Friday, February 8, 2008

John Lukacs' Democracy and Populism: Fear and Hatred

John Lukacs, Democracy and Populism: Fear and Hatred. New Haven: Yale University Press, 2005. 248 pages.

Democracy and Populism is a set of essays by an eminent, very talented historian. As would be expected, given the breadth of Lukacs's historical knowledge and his ability to imaginatively apply it, there are many fascinating essays in the book. The fear and hatred part of the title refers to his argument that fear primarily drives the left while hatred primarily drives the right. The most interesting claim in the book is that nationalism has been the driving force behind the rise of much of the last century's extremism. Lukacs argues that national socialism is the proper name for most kinds of totalitarianism (a word that he does not like) and that the reason that many writers have called Nazism "fascism" was due to Stalin's decision to forbid his journalists from using the more accurate term "national socialism". Western journalists voluntarily adopted Stalin's position on terminology.

The reason for Stalin's forbidding use of the term "national socialism", according to Lukacs, was that he realized that his own brand of "socialism in one country" was in fact also "national socialism". Thus, argues Lukacs, populism and nationalism have been the driving force behind all of the last century's totalitarian movements. He also emphasizes that populism and what we call "conservativism" are linked. In reality, nationalism or national socialism are not conservative, but for example the immigrant question today is most closely linked to conservatism. Being opposed to immigration is a position associated with Progressivism, not with traditional American liberalism of the late eighteenth century. Lukacs points out that a fundamental error that conservatives of the early to mid twentieth century, like Robert A. Taft, made was that they were too willing to align themselves with nationalists, who were in fact Volkish national socialists and had little in common with traditional liberalism. The fatal error of the European and American classical liberals of the twentieth century in Lukacs's view was that they feared communism so much that they were willing to make deals with the nationalist right, which was really no different from the communists. At the same time, though, liberalism failed, in Lukacs' view, because it was insufficiently nationalist (the two points seem to contradict).

Although the notion that the Nazis were a socialist movement is nothing new to most people I know well, Lukacs raises some new points, for example that the name Nazi was shortened from Nazi-Sozi.

One bone I have to pick with the book is that on page 57 Lukacs describes the mugwumps as early Progressives who believed in social and political planning. This is true to a degree, but the mugwumps differed significantly from the Progressives, who appeared in the 1890s, and their commitment to "social and political planning" was a small part of a largely laissez faire, free trade and hard money platform. It is true that some of the mugwumps advocated early kinds of progressive reforms in areas like improving the New York slums, but for the most part they were far more committed to laissez faire economics than almost any movement of the twentieth century besides the Libertarian Party that emerged in the 1970s.

Lukacs's theme is that liberalism's (in the classical sense) nemesis has been nationalism. In one interesting passage on p. 36 he writes:

"After 1870, nationalism, almost always, turned anti-liberal, especially where liberalism was no longer nationalist. The contempt for money-minded bourgeoisie that moved artists and writers a generation before was now changing into a contempt for liberals. The great Norwegian writer Knut Hamsun, for instance, hated not only Gladstone, in whom he saw the prototype of a hypocrite and a liberal, but all liberals. Confronted with someone whom he suspected to be a liberal, 'it is the logic of my blood expressing itself.' Eventually this led Hamsun to become an unrepentant admirer of Hitler."

One of the themes of the book that I found fascinating is the pivotal role that anti-Semitism played in the development of nationalism. In other words, European hatred for Jews created the nationalist mindset, which went on to dominate the governments of most of the repressive governments and even democracies around the world (p.41):

"Mussolini, Hitler, Peron, Stalin: all of them nationalist socialists, with the emphasis on the first word. In 1870s and even decades later it seemed impossible that nationalism and socialism would ever be allied. Yet--considering the ubiquity of the welfare state--we are at least in one sense all national socialists now...The diverse comibinations of nationalism and socialism marked most of the history of the twentieth century."

Populism, the earliest variant of national socialism that appeared from the late nineteenth to mid twentieth century, especially in Austria and Germany (but also in the United States) included anti-Semitism targeted against assimilated Jews. (Recall E.L. Godkin's remarks about Archibald Primrose Rosebery, 5th Earl of Rosebery . Godkin was no populist, socialist or nationalist, though.) Think of Hitler's frequent use of the word "Volk" as related not only to populism (and the late nineteenth century US Populist Party was called the People's Party) but also socialists' emphasis on "the People" (p. 63). Lukacs argues that late nineteenth century populism had three elements: anti-Semitism, nationalism and philo-Germanism even when adopted in other countries. In contrast, "Liberalism to most people meant philo-Semitism" (p. 64).

Lukacs suggests that we are nowhere near the end of the triumph of populism. He mentions the issue of inflation several times, but does not mention that inflation was one of the key populist positions of the late nineteenth century. Bryan's cross of gold speech marked the end of the Peoples' Party in America because the Democrats had integrated populist ideas into their own ideology.

Although Lukacs doesn't mention Patrick Buchanan, I kept thinking of him as I read the book. Anti-communist and nationalist, and at least mildly anti-Semitic, Buchanan fits the national socialist or populist model closely.

The book covers many different areas. Although it is probably not Lukacs's most important book, it makes for an interesting evening, more interesting than watching Bill Maher, to say the least.

John Lukacs on Hitler

"But here we come to the mistaken view that many conservatives adopted during the twentieth century and that they have even now. This is that the rise of nationalist anti-liberalism meant a great historical reaction against 1789.* In 1933 and 1934 the then-leading German conservative, Franz von Papen, said that what was happening in Germany in 1933 was the great answer of history against the largely French-inspired idea of 1789 (And this is the enduring mistake of many conservatives, who despise the "Left" more than they distance themselves from "extremists" on the "Right".) But Hitler was someone very different from a counterrevolutionary; and the German 1933 was not a counterrevolutionary movement. Nothing was further from Hitler (or even from Mussolini, or from Peron, etc., etc.) than to see anything good in monarchy or aristocracy (let alone in the world of the eighteenth century). He was a populist; and a revolutionary; and at least in some ways, a democrat. Evidences of this, in his words and acts, could fill a small book."

----John Lukacs
Democracy and Populism: Fear and Hatred, New Haven: Yale University Press, 2005, 248 pp.

*The French Revolution occurred in 1789.

Philosophical versus Empirical Underpinnings of Capitalism and Progressivism

The ultimate defense for free market ideas must be empirical, not philosophical. The reason is that philosophical arguments can be turned on their heads and pose an argument for socialism or progressivism. Neither capitalism nor socialism has any a priori or pre-experiential meaning. Both are derived from historical experience. Prior to the middle ages economies and societies were largely tribal or traditional in nature. There were a couple of democratic and republican experiments, most famously in Athens and Rome, but the distinguishing features of capitalism were absent. These include the limited state and natural rights, especially the rights of contract and property. Rome stopped being a republic more than four hundred years before the last western emperor (some historians would argue that western Rome never really fell, that there is no real dividing line between late antiquity and the middle ages, and that the transition from western Roman to barbarian rule in western Europe resulted from plagues and other dislocations rather than from any real conquest or the sackings that occurred twice late in its history.) The ideas of natural rights emerged in England and Scotland and to a lesser degree in France and Germany as markets expanded in scope facilitating the advance of technology. This began to occur toward the end of the Crusades (which themselves ensued from advances in European agriculture) and were in part a result of increased capacity for trade by the Italian city states and other European centers. At the same time, socialism, which argues against property, contract and other natural rights, also emerged in the specific historical context of advanced technology, increasing scale of business and the rejection of small proprietorship and agricultural-based free market capitalism of the late nineteenth century. Like conservatism, socialism was an attempt to rationalize social relations in the historical context of emerging large-scale industry which did not seem responsive to public welfare and similar interests. The socialists believe(d) that the way to maximize social welare is to inhibit greed and the ability of large industry to exploit. Capitalists believe(d) that the way to maximize social welfare is to permit corporations to innovate, develop new technologies and to compete in terms of Schumepter's creative destruction.

Both conservatism and socialism or progressivism saw the state as an essential response to the rise of corporate power, which in turn just means size or scale. Both conservatism and progressivism are utilitarian in nature. Utilitarianism, the philosophy of John Stuart Mill and Henry Sidgwick, holds that moral action maximizes human welfare. But both socialists and conservatives can claim that their policies maximize human welfare. The problem with utilitarianism is that no one can prove that one policy or another maximizes human welfare. That is the point of the debate about capitalism and progressivism. One side crows that progressivism can cure all ills, and the other side claims that capitalism and technological advance are better at doing this. Thus, the ultimate conclusion needs to be empirically driven. There needs to be evidence about capitalism versus socialism, and the evidence needs to be emphasized.

Murray N. Rothbard developed an alternative philosophical defense of capitalism in his book For a New Liberty. Rothbard argued that the fundamental principle of "no harm" necessarily leads to a free market conclusion. Rothbard argues that all government action depends of violence or the threat of violence and therefore causes harm. If you start from the principle that doing harm to others is always wrong, then government is wrong. This moral argument is what philosophers call a deontological one, because it is based on duty. We have a duty not to harm others and a corollary of the duty not to harm is not to force people to pay taxes or join the army. But the progressives can derive an equivalent argument. First, large business would not exist without government subsidy. Second, because large business is based on harm (i.e., it has extracted land entitlements forcibly) it is likely to cause further harm. Moreover, its size and market power enables it to cause harm. Therefore, the state is necessary to minimize the amount of harm.

Both utilitarian and moral arguments can lead to either capitalism or socialism. Conservatives argue that the greatest good for the greatest number necessitates state action in favor of corporate interests. Libertarians argue that the non-harm principle prohibits state action. Socialists argue that both duty and social welfare necessitate state control of the economy. Progressives argue that social welfare necessitates state action as well.

The nature of the debate takes on emotionally charged, quasi-religious overtones. John Dewey, the most famous of the Progressives, and the founder of progressive education that has rendered America an illiterate country, argued that democracy is an ultimate good. His belief in democracy was religious in quality. Likewise, Murray N. Rothbard and Ayn Rand devoutly believed in the no harm principle.

The question is who is right. Unlike the religious realm, where faith is the ultimate arbiter, in the economic and societal realm, empirical facts can be collected and observed. Creativity can have play. In my opinion, history has largely discredited socialism and progressivism for a number of reasons, and the devoutly religious progressives are obsessed with their viewpoint to a degree as dogmatic as the medieval proponents of religious doctrine. However, practical empiricism avoids the need for convincing arguments. If people are given choices among systems, they will vote with their feet. Thus, competition among ideas ought to devolve to competition among social systems. To some degree this has already occurred. New York, where the ideas of progressivism and the New Deal in large degree germinated and were implemented first, has been a state in decline in importance ever since. In contrast, states like Arizona, which have resisted progressivism's religious war against individualism, has flourished.

Thus, there are two philosophical defenses for capitalism, the deontological and the utilitarian. Both can be equally used as defenses for socialism. Philosophy leads to a stalemate. The question is what does history and the factual say about the alternative philosophies? The evidence seems clear to me, but the progressive-liberals superstitiously adhere to left wing ideology.

Thursday, February 7, 2008

Economies of Scale, Progressivism and Conservatism

Progressive-liberalism and conservatism arose from debates that occurred in the late 19th century about how to grapple with the increasing scale of industry. Historians and economists view scale as critical to the development of the consumer society. This was the assumption of all parties to the debate, beginning in the postbellum period. The railroads required large land grants. In turn, they linked the national economy. As John R. Commons, the labor economist and historian, has argued, expansion of markets characterized the growth not only of industry but also of the natural response, labor unions, which are a cornerstone of modern liberalism. As railroads became the "arteries" of America, wider markets facilitated larger distribution centers hence larger factories hence greater amounts of financing. This story has been told by most business and labor historians.

But there is little empirical evidence that scale was a crucial to the development of the consumer society as most observers have assumed. If scale were so crucial, then government subsidies would not have been necessary to encourage large scale railroads. As the large-scale philosophy proceeded, observers of the late nineteenth century immediately saw problems. Large scale industry is associated with corruption. The financing facilitates large scale manipulation and fraud. Democratic institutions have trouble sustaining the corrupt incentives that large scale financing offers. Yet, it seemed apparent to all observers, those friendly to corporate enterprise and those hostile, that there was no choice. It was as though the subsidies did not exist.

Both modern conservatism and modern liberalism appeared at the same time in response to the challenges that large scale industry posed. Both assumed that what Nancy Cohen in The Reconstruction of American liberalism calls the "producerist" philosophy of early American was a relic of a smaller-scale era, and that to understand society in an era of large scale organizations, a new philosophy was needed. Conservatism originated in the ideas of John Bates Clark and EL Godkin, many of the Mugwumps. It held that the proper response to the growth of business was to inhibit unionization, provide legal support to corporations and use government experts to handle market failure and provide data to companies. The liberal view, which also was advocated by some Mugwumps, Henry Carter Adams, Richard T. Ely and the early American Economics Association, was to support unionization, pass legislation that enforced workers' rights and potentially socialize industry. Both were responses to the belief that scale was essential to the development of industry, and that a unified national market was essential to scale.

It is not possible to know whether an alternative path could have been taken whereby technology might have developed in a purely laissez faire environment without encouragement of scale. Scale might have proceeded to its economically optimal point and its importance been superseded by technologies that limit the importance of scale. There is no question, however, that scale and a unified national market are no longer as important today as they were during the late nineteenth century. Firms voluntary leave the country to perform manufacturing in other countries; to say that a unified national market is essential to manufacturing ignores that most manufacturing occurs in the third world in countries with different legal, regulatory and cultural regimes from our own. Outsourcing and new organizational forms have eliminated the need for large organizations. A firm like Nike is a sneaker firm that produces no sneakers. The need for a unified market is a relic. Alternative organizational forms, new technology that links individuals and business strategies that span the globe have resulted in firms for which coordination does not depend on organization, on coherent culture or on regulatory consistency, but rather on innovation and fast communication. In such environments technological innovation replaces scale as the driving factor. Moreover, the managed kind of technology that characterized say the automobile industry of the 1960s is passe. Increasingly innovation can occur due to a small entrepreneur, such as the developer of Youtube or Google for that matter. Thus, the economic philosophies that emphasized central coordination, both liberalism and conservatism, are now passe. It is true that there is still the question of poverty and insecurity of those excluded from the primary economy, but the central state solution to that problem has been a complete failure.

The Gilded Age Letters of E.L. Godkin

The Gilded Age Letters of E.L. Godkin. Edited by William M. Armstrong. Albany, New York: State University of New York Press, 1974.

I have been perusing Godkin's letters and am a bit disappointed. A foreceful editor and an articulate writer, Godkin was as well self promoting and self serving. He seems to have been prone to deceiving others a bit in business affairs. Many of his letters involve fights in which he was engaged with investors in the Nation, notably George L. Stearns of Massachusetts, who thought that the Nation would represent the radical Republican position of the abolitionists (or at least Stearns's positions) postbellum. Also, there was a conflict because he told some investors in Philadelphia that he would not oppose (or rather take a position on) the tariff, when several of his investors opposed the tariff, and he had to navigate avoiding offense to either side, even though the tariff issue was an important one in that period. When Godkin ignored Stearns's and his associates' demands, there was more than a decade of ensuing belligerence.

When dealing with lesser known writers Godkin is often abrupt condescending (an exception, of course, is his enthusiasm for Hart Crane). But in a letter to Henry Wadsworth Longfellow, who was on the Nation's editorial board but never contributed to it, Godkin was sycophantic and fawning.

Godkin's comments on race are distasteful by today's standards. Godkin himself was subject to prejudice because he was an immigrant from Ireland. As an Anglo-Protestant Godkin was welcome in Yankee upper class social circles. Nevertheless, one or more of his letters involve Godkin's furious responses to newspaper articles that attacked him on grounds of his foreign, Anglo-Irish national origin.

He was not the most open minded of his day about voting rights for the newly freed slaves, and in an April 13, 1865 letter to Charles Eliot Norton (pp. 26-8) expresses in distasteful language that blacks needed to prove their fitness to vote:

"The possession of the suffrage by anybody, black or white, is but a means to... ends. If the majority in the United States were to vote for the establishment of a despotism or a community of goods, I should feel as much bound to resist them sword in hand as I would a foreign invader...we would be justified in withholding the suffrage until we had satisfactory assurance that they would not abuse it...The objections to the plan are the same which lie against any theory of universal suffrage. I entirely agree with you and Mr. Lowell, however, as to the expediency of giving the blacks the franchise, but I hate logic in politics, and all I ask is that they be subjected to a test, which in their case ought, I think to be somewhat different from that imposed on the white man, for I think the latter also should submit to it."

Godkin advocates literacy tests for voting (for whites and blacks) and also a requirement that newly freed slaves work for a living for ten years to prove that they are morally fit before they be allowed to vote.

Godkin at several points says that he does not think that race is the issue but rather the newly freed slaves' moral and cognitive ability to handle the "fiduciary" duty of voting. This is insensitive at a minimum, but may not be racist. He had had identical concerns about white voters.

Similar points might be made about Godkin's attitude toward Jews. On June 20, 1889 Godkin wrote a letter to his wife mentioning that he had "lunched with (Ferdinand) Rothschild" and had called on "Miss de Rothschild". He also mentions that on June 18, 1897, Miss de Rothschild invited him to watch "the Jubilee from her windows in Picadilly"). In a letter to James Russell Lowell on October 22, 1868, he refers to a writer who worked for the Nation for twenty years, Michael Heilprin, as "our many-sided Jew" in reference to Heilprin's (in Lowell's opinion) "omniscience". In a letter of February 11, 1876 to Daniel Coit Gilman, president of Johns Hopkins University, Godkin called Heilprin "one of the most worthy and modest men I ever knew" and a "mine of facts" but declines to recommend him for a professorial post because "he is not a man with any great hold of principles or any great power of expression and is too shy for a teacher. But he is an excellent fellow..." On June 27, 1889 Godkin describes a meeting with "George Lewis, the famous attorney" with regard to a libel law suit by Oakey Hall, a writer and one-time mayor of New York, against his friend James Bryce. He describes Lewis as "a small, ferrety looking Jew, but has an extraordinary reputation here as a 'solicitor', especially in 'delicate cases'. He is probably consulted oftener I am told in blackmail cases which are very numerous here than all the other London lawyers put together..." On July 18, 1901, he wrote a letter to James Bryce in which he mentions Archibald Primrose Rosebery, 5th Earl of Rosebery and former Prime Minister of England, who had married Hannah Rothschild, heiress of Mayer de Rothschild. He says that "the best thing for him to do now is to live jauntily on his Jew money!"

The last remark can easily be interpreted as an off-color joke. Likewise, his failure to recommend Heilprin to a professorship seems to have been a result of Heilprin's personal characteristics, not his race or religion. Heilprin had been associated with the Nation for twenty years. Given the small number of Jews in New York in the 1860s, this hardly suggests prejudice. In the case of Lewis, his reference to Lewis as a "ferrety looking Jew" while suggestive of a degree of prejudice is not hardcore bigotry. The current left wing in the United States, such as Walt and Mearshimer, say worse things about Jews all the time. Given more than a century of history and bloodshed, today's left wingers might be said to be considerably more anti-Semitic than Godkin was, if he was at all.

As well, based on today's electorate, I'm not so sure that the 19th century's decision to permit unlimited democracy wasn't a mistake. I wonder if our political world would be better were voters required to be able to understand the New York Times and to have an economic stake such as a job, a pension or a home before they were permitted to vote.

That said, it would be more instructive to compare Godkin's views to those of trade union leaders before and after the Civil War than to critize Godkin and other Mugwumps (the genteel, educated Independent Republicans) on grounds of racism. I very much doubt that Godkin and the other Mugwumps were more racist than were the labor unionists. Rather, the truth is the opposite. What you will find in comparing the decisions of labor unions of the Gilded Age with the Mugwumps' positions is that the trade union leaders were more pro-slavery before the war and far more prejudiced during the period, to the extent of prohibiting blacks from belonging to trade unions altogether. Godkin never said that Blacks should be prohibited from voting. Rather he said that blacks as well as whites should be literate before they are permitted to vote. In contrast, many labor unions excluded blacks entirely from membership and also prohibited them from making a living using skills that they had already developed, preventing them from gaining the economic independence that Godkin emphasized. Perhaps he was hypocritical in not demanding greater protections for blacks (such as the proposed Force Act bill of the 1890s, which failed in Congress) but he never went so far in his prejudice as did the labor movement of that day.

Profit Sharing Circa 1868

Leter to Railroad Executive Charles Francis Adams, Jr.* written in New York, February 8, 1868, almost 140 years ago to the day:

"I am very much obliged for your note and for the pamphlet on "Railroad Legislation" by which it was accompanied...

"The plan of paying railroad employees in funds out of profits has been tried on the Orleans railroad in France. I am not quite sure about the particular line, but certainly it is one of the French ones, and I am informed with great success. I think cooperation, or some modification of it, will yet be resorted to in all employments and occupations, in which zeal is of high importance, and cannot be secured by constant inspection. On railroads, the effect of dependence of the servants for part of their wages, on net receipts, would undoubtedly diminish waste, promote vigilance and politeness to passangers. I think the employer's art--the art that is of getting the most out of men, of bringing their faculties most effectively into play in industry, is still in the rudest condition in all civilized countries. Fixed wages is one degree better than slavery, which only appeals to one motive of action, and that a low one."

--Edwin Lawrence Godkin, founder and editor of the Nation and editor of the New York Evening Post
William K. Armstrong, editor, The Gilded Age Letters of E.L. Godkin,, pp. 119-20
Albany, NY 1974: SUNY Press

Question: How much has management improved since 1868?

*"Adams was...the great-grandson of both United States President John Adams and United States Secretary of the Navy Benjamin Williams Crowninshield, and the grandson of president John Quincy Adams...After graduating from Harvard University in 1856, Adams served on the Union side in the American Civil War...He received the brevet rank of brigadier-general in the Regular Army in 1865...Adams was president of the Union Pacific Railroad from 1884 to 1890, having previously become widely known as an authority on the management of railways. Among his writings are Railroads, Their Origin and Problems (1878)."

Wednesday, February 6, 2008

Then and Now

"The doings of the last Legislature at Albany have been shocking--far worse than appears in the papers, and I fear there is little hope of reform from the regular politicians. They are all banded together for plunder, no matter how much difference of opinion they may effect...If the country is to be saved and purified, it must be by some force outside their ranks..."

--Edwin Lawrence Godkin, founder and editor of the Nation and editor of the New York Evening Post
Letter to Charles Eliot Norton, April 23, 1867
William K. Armstrong, editor, The Gilded Age Letters of E.L. Godkin,, p. 103
Albany, NY 1974: SUNY Press

How to Avoid ERISA Litigation

I just gave a talk sponsored by the CPA Training Center on how to avoid ERISA litigation. My cospeaker, Robert Edward Hoskins of the Foster Law Firm, LLC, is a talented speaker and a gifted attorney. I primarily spoke about my experiences with ERISA litigation.

Two Kinds of Corruption

"I am sorry to say I [am] perfectly satisfied that the leading Republican politicians are worse rogues than the Democrats, inasmuch as they are fully as corrupt while making far more pretensions to honesty."

---Edwin Lawrence Godkin
Letter to Frederick Law Olmstead, December 25, 1864
William M. Armstrong, The Gilded Age Letters of E.L. Godkin, Albany: SUNY Press, 1974, p. 17.

Sunday, February 3, 2008

New York Giants Win Superbowl XLII

Eli Manning has led the Giants to what the Kansas City Star calls "among the greatest upsets in the history of professional team sports." Wide receiver David Tyree made the catch of the century and Plaxico Burress caught a 13-yard touchdown pass. I'm not a regular football fan, but this game's edge-of-the-seat, spectacular fourth quarter (at least for us New Yorkers) got me interested.

Now, might some other folks in New York throw some upset passes? How about Eliot Spitzer eliminating New York State's income tax? How about a 20% across the board reduction in Albany's general fund budget next year? How about a real celebration?