‘dis’ and ‘hon’, with dishonest applied to language (hence appearances), and ‘dishonourable’ to actions. It seems the type of mind whiich interprets meaning by feelings rather than by deconstruction is always liable to take such words ad hominem rather than logically, as may be seen more clearly in a spate of “honor” killings we have had recently in Britain, where a Pakistani women who has married an outsider has been deemed to have brought dishonour on her whole family. What is so shocking about Cobbett’s history is that he refers not to dishonest money or dishonourable usury but to Henry VIII for making usury legal and Jews (without distinction of individuals or profession) for practicing it. In the “Rural RIdes” it is interesting to see what he has to say about Ricardo. Unparliamentary language was his forte!

    Hence, anyway, my interest being in the concept of honest money (and thus in honest interpretations of dishonest money). Linguist Noam Chomsky analyses the “parliamentary language” of Gregory Mankiw at p.142 of “Imperial Ambitions” (2005, Hamish Hamilton).
    In the long timeline of https://en.wikipedia.org/wiki/History_of_economic_thought the credit theory of money gets just two lines, not mentioning the wiki on Henry Dunning Macleod (1889) or an 1830’s guy whose name I have forgotten. It does approve of A Mitchell Innes, whose article in the Banking Law Journal, vol 31 (1914), Dec/Jan, pp 151-168 is online at
    https://www.community-exchange.org/docs/The%20Credit%20Theoriy%20of%20Money.htm . More helpful is https://archive.sustecweb.co.uk/Wheres_the_Money_to_Come_From.pdf, which ends with an apt quote from J K Galbraith’s “Money: Whence it came, Where it went”:

    ““The study of money, above all other fields in economics, is the one in which complexity is
    used to disguise truth or to evade truth, not to reveal it.”

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