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A State of Mind

I invest because it’s inevitable that anyone with capital must invest. I am a socialist because I feel a kinship and sympathy with other human beings, and I do not want my economic life to alienate me from others.

This blog is partly about cultivating a state of mind which I hesitate to name for fear of reducing to it to dust. Let’s say it’s something like a humane clarity, although it must also encompass and reflect experiences that are neither humane nor clear.

The specifics of investing and of socialism, among other subjects, will get their turn. However, this blog will not be about socially conscious investing, which I do not recommend. Socially conscious investing (or sustainable investing) is an effort to do two complicated things at once: change society for the better, and make money investing. One of the advantages of investing as a mental discipline is the frequency with which opinions and preconceptions are destroyed by markets. But socially conscious investors never have to confront that experience, because their poor returns are never clearly due to mistakes—they may just as easily be the price of social progress.

We cannot cultivate a humane clarity if we never have to face and correct our own confusion.

Israel, Gaza, and Nationalism

What can we learn from the conflict between Hamas and Israel?

First, we note that Hamas’ tactical goal was to kill civilians, and to take others hostage. This is almost certainly a preview of what would happen if Hamas ever won its long struggle against Israel—the Israeli population would be eliminated. Perhaps some Israelis would be allowed to leave, but the Jewish population in situ would disappear, largely through massacres.

Of course, Hamas is a terrorist organization; people say that often, as if that concludes the discussion. But terrorism to what end? What is the underlying ideology?

It’s nationalism, and the Israelis are likewise nationalists. Any nationalist movement can kill.

And I don’t say that to assert a false equivalency, or to otherwise distance myself from this horror. Every new massacre is an escalation, and Hamas has escalated the struggle in an especially catastrophic way. But if in response Israel kills 40,000 or 140,000 civilians in Gaza through airstrikes, artillery bombardments and disease to avenge the 1,400 that Hamas killed with rockets and small arms, is that justice?

No, it’s not justice, but it’s the only justice nationalism knows. Nationalism emphasizes the differences between groups, never their similarities. Since any ethical system is built on empathy, nationalism—with its lack of empathy for out-groups—has only a blunted and primitive sense of right and wrong. Killing a hundred Palestinian civilians to avenge a single Israeli civilian does not seem unethical to an Israeli nationalist; at best it might be seen as a disagreeable necessity.

Observers often note that both sides are trapped in an endless cycle of revenge. But in truth they are actually trapped in their nationalist ideology; because of their habitual ways of thinking and feeling about the situation, they are unable to see any possible path to peace.

To the Israeli nationalists, any plausible peace settlement is simply not real, and likewise for Hamas militants.  For Israelis and Palestinians to negotiate as equals, they’d have to assume their opponents were human beings capable of good faith, which is an impossible thought for any extreme nationalist.

Both sides regard the other as monsters in human form. And this belief allows them—indeed, it requires them—to commit and justify horrible crimes. And those crimes are then used by the other side to justify its own atrocities.

Both sides would benefit from peace. True peace would probably mean trade and commercial ties between Gaza and Israel, and as Europe has demonstrated, this can go a long way toward lasting peace.

Netanyahu might say, nothing good is possible without destroying Hamas. But of course he cannot destroy Hamas without re-occupying Gaza for an extended period, and that will mean heavy Israeli casualties and immense suffering for Palestinian civilians. Israel ended its occupation of Gaza in 2005 for good reasons.

But maybe just a short occupation, of a few months? Just long enough to root the Hamas fighters out of their tunnels? But even if Israel kills 80% of Hamas, the leaders will mostly escape to Iran or elsewhere and once the Israelis leave, they will return. And as long as the people in Gaza hate Israel, the leaders will find more recruits.

So the situation is impossible for both sides. Barring some unforeseen change in the power dynamic, neither side can win. Further, neither side can benefit politically. The West is already moving to suppress pro-Hamas organizations, and public opinion in Gaza may be turning against Hamas as well. Netanyahu could be called to task by Israeli voters for his failure to guard Israel’s southern border.

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Netanyahu and his generals must know Israel’s situation is impossible, but they pretend otherwise. This brings us to a key function of nationalist movements: lying to one’s own people, which is counter-intuitive. The implicit promise of nationalist movements is of solidarity within the group; the Irish, for example, will trust and support each other in opposition to the English. That is the vision.

But this vision is seldom realized, and why not? In general terms, social unity is not common. For example, in the Irish war for independence, there were two views on the goals of the struggle against Britain. There were nationalists who wanted a republic and who were as secular as possible in Ireland at the time, perhaps including Michael Collins; on the other hand, there were those who wanted a Catholic state with the clergy dominating social services, education and family law—including access to contraception. Eamon de Valera emerged as the leader of the second group.

The key question for both factions was, why oppose British rule in Ireland? The first group, the relative secularists, would say: British rule was bad for the Irish. They were poorer, less educated and possibly less healthy than they would have been otherwise, and the poverty and lack of opportunity led them away to fight Britain’s wars.

But the second group would say, the British are Protestant, and they deny the validity of Catholic faith and the authority of the Catholic church, in Ireland and elsewhere. The British Empire was therefore a great evil, perhaps even Satanic in origin.

This difference came into sharp focus in the debate over the Treaty of 1921. Accepting dominion status and pledging fidelity to the British monarch seemed a small price to pay to the first party, the relative secularists. The benefit, after all, was the removal of British troops and police from Ireland, and the Irish managing their own affairs for the first time in centuries. Henry IV said, “Paris is well worth a Mass,” when he agreed to convert to Catholicism to become king, and the Irish pro-Treaty party felt similarly.

But the anti-Treaty forces felt the evil of the British Empire so intensely that they refused to take the oath, and were willing to kill other Irishmen in a civil war to avoid doing so.

So, despite the vision of unity, nationalist movements usually have factions which sometimes differ profoundly. And the split between the leaders, or would-be leaders, and the ordinary people is often acute. The anti-treaty Irish nationalists lost primarily because most of the ordinary people wanted peace and the British out. The Treaty got rid of British troops and police, and that was the end of the discussion for many people. By 1921 Ireland had seen enough violence and atrocities; the country wanted peace.

But the political class was divided almost evenly, and so a civil war broke out. Most of the common people and about half the political class backed the Treaty, and the British supported the Treaty party with cash and weapons. So, the result was never in doubt to any reasonable observer.

Also obvious was that once the British troops were gone, and the Irish had their own government, anyone could safely refuse to sign the oath of loyalty to the Crown. The British weren’t going to invade Ireland again to enforce paperwork.

Let’s change the focus a bit here. In Ireland, by 1921, almost everyone was a nationalist to some degree; the Black and Tans will do that. And the same may be true in Gaza today.

But not everyone is Israel is a nationalist. There is a peace party, and a government that’s willing to negotiate in good faith with the Palestinians is imaginable; Likud could lose power. And in fact the same was true in Germany under Hitler. The SPD and the Communists enjoyed significant support and the Nazis suppressed them by force. But there were still plenty of Germans who had voted for the SPD and the Communists and who were privately skeptical of Nazi ideology.

Let’s think about what it means to be a leader of a nation, and a nationalist movement, where many of the citizens aren’t nationalists, as with Netanyahu and Israel. The anti-nationalists are bound to be seen as “other” and even people who are notionally nationalist can be lacking in the eyes of a demanding leader. In the last days of the war, Hitler said that if the Germans couldn’t win, they didn’t deserve to survive. And he backed that up by refusing to evacuate German civilians from the path of the Soviet army, exposing them to horrific atrocities. This might remind us of Hamas’ indifference to the suffering of its own civilians, and Netanyahu’s to the hostages.

Nationalist leaders are often alienated from their people. Partly that’s the loneliness of leadership, but mostly it’s the lack of empathy. If you become the leader of a nationalist movement—say of Germany—then you’ve spent years rejecting empathy for the Poles, the Jews, the Czechs and the French, despite the fact that they’re your neighbors. It’s a short step from there to rejecting empathy for ordinary Germans, particularly those you believe are unenthusiastic about the cause.

But to call it a “lack of empathy” is an extreme understatement. In truth it’s an active effort to dehumanize others, and it happens continuously through the propaganda of all nationalist movements. Nationalism is built for war, and as one old soldier put it, “war means fighting and fighting means killing.” And to kill someone you must believe they are not human in the same way you and your people are.

And your own soldiers, who do the killing, also have to be dehumanized, mythologized into heroes and even gods, because the suffering of heroes and gods isn’t ordinary suffering, not what you or I suffer, but something more profound, part of an archetypal ritual of sacrifice and renewal.

But at the end of the day, they are just as dead as the enemy; they rot in the same ditches. The myth of sacrifice and renewal isn’t false, but the way nationalism exploits it is a revolting lie. The similarities between people far outweigh the differences, and nationalism’s denial of that fundamental truth sets the stage for a tragedy with no denouement. And that denial is the first lie of nationalism, the basis for all the systematic and shameless lying that is inherent to it.

Hence Gaza. Dehumanization is the heart of nationalism, and both sides are deep into it. And there’s no exit, because dehumanization poisons the well. No meaningful dialogue is possible, no compromise, no reconciliation. The crimes continue almost automatically, not the acts of individuals but the impersonal product of nationalism.

Nationalism promises unity, strength and safety. And it actually delivers none of these. How many times have we heard that Jews can only be truly safe in their own country, in Israel? And yet they are not safe, and never have been—it’s an illusion.

And it’s an illusion for the entire world, not just the Israelis.

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Could a Gandhi or Mandela emerge to lead both sides to peace? Of course not. There are probably thousands of people on both sides with the spiritual vision to play that role, but they are marginalized as eccentrics, or if they are too persistent, they are jailed or otherwise suppressed. These people are regarded by their peers as dreamers, weak and unrealistic.

And yet what could be more unrealistic than to believe that this conflict could go on forever? And what could be weaker than to let one’s people slide toward extermination? The hard-bitten realists of Netanyahu’s cabinet will sooner or later exterminate the Palestinians or be exterminated by them. Making no effort to avoid those eventualities is idiotic, but that’s nationalism for you.

Only the presence of Western and Arab public opinion has prevented extermination from happening already.

How have people made peace in the past? How did the Japanese and Americans become allies and business partners? After World War II, the Americans and Japanese agreed that Japanese nationalism had to be suppressed. Some unreconstructed Japanese nationalists remained, but they were neutralized politically. The monarchy was likewise de-politicized; that is, the Americans agreed not to hang the emperor if he agreed never to become the center of a nationalist movement. Liberal democracy was imposed on Japan, and it was able to take root because defeat had discredited nationalism.

[Embracing Defeat by John W. Dower, W. W. Norton & Company; Illustrated edition (June 17, 2000). ISBN-10 ‏ : ‎ 0393320278, ISBN-13 ‏ : ‎ 978-0393320275]

The fact that democracy was linked to trade with America meant that Japan could recover economically. Ordinary Japanese rapidly came to see democracy, pacifism, and access to American markets as inevitable. The nationalists grumbled, but they couldn’t argue with economic growth.

And Japan did not become an American colony. Diplomatically, they lined up with America and the West, but they resisted any military involvement in the Cold War. The Americans would have preferred it otherwise, but if Japan was to be a democracy then the Americans had to accept their pacifism.

The basis of this peace was American ideology. Americans believed their institutions were superior, not their people; if other nations would only adopt American ways they too would have peace and prosperity. Note this emphasized the similarities between groups, not their differences. Since the American model was always federal and decentralized, local adaptations were easily made: the Japanese kept their emperor and refused to actively fight communism, and in Europe the Americans had to accept social democracy to resist communism.

Of course, in Europe the American system meant the suppression of German nationalism, and also—more subtly—the suppression of French and British nationalism. The Americans steadily opposed colonialism to the point of humiliating allies publicly, as in the Suez Crisis. This served the American purpose of blunting Soviet anti-colonial propaganda, but it also crushed French and British nationalism. What is a British nationalist without an Empire? Nationalism, like any other political movement, has to have a purpose.

The Americans not only wanted to eliminate colonialism, they also wanted to stabilize Europe itself. Anything that resembled the political situation in Germany and Italy in the 1920s had to be tamped down. In France, for example, the right-wing was militaristic, anti-semitic, anti-democratic and imperialistic. Their beliefs were similar to Nazism; French collaborators largely shared the Nazi worldview. Furthermore, there was no post-war reckoning in France with right-wing ideology, as there was in Germany and Japan. After the war, the French wanted to claw back Vietnam and hold Algeria, just as the Nazis had wanted Danzig and the Sudetenland before the war.

But in the long run, the French could not keep their empire. The Americans were never willing to help them, not even to defeat the communists in Vietnam. And few in the Western World accepted the French arguments in favor of colonialism—not the communists, not the socialists, not the liberals, and most of all, not the Americans. In the end, French nationalists were reduced to trying to assassinate De Gaulle, one of their own. This had the potential to profoundly destabilize France and Europe, but fortunately De Gaulle survived to rule France with his odd mixture of nostalgia and sharp-eyed pragmatism. French nationalism today has no foreign policy and no vision; it’s just a set of petty complaints against immigrants and America.

https://en.wikipedia.org/wiki/Charles_de_Gaulle

https://en.wikipedia.org/wiki/Algerian_War

https://en.wikipedia.org/wiki/Algiers_putsch_of_1961

https://en.wikipedia.org/wiki/May_1958_crisis_in_France

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As the Americans were attempting to discredit and weaken western European nationalism, the Soviets were doing the same in the east; German and Polish nationalism seem to have been of particular interest, although there were certainly no safe spaces for nationalists anywhere behind the Iron Curtain. But the severity of the suppression was worse in the East—British nationalists had to endure political irrelevancy, but Polish nationalists were shot or jailed.

Both the Soviets and the Americans realized they couldn’t establish a stable world order if nationalism was allowed run amok as it is doing today in Gaza, and as it did in both World Wars. The two great powers disagreed profoundly about what that stable world order would look like, but they saw eye-to-eye on the question of nationalism.

Nationalism was only encouraged in border zones, to cause trouble for the other side. The Americans encouraged Greek nationalism as a way of opposing the Greek Communist Party, and the Soviets encouraged Vietnamese nationalism to pin down the American army.

The American system was federal, and the nations in the American sphere of influence had a lot of autonomy, so long as they didn’t go communist. But the big decisions had to be made by some central authority—either Washington or the EEC. The UN could have been effective, if the Cold War hadn’t crippled it.

The Soviet system was more centralized, and the Eastern Europeans mostly did as they were told. When they didn’t, the Russians sent in tanks. But China was problematic; in the beginning it was too poor to be completely independent, but too big to be dominated by the Soviet Union.

Let’s pause to set some context here. My readers in 2024 may be surprised that both American and Soviet leadership were capable of such vision, and perhaps doubt my interpretation. And why might my readers reasonably doubt that the Soviets and the Americans saw nationalism as a destructive and destabilizing force? After all, isn’t nationalism normal?

Few people in 1946 saw nationalism as normal. And neither the Soviet nor American leadership needed any prophetic vision to see the trouble nationalism might cause—they had only to look out their windows: much of their world was a smoking ruin. Everyone was aware that the World Wars, which had nearly destroyed everything, were mainly driven by nationalism.

And in particular, nationalism made it nearly impossible to make peace. Louis XIV would have made peace in 1915, when the game was clearly no longer worth the candle, but the leaders of the time were unable to do so due to the unbridled nationalism of their people. To have made peace without victory was unthinkable even in Great Britain, not the most nationalistic of the warring nations.

But to fight on in World War One was clearly a disaster, not only because of the staggering human losses, but also because of the resulting demoralization and alienation which led to political extremism: fascism and communism. To fight on until one side collapsed like an exhausted boxer meant that a second war was inevitable, and a third highly likely.

The victory that nationalists dreamed of in World War I was never possible. Yes, the ancien regime was swept away—the Czar, the Kaiser, the Austro-Hungarian Empire—but they were replaced partly because they were irrelevant to nationalism! The Kaiser had been replaced by a nationalistic military dictatorship headed by Hindenburg and Ludendorff months before the Armistice.

https://en.wikipedia.org/wiki/Oberste_Heeresleitung#Third_OHL

Only in Russia was the ancien regime evaluated solely on its merits and rejected in favor of another (non-nationalist) system. Communism was a humanitarian disaster, but Lenin had more flexibility than any nationalist leader: he could make peace with the Germans and keep his job. And Stalin could fight Finland without winning a total victory. Neither was a prisoner of nationalism.

Lloyd George, for example, couldn’t even fire his generals, and reportedly kept newly trained divisions in England, so that Haig couldn’t hurl them against the German trenches.

[Strategy by Sir Basil Henry Liddell Hart, Plume; 2nd Edition (March 30, 1991). ISBN-10 : 0452010713, ISBN-13 : 978-0452010710]

The Allied insistence on “unconditional surrender” in World War II may have been based on the understanding that a country dominated by nationalist thinking would never accept defeat unless it was occupied and re-made.

By 1946 the world had taken a big step backwards from nationalism. Both the two superpowers claimed to represent a trans-national ideology that would benefit all; the choice was between the two ideologies, not between American and Russian nationalism. Were both countries a bit nationalistic, nonetheless? Possibly, but everyone knew that the big issues were capitalism, socialism and democracy; the side you chose depended on your take on those institutions.

Ordinary people and leaders alike understood that world peace couldn’t be achieved without suppressing or sidelining nationalism. And the same is true today.

But today nationalism is almost standard throughout the world. This is “nationalism” but not the European nationalism of the 19th century, which usually had links to the Enlightenment or Christianity or both. Modern nationalism is therefore stripped of both reason and compassion.

Nationalism reigns unchallenged in many countries: Russia, China, Iran, and Hungary. People are not allowed to speak against the lies, the crimes, and the profound dehumanization of nationalism. They are not allowed to speak against an ideology that could wipe out the human race.

And other countries, such as India, Turkey and the United States are not far behind.

In a world with eight billion people and 195 nations—none of them autarkies—getting along might seem a foreign policy priority for every country. We are united by trade and the internet to an extent that would have been inconceivable a generation ago.

And yet, despite (or perhaps because of) this reality, countries like China, North Korea, Russia and Iran bristle like pit bulls at any threat to their fevered dreams of dominance.

And the contradiction is sharpest in China, which is at the center of the world’s trade network.

“Where there is no vision, the people perish,” and what is the vision of modern China? The old CCP vision of a better life for the Chinese people and for the whole world has disappeared. What has replaced it? It’s a nationalist vision of China as a great empire that has, by war and economic pressure, supplanted America. Taiwan will be conquered, and likewise the Philippines. Japan and South Korea will be neutralized and reduced to economic colonies of China. Southeast Asia, Central Asia and Africa will likewise become clients of China. The CCP does not mention that this ascent to glory will almost certainly involve a world war—and with China’s best customers!

Nationalism is always irrational to some extent, but modern Chinese nationalism is strikingly so. The Chinese economy is built around manufacturing for export; the legitimacy of the state depends on the success of that economy. Therefore good relations with China’s customers should be a necessity.

And yet China spends large sums to prepare for war against Taiwan and the United States, two of its most important trading partners. How can your foreign policy imply the destruction of your economy? It doesn’t make sense, but it makes nationalist sense.

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As with any political movement, we need to ask what is nationalism for? What purpose does it serve? Obviously, this could be a complex subject, so let’s start here: there are political ideologies that are de-humanizing, such as nationalism, and there are also humanizing ideologies, like democratic socialism or Gandhi’s Congress Party movement in India; that is, movements that raise people up and give them dignity.

If the only political expression allowed is nationalist (as is true in both Russia and China today) then humanizing political movements are in effect outlawed; if there is no political force standing up for humanity, then the people will suffer long-term dehumanization, the symptoms of which include violence, drug addiction, alienation, loss of personal relationships and nihilism. We can add more nouns: homelessness, criminality, racism, and loss of spirituality. Life expectancy falls, the suicide rate rises. People lose faith in institutions, including democracy and education.

And sensing in an unfocused way that the system is stacked against them, the people lash out in rage.

If people have experienced intensive dehumanization in their personal and economic lives, they may in turn dehumanize their enemies. Or their supposed enemies, the ones that nationalist propaganda serves up for them.

Nationalism therefore extends the dehumanization of Billionaire Capitalism onto an international stage and makes another world war much more likely.

There’s yet another aspect to this problem. In the case of a countries like China and the U.S., where the founding ideologies are explicitly Utilitarian, nationalism also acts as a permanent conversation-stopper: no one can ask, why isn’t life getting better? Don’t we have a system that’s supposed to help us? What has gone wrong?

Because the nationalists would say: we can discuss all that after we’ve defeated our enemies. Which is exactly what Netanyahu is saying to the families of the hostages.

This isn’t just misdirection, it’s actually how societies are depoliticized. If the Chinese cannot analyze current conditions in light of Marxist-Maoist thought, or Confucianism for that matter, then what’s the basis of their analysis? Nothing—and that is exactly the point. To discuss anything outside a nationalist framework was at first discouraged, then forbidden, and after some time it finally became impossible.

And to take another example, if Americans can’t refer back (say) to the ideals of the Enlightenment, then they’re stuck. Americans can’t say, how can reason and science guide us in a world full of disinformation? Or if they say it, they won’t be heard.

People have to analyze the present in terms of what they already know, but nationalism negates that knowledge. So nationalism depoliticizes society by destroying or occluding political and cultural context—by eliminating history, in other words. Nationalism makes us forget Socrates and Christ, the Enlightenment, science and democracy.

But again, early nationalist movements, like Irish nationalism, were rooted in Christianity or the Enlightenment, because early nationalism had to prove its worth in terms of what people already knew and valued. Today, nationalism is justified only by nationalism itself, which means it has no independent value system, not even in China or Russia, where Marxism retains some prestige. But Marxism is inherently political; you cannot depoliticize class conflict.

Worse, Marxism has a vision of a better world for all. The practicality or desirability of this vision—which so many people fought and died over—is now beside the point. The people are intended to have no vision of the future at all, so Marxism cannot be discussed.

So, what is modern nationalism for? Nationalism exists as a force-multiplier for Billionaire Capitalism. By depoliticizing society, it prevents any discussion of improving the lives of the people or of changes to the power structure, and it is profoundly dehumanizing. These are virtues from the point of view of Billionaire Capitalism.

Nationalism was obsolete after World War II, but the rise of Billionaire Capitalism in 1980 changed that. Nationalism was resurrected and carefully stripped of anything that resembled an independent value system; Billionaire Capitalism then turned nationalism to its own purposes.

And when I say that nationalism is dehumanizing, I mean that when you dehumanize the Other, you are also dehumanizing yourself. The same illusions that allow you to deny the dignity of the Other will eventually come around again in self-condemnation, self-contempt.

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For a long time after 1945, most of us understood that the World Wars were a dark wasteland that we could never re-visit; the human race would not survive a World War fought with nuclear weapons. But there was a paradox: as in a fairy tale, our worst fear had to be met with fearlessness. The generation that survived World War I saw the errors of militarism and nationalism, but they lacked the ideology, or the courage, to resist fascism.

So the generation of World War II had to walk the razor’s edge between peace and war, and they survived by the narrowest of margins.

Their success was largely due to their recognition of the dangers and limitations of nationalism.

And today?

Artificial Intelligence and Little John

If our socialism is to solve humanity’s problems, it can’t be merely a set of virtuous opinions. Socialists must be able to govern, and to do so they must understand economics, society and technology, and this understanding must be infused with humanity.

So in this essay and following ones, I will examine artificial intelligence as both a technology and as a social and economic phenomenon. Not to give away the plot, but once you understand the history and technology of artificial intelligence, the social and economic implications are clear.

I will rely here not only on research, but also my own experience. As a computer scientist of a certain age, I might claim to have been there at the founding of Artificial Intelligence, but that wouldn’t be true, although I thought so at the time. A peculiarity of AI research is that every year since at least 1980 people have believed that AI was just beginning at that moment, despite vast amounts of previous research.

In 1981 I was a graduate student in computer science at a large university which claimed to have a “top 20” CS department, and that might have been true. Most of my professors knew their stuff, at least.

One professor I particularly liked taught Operating System Theory, and one day in class he was asked about Artificial Intelligence—was there anything to it? Would it someday work?

He said, “the fundamental assumption of Artificial Intelligence is that the human brain is basically a meat machine, that it’s very similar to a computer in function and structure, only it’s much slower. And so computer jocks can just write some code and the software will do anything human beings can do, but much faster.”

The term “computer jock” meant a programmer of average ability and boundless confidence, and his use of the term indicated he thought that developing AI software might be a significant challenge.

He looked around the room. “So that implies that computers will replace human beings for practically every cognitive task. And it won’t take that long, it’s just a matter of writing some code. The idea is that computers will replace the human brain the way machines replaced human muscle during the Industrial Revolution.”

One grad student asked, “Is Artificial Intelligence worth studying?”

The professor was a young man, lean and bearded. He smiled slightly and shrugged his shoulders. “If you accept that the human brain is basically just like a computer, but slower, then yes, you might decide to study Artificial Intelligence. Just be aware that if your assumption is correct, then you yourself will shortly be replaced by AI, studying itself.”

This was a serious prediction, often repeated at the time, but the audience still chuckled. I wondered why they were laughing.

However, since we were already using computers to calculate statistical and trigonometric functions, matrix operations and graphics, the basic assumption of AI didn’t seem too implausible. But I was aware (and the professor probably was too) that AI researchers had made a sweeping assertion about not just the brain, but about human nature itself.

There is nothing like spending time with computer scientists to see their limitations. Although hard-working and intelligent, they had no breadth beyond their field. They rarely had any interest in philosophy, and the few that did followed Ayn Rand. Their musical tastes were likewise limited: later I met women engineers who liked Enya, and I knew a computer scientist once who loved Gilbert and Sullivan. But easily 80% of computer scientists and engineers had no interest whatsoever in music. Painting and dance were never mentioned.

Their leisure reading was limited to science fiction.

I mention their lack of breadth not to criticize—engineering programs neither allow nor require much exposure to the arts and humanities—but to illustrate their lack of knowledge outside their discipline. No reasonable person would ask a computer scientist about anything other than computer science. And yet all the funding poured into AI since the Fifties has depended on a questionable assertion about the nature of human intelligence, and by extension about the psyche itself.

In what follows I will discuss major areas of AI research since the ‘50s—their goals, their challenges and their accomplishments. But first I have to point out a major difficulty in discussing Artificial Intelligence—-what is its definition? Resolving that problem is beyond the scope of this essay, but I’d like to point out that often software “displays intelligence” that is merely the intelligence of the programmer. Internet search engines, like Google, are sometimes described as examples of AI, but what is Google, after all? It’s a vast, special purpose database management system that includes descriptors and addresses of almost everything on the internet, along with methods for accessing that data and modifying it if needed. It’s a DBMS, a database management system, a nearly ubiquitous technology, but custom made by Google employees. A DBMS is not AI; if we assert otherwise, then AI has been defined so broadly as to be meaningless. The intelligence in a Google search is mostly the intelligence of the humans who designed the database.

You might say, what about the search heuristics? Aren’t they AI? Let’s think about that: does Google use heuristics in its searches? No doubt. Does the software itself choose between a set of heuristics using statistics of recent searches? Possibly.

Does it create its own heuristics? It almost certainly does not. And the reason is that putting all this data into a DBMS—that is, into a defined format—means that searches are constrained. There is a vast amount of data, but it can only be searched in a few ways, and most searches are quickly accomplished using indices or similar tools, like hash tables. If this weren’t true, Google searches would take a long time. And this also implies that any search heuristics are fairly simple. Not dead simple, because Google queries can be complex, but as simple as the programmers can make them.

You might suppose that such a vast amount of data would need extremely complex search methods just to find anything, but it doesn’t, because the database design reduces the complexity of the search space. It’s the same principle as finding a book in a library; sophisticated search methods aren’t needed.

So the smarts in Google are in the database design and to a lesser extent in the search heuristics. It may also do pre-fetching and caching of content to improve performance, and some of this vast database may be compressed.

What Google does is complex and extremely effective, but is it artificial intelligence? Most or all of the intelligence it displays came directly from the database architects and the programmers. And we shouldn’t forget the intelligence of the users, who learn how to frame Google searches to get relevant results. This learning may be half-conscious, but it’s a factor.

The people who do AI research sometimes say that any software that displays intelligence is AI, but that would mean that the statistical package on my laptop is doing AI when it calculates a standard deviation. Most people would say that’s not AI, because they know it’s just calculations, and I agree. The programmer was intelligent, but not the software. Therefore, unless there’s some independence of AI software from its creators, we don’t have AI. But defining and measuring that independence is difficult.

So for this discussion, a general definition of AI doesn’t yet exist, and we’ll set that problem aside. Let’s turn instead to specific examples of AI research.

Machine Translation

Most of the early work in MT was shaped by the exigencies of the Cold War, particularly the need to translate scientific and technical documents from Russian to English.

Initially, there was hope that cryptographic methods developed during World War II could be applied to machine translation. After all, a language you don’t understand is similar (in some sense) to an encrypted version of a language you do understand. However, when you decrypt a message what you ordinarily get is a numeric mapping of letters to letters. The encryption is simpler if semantic units—words and sentences—are ignored.

But machine translation cannot so easily ignore semantics. And the cryptographers themselves had encountered difficult semantic problems during World War II; even after the Allies captured the German Enigma machine from a damaged U-boat, they still sometimes had trouble making sense of the unencrypted German. There were often too many abbreviations, jargon and acronyms for a German speaker without current military experience to understand. Context mattered.

https://en.wikipedia.org/wiki/History_of_machine_translation

Machine translation projects began in earnest around 1951, at Georgetown and MIT. By 1954, the Georgetown Project was able to translate 49 Russian sentences, carefully selected, into English, and they predicted that machine translation would be solved soon:

“Well publicized by journalists and perceived as a success, the experiment did encourage governments to invest in computational linguistics. The authors claimed that within three or five years, machine translation could well be a solved problem.”

https://en.wikipedia.org/wiki/Georgetown%E2%80%93IBM_experiment#Reception

By a “solved problem” they clearly meant that human translators would join candlestick makers and tinsmiths in the history books. The timeline may seem absurdly aggressive to us, but compared to the progress of the Industrial Revolution in displacing traditional craftsmen maybe it wasn’t. And that was the model of change they had.

The Georgetown Project was focused on papers on organic chemistry, a highly denotative subject, so there was little extraneous context to complicate the translation.

The project at MIT confronted the problem of context more directly, by pointing out the difficulty of “semantic ambiguity.” Yehoshua Ben-Hillel created the following test:

“Little John was looking for his toy box. Finally he found it. The box was in the pen.”

The word pen may have two meanings: the first meaning, something used to write in ink with; the second meaning, a container of some kind. To a human, the meaning is obvious, but Bar-Hillel claimed that without a “universal encyclopedia” a machine would never be able to deal with this problem. At the time, this type of semantic ambiguity could only be solved by writing source texts for machine translation in a controlled language that uses a vocabulary in which each word has exactly one meaning.

https://en.wikipedia.org/wiki/History_of_machine_translation#The_early_years

Let’s examine Ben-Hillel’s test case. This isn’t a matter of inherent ambiguity because no native English speaker could mistake the meaning. Little John is clearly a child because he owns a toy box. Adults put toys in boxes all the time—as presents, or in factories—but the term “toy box” is limited to storage in the home, usually in a child’s room.

And because he is a child, he isn’t Robin Hood’s sidekick. Also, children are usually not allowed ink pens, and a toy box wouldn’t fit in an ink pen anyway. But small children have “play pens,” and understanding that “pen” is short for “play pen” would be a difficult challenge for the translation software—which may not even understand that Little John is a child.

Even today, sixty years or more later, if you feed these three sentences into Google Translate, with German as the target language, “pen” is translated as “Stift,” which means an ink pen or a pencil.

Ben-Hillel was and still is quite right that machine translation software would find these three sentences difficult or impossible, and many more like them. But the problem isn’t ambiguity; it’s that the translation software doesn’t understand the world. This was the problem that Ben-Hillel was trying to address with the “universal encyclopedia,” which is the context that people need to fully understand their native language. It approximates the sum of human knowledge, or at least that which can be expressed in words.

As far as I can tell, Ben-Hillel never described how a “universal encyclopedia” would be implemented, and his skepticism about machine translation may have contributed to the US government setting up ALPAC (the Automatic Language Processing Advisory Committee) to evaluate the progress of machine translation research and of computational linguistics in general. The committee concluded in 1966 that machine translation research since 1951 hadn’t generally been useful. Priorities for future research included:

  1. practical methods for evaluation of translations;
  2. means for speeding up the human translation process;
  3. evaluation of quality and cost of various sources of translations;
  4. investigation of the utilization of translations, to guard against production of translations that are never read;
  5. study of delays in the over-all translation process, and means for eliminating them, both in journals and in individual items;
  6. evaluation of the relative speed and cost of various sorts of machine-aided translation;
  7. adaptation of existing mechanized editing and production processes in translation;
  8. the over-all translation process; and
  9. production of adequate reference works for the translator, including the adaptation of glossaries that now exist primarily for automatic dictionary look-up in machine translation

These priorities are revealing. After 15 years of research, “evaluation of translations” was apparently still an open topic. I wonder how experiments were designed and the results analyzed without standardized evaluation.

Several of the recommendations—2, 5, 6, 8, 9—seem to concede that human translators had a future, even if aided somehow by software.

Efficiency and cost were raised in recommendations 2, 3, 5, 6, 7, 8, in fact the majority of the nine. Apparently those issues were discussed a lot. Did anyone explicitly compare the cost of training a human translator with the cost of machine translation research?

Recommendation 9 might imply that future research should focus on developing tools to aid human translators.

ALPAC wasn’t just questioning the theoretical potential of machine translation, as Ben-Hillel had done. They were questioning the experimental rigor and focus of past research as well. It had after all been fifteen years and who knows how much money.

Government funding for MT research fell dramatically as a result of the ALPAC report. This is sometimes regarded by AI researchers as an inexplicable tragedy.

https://en.wikipedia.org/wiki/ALPAC

https://en.wikipedia.org/wiki/AI_winter#Underlying_causes_behind_AI_winters

The reader may have guessed already that AI research largely depends on government research money, and this was especially the case in the 20th century. Naturally AI researchers developed marketing and PR skills early.

Even after ALPAC, computational linguistics continued, because studying the nature of language using computers as a tool was still a valid undertaking. And machine translation did make a comeback, using statistical methods and expansive lexicons that included common phrases and idiomatic expressions. But as Wikipedia states:

“Current machine translation software often allows for customization by domain or profession (such as weather reports), improving output by limiting the scope of allowable substitutions. This technique is particularly effective in domains where formal or formulaic language is used. It follows that machine translation of government and legal documents more readily produces usable output than machine translation of conversation or less standardised text.

Improved output quality can also be achieved by human intervention: for example, some systems are able to translate more accurately if the user has unambiguously identified which words in the text are proper names. With the assistance of these techniques, MT has proven useful as a tool to assist human translators and, in a very limited number of cases, can even produce output that can be used as is (e.g., weather reports).”

https://en.wikipedia.org/wiki/Machine_translation

Sixty-nine years later, and MT still only produces high-quality translations in tightly defined and denotative domains. The fundamentals haven’t changed much since the Georgetown Project.

We might question how funding for MT ever returned; the ALPAC report might reasonably have put an end to government-funded research in MT for good, and why didn’t it? My theory is that capitalism wasn’t willing to give up on the idea that AI was analogous to the Industrial Revolution, and that it might result in a massive reduction in cognitive labor. After all, great fortunes were made when the Industrial Revolution eliminated so many spinners and weavers, and even greater fortunes might be made when AI replaced translators, lawyers and accountants, no matter what the social cost might be.

In other words, the potential of AI to concentrate wealth and power was too alluring. Without some such powerful motive, why throw good money after bad in MT research?

Everyone has used Google Translate, and it’s useful—and fun–to translate individual foreign words, a few sentences or a technical abstract. And the price is right. But we’ve spent a tremendous amount of money and time to get Google Translate, and it can’t be used in serious situations. If testimony in court must be given in a foreign language, they hire a human translator with training and credentials; the judge doesn’t bring up Google on his smartphone. No one accused of a serious crime would communicate with the court, much less their attorney, using Google Translate. And likewise for international business negotiations—unless the two sides can communicate in English. The situation in diplomacy is the same.

I understand that professional translators sometimes use Google Translate for prose, and that makes sense. Google would save the human time on the “first cut” translation, and the human has Ben-Hillel’s “universal encyclopedia” between her ears. This can result in fast, high-quality translations.

An ironic postscript to this discussion is that Ben-Hillel’s granddaughter is a professional translator who translated the Harry Potter books into Hebrew. Did she ever worry she might be replaced by AI? If the young still listen to their grandfathers, probably not.

The Sixties

My approach in these essays is consistent—I don’t change assumptions or values from essay to essay, and major concepts like billionaire capitalism and capitalist socialization are likewise stable. This is an analytical method.

One premise is that systemic problems are systemic. By and large, our problems are not the result of individual choices; our social dysfunction is instead structural.

I therefore am careful about the disciplines I draw from in my analyses. Semiology, literary criticism, social psychology, and most of the identity narratives too easily lend themselves to moral judgement and labeling. Even cultural anthropology can be misused in this way. How many articles have we read contrasting the values and mindsets of red states versus blue states?

The end point of socialist analysis should never be that one group is good and another bad; this is not a movie, but an effort to save humanity, civilization, and our planet. It is our duty (and our joy) to shed light, not to blame and scapegoat.

So, in my writing I mostly use history and economics; I am also keenly aware of the role socialization plays. Occasionally I will talk about narcissism, because it’s so characteristic of the Billionaire Capitalism culture. But I don’t talk about any psychological phenomenon without linking it to a wider context.

And most of all, I realize that correctly answering the wrong question is worthless. Finding just the right question, at the right level of abstraction, is invaluable. Wisdom isn’t knowing, it’s not knowing in a precise way.

All that said, what good is my analytical method? For one thing, it allows us to ask (and answer) questions that are otherwise ignored. For example, I didn’t ask what the American class structure was—I also asked what it was for. (See Class and Underclass). And I didn’t just assume capitalism is harmful, I asked precisely how it was harmful—and the answer was capitalist socialization. (See A Greater Power).

But can this method predict the future, or at least allow us to understand it partly? Of course, “nothing is so difficult to predict as the future,” but some insight is necessary for our survival, so we have to try.

To test whether this method can shed light on the future, we could just make predictions and wait, but life is short. Instead, let’s find proxies for the future. A good place to start is with events in the past that no one understands.

Using this method, can we explain, let’s say, the Sixties? Liberals couldn’t explain the Sixties (although they were able to accept it eventually), conservatives attributed the Sixties to the unbounded depravity of hippies—although once in a while they blamed Dr. Spock for the “permissive” child-rearing practices of post-war families. Marxists blamed bourgeois decadence and completely missed what looked for all the world like a revolutionary moment. As for the participants themselves, they felt a sense of liberation which they could not explain other than to assert how oppressive and unsatisfactory the old system was; the value of their path was self-evident to them.

[https://en.wikipedia.org/wiki/Counterculture_of_the_1960s#Criticism_and_legacy and personal memory]

And what did they mean by the “old system”? Often they said the Fifties, which were generally perceived as a dead end. But the decade of the Fifties had no existence of its own; it was just a set of experiences that shaped how we saw the world and what we expected from life.

The Fifties were the prelude to the Sixties, obviously. But what does “prelude” mean exactly? What was the deep relationship between these two eras, these two Zeitgeists?

When we look at the Sixties today, it certainly was a complex, wide-ranging movement—-although observers often tried to explain it in simple terms. People made basic and far-reaching changes as a matter of course. They changed how they ate—-how often, in the sweep of history, does a society change its diet, except in the face of severe shortages? They changed their sexual mores, they changed how they saw war and violence—and authority. They completely threw over the Western male socialization around military honor and glory, a system that had led Western men into battle for millennia. They changed their attitudes toward work and money. They adopted (or invented) new religions; Christianity’s appeal faded. They build new kinds of houses—they lived in transparent geodesic domes, or they lived underground, or in teepees. They farmed in new ways, and in old ways. They changed their clothes, their hair, their thoughts.

They turned back to nature in a profound way. And they questioned the structure of consciousness and reality, which they attempted to change (or understand) using psychedelics and meditation.

[https://en.wikipedia.org/wiki/Counterculture_of_the_1960s and personal memory]

No one understands the Sixties. It has become a part of our culture in so many ways, but no one can account for it.

Let’s take a deep breath here and remember what Jung wrote about individuals who show some extreme development or other— being highly intellectual or witty or unusually sensitive. He said that all such cases are a compensation. We might ask: a compensation for what? Something unacceptable, perhaps painful or grievous. Something that limits or harms us.

[Memories, Dreams, and Reflections, Carl G. Jung, Vintage, April 23, 1989, ISBN-10: 9780679723950, page numbers to be added later]

The Sixties were certainly an extreme development. What could it have been a compensation for?

Not to go back to Jung for every question, but he also pointed out that the invention of nuclear weapons caused a collective psychological crisis, one symptom of which was UFO sightings.

[Flying Saucers: A Modern Myth of Things Seen in the Skies, by Carl G. Jung. Princeton University Press, January 21, 1979. ISBN-13: 978-0691018225]

What if the Sixties were a reaction to this psychological crisis? But the beginning of the counter-culture—say around 1964—was nineteen years after Hiroshima and Nagasaki, which would be an extremely delayed reaction, and might suggest there was no relationship between the development of nuclear weapons and the Sixties.

But 1964 was only two years after the Cuban Missile Crisis. It’s understandable that people and societies would re-examine their priorities after such a frightening near-miss. But the Sixties went well beyond slowing down to smell the roses, so to speak, and the counter-cultural ferment was center-stage in American society into the mid-seventies—ten years or so. That seems an outsize reaction to the Cuban Missile Crisis by itself; we need to explain why the cultural ferment of the Sixties lasted as long as it did and affected so many areas of life.

It may be plausible that the Sixties was somehow associated with the Cuban Missile Crisis, but what was the specific linkage?

Let’s look at the geo-political and social implications of the invention of nuclear weapons, the overall context of the Cold War. This collective psychological crisis that Jung describes—how did it develop and how did people adapt to it?

At the end of World War II there were only two significant powers left standing—the USSR and the US, and these two had opposing ideologies. There was bound to be conflict, but on what scale? The tension built rather slowly, since the two countries had been allies and neither wanted another war.

The years of 1948 through 1950 were decisive. On New Year’s Day of 1948, the tensions seemed manageable. The Americans had drastically drawn down their forces in Europe and reduced military spending overall. Then in quick succession there was the coup in Czechoslovakia in February, the beginning of the Berlin Blockade in June (and finally ending in May 1949) and then, to the great shock of the West, the Soviets tested an atomic weapon on August 29, 1949.

[https://en.wikipedia.org/wiki/Cold_War#Marshall_Plan,_Czechoslovak_coup_d’%C3%A9tat,_and_formation_of_two_German_states https://en.wikipedia.org/wiki/Cold_War#Berlin_Blockade_and_Airlift https://en.wikipedia.org/wiki/Soviet_atomic_bomb_project ]

Further, in October, Mao Tse-Tung proclaimed the People’s Republic of China; the remnants of the Nationalists fled to Taiwan and left the communists in control of the world’s most populous country. Lastly, the outbreak of the Korean War in 1950 reinforced the belief that the West was engaged in a global struggle with communism, and that the communists were willing to endlessly escalate this conflict, even where the strategic benefits were minor, as in Korea.

[https://en.wikipedia.org/wiki/Chinese_Civil_War#Pushing_south

https://en.wikipedia.org/wiki/Cold_War#Korean_War]

The collective psychological crisis posited by Jung was well underway by the end of 1950. MacArthur wanted to use nuclear weapons against Chinese troops in Korea, and he didn’t believe the president had the authority to stop him. This was a significant crisis which could have led to a general war. Fortunately, Truman relieved MacArthur of his command.

We were one or two or three mistakes from extinction.

How did Western societies cope? America became apathetic and conformist, unable to resist a policy not of protecting the country and the people but of sacrificing them to protect capitalism, democracy, and Christianity, none of which would survive the sacrifice.

And refusing to oppose Communism wouldn’t work either, because that might mean a 1984 future for the entire human race.

This wasn’t even a dilemma; this was a nihilistic dead end.

The Thirties and Forties had been challenging in the extreme, but Americans responded by taking action; they didn’t lose their sense of freedom; they didn’t stop being Americans. The Fifties were different; we were dead inside.

We could only adapt by changing our socialization. This sounds impossible, but what is our socialization, anyway? It’s a set of memories of what we value, how we solve problems, and how we relate to others. And every time we remember something, we can change that memory if it no longer matches reality—oh, that business moved, I need to write down the new address—and so it was with socialization in the Fifties. Americans had always been future-oriented, and we stopped except in trivial ways—we didn’t plan in detail, but we did read science fiction. We hoped we might have a future, but we tried not to think about it too much.

Hardly anyone built a bomb shelter.

[personal memory]

We made changes where we could, but everything had a price. Americans acquiesced to peacetime conscription because this was clearly not a time of peace, and yet not quite war either. Every young man spent two years in their early twenties in the military. This strengthened conformity and weakened ties between young men and their communities—and the young women they grew up with.

We accepted the suppression of the Communist Party, but this meant no one else could criticize capitalism, either. But the good and ill capitalism does should always be a subject for debate in democracy—so America was de-politicized in an odd way, as Russia and China are today. America wasn’t a dictatorship, but in some ways it resembled one.

[Many Are the Crimes: McCarthyism in America, by Ellen Schrecker. Little, Brown and Company, May 1 1998. ISBN-10: 9780316774703]

Male socialization in particular had to undergo some wrenching changes. The combination of militarization and passivity was hard to manage, and of course the basic contradiction of the Cold War that I mentioned earlier—of sacrificing everything for nothing—meant that no man could be a hero, because no possible sacrifice could save one’s people.

I imagine Jung would say that losing the archetype of the Hero would be painful, but that it might also lead a necessary transformation. But the transformation was in the future, while the pain was immediate.

Men began to act out. For the first time, American youth started to oppose society directly. They formed gangs and fought each other and the police. Hells Angels were formed in 1948 and spread rapidly, but the problem went way beyond motorcycle gangs. The word “teen-ager” itself acquired a violent connotation, and every community had violent young men with duck-tailed haircuts. And this happened at a time of prosperity and low unemployment.

Later this discontent took a more refined form in the Beat movement, but those middle-class writers and musicians were just as alienated as the Hells Angels.

The boys weren’t right.

An insidious thing about Cold War socialization was that it took values and mores that pre-dated the Cold War—respect for authority, postponing sex until marriage, stoicism in the face of danger, just to name a few—and remapped those into political passivity, alienation between men and women, and numb acceptance of the unacceptable, respectively. And no wonder—the ancient context that gave rise to those values and mores had disappeared and had been replaced by something as grotesque as it was dangerous: a civilization that could only protect itself by destroying itself.

The ordinary socialization that parents gave children became deeply unconvincing, even to the parents themselves. The generational conflict that we saw in the Sixties did not come out of normal family life. The ties that bind had been loosened during the Fifties.

Take corporal punishment as an example. The only reason to physically punish a child is to inculcate values that will serve the child, and society, for decades to come. Truthfulness might be one example; obeying the law might be another.

But “decades to come”? Few people imagined we could avoid World War III. The conflicts and crises we had with the USSR and China seemed severe and intractable and we knew from experience how it would probably end. We hoped for peace, of course, but we’d just fought two immensely destructive World Wars that hardly anyone wanted, and our odds of avoiding the third seemed slight.

And a parent that can’t protect a child is on emotional thin ice with corporal punishment, and the parents must have known that at some level. Why be severe with a child when it’s likely neither of you has much time left? Why not just enjoy each other?

And yet corporal punishment was widely practiced in the Fifties. But since we doubted our future, it seemed pointless. The Cold War had destroyed the context that justified corporal punishment, but we continued with it anyway, out of habit or cruelty or both.

And this resulted in a hollowing-out of discipline. If the parents didn’t truly believe in the rationale for corporal punishment, then the children wouldn’t either when they were old enough to form an opinion. And this de-stabilized family life generally—slowly at first, beneath the surface, but later so openly that the entire world noticed.

Because it wasn’t just corporal punishment that was discredited. By extension, everything parents did to correct and instruct became questionable.

[personal memory]

There are several ways socialization can change. First, people almost unconsciously change their habits, values and ways of thinking in response to changing circumstances, and that was certainly a factor during the Cold War. Second, people can consciously set out to change, and this happened during the Enlightenment and the Sixties, but not so much during the Fifties. Few people set out to make themselves more passive and despairing.

And lastly, changes in socialization can be made top-down. McCarthyism met this definition, because its goal was not merely to suppress the Communist Party, but to make social change by anyone (particularly liberals) difficult or impossible. This was done by socializing people into a kind of apolitical apathy. And long after McCarthy fell, the FBI under J. Edgar Hoover continued McCarthyism less publicly.

[Many Are the Crimes: McCarthyism in America, by Ellen Schrecker. Little, Brown and Company, May 1 1998. ISBN-10: 9780316774703]

Another example of this top-down socialization was the effort (by Herman Kahn and others) to convince the people that a nuclear war was winnable. This never really caught on, and President Eisenhower for one did not believe it. When Kahn’s work was mentioned at a cabinet meeting, Eisenhower shook his head and silently drew a finger across his throat.

So Cold War socialization hadn’t pushed reason, including common sense, completely aside. Old soldiers still knew nonsense when they heard it. And in fact, the values of the Enlightenment and of Christianity trudged on; we didn’t have much else. In fact, they were a counterweight to the apathy and despair of the Fifties, and people clung to them all the more for that.

And as time passed we began to recover some hope.  After June 1951, when positions in the Korean War stabilized, the Cold War seemed less chaotic. Communist forces took over North Vietnam and later Cuba, but the Soviets were unable to dominate Yugoslavia or make any further gains in Europe. Insurgencies in the Philippines and Malaya were defeated. It was obvious that the big losses of the late forties—eastern Europe, China—had ended. Europe grew stronger and more cohesive through the Common Market and NATO, and European communist parties lost ground. Japan became a democracy and increased trade with the US.

And Khrushchev’s denunciation of Stalin was a hopeful sign; perhaps the Soviet Union would become less oppressive? At least some communists had the unexpected capacity to recognize the errors of their movement.

Of course, there were some unpleasant surprises. One example was how rapidly the Soviets developed nuclear weapons and another was the launch of Sputnik, which everyone in America could see in the night sky. But these were challenges the West could meet without falling into despair. Even in 1957 Americans were quick to note that Sputnik wasn’t armed—and to explain that to their children.

[https://en.wikipedia.org/wiki/Soviet_atomic_bomb_project

https://en.wikipedia.org/wiki/Soviet_space_program#Sputnik_and_Vostok]

So the Cuban Missile Crisis bit deep. The effect on the psyches of Westerners cannot be underestimated, although there was no panic at the time. That the Soviets would place missiles in Cuba seemed like a staggeringly reckless act—-and despite Russian rationalizations, it most definitely was. To keep the missiles secret was even worse, because that meant the weapons were not meant for deterrence, but for a first strike.

[https://en.wikipedia.org/wiki/Cuban_Missile_Crisis]

Fifteen years after the Berlin Airlift, we had Russian nuclear missiles in Cuba? People were bound to be immensely discouraged about the outcome of the Cold War.

Soviet propaganda pretended that the missiles in Cuba were a fair response to the US placing missiles in Italy and Turkey—but that was done publicly, not secretly, and the strategic importance of Cuba to Russia was grossly out of proportion to the importance of Europe and the Middle East to the US.

In the aftermath of the Cuban Missile Crisis, there was a rush on both sides to rationalize what had happened—-Khrushchev was reckless, communication between the leaders was too slow and indirect—but neither wanted to review the larger causes.

The West did not have a strategy to win the Cold War; it had defensive tactics that worked well in the industrialized world, but whether it could defend the post-colonial Third World remained to be seen. The Soviets, on the other hand, did have a strategy to win the Cold War, but it wasn’t working, and hadn’t worked since about 1951. But perhaps blinded by faith in their inevitable victory, the communists didn’t recognize that their strategy was failing. The fact that Khruschev imagined in 1961 that he could muscle the West out of Berlin is symptomatic of that failure; the question of West Berlin had been settled in 1949, and it was absurd and dangerous to revisit it without some change in the power dynamic.

[https://en.wikipedia.org/wiki/Berlin_Crisis_of_1961]

On the other side, no one in the West dreamed of trying to change the status quo in East Germany or Poland—that was clearly too dangerous and destabilizing.

So, there was a “reality principle gap” between West and East. The Soviets imagined they could do things they couldn’t, but the Americans were less deluded. And that’s not to say that Americans were always bathed in the light of rationality, but they were capable of calibrated responses, as when Kennedy placed a naval blockade on Cuba rather than invading, and then called that blockade a “quarantine” because a blockade was considered an act of war.

Khrushchev, on the other hand, had no place to go after the naval blockade was in place. His choices came down to shooting at American warships, with an unpredictable escalation from there, or a humiliating withdrawal of the missiles from Cuba. This was, of course, no choice at all.

And yet Khrushchev had thought his plan was brilliant. Apparently no one in the Kremlin had taken a day or two to game out the alternatives before shipping the missiles to Cuba. The possibility that the Americans would find out, make a public issue of it and then use their local naval and air superiority to make the Soviet position in Cuba untenable seems to have never crossed Khrushchev’s mind. Bank robbers plan better than that.

In the aftermath of the Cuban Missile Crisis, the West saw that “peaceful coexistence” had never been anything but a head fake, and that the Soviets were still capable of breathtaking and poorly planned recklessness.

One dramatic consequence was that the Soviets lost the propaganda war forever. The West, with its history of colonialism, militarism, racism and exploitation of workers, might have seemed like easy pickings for the Soviet propaganda machine, and indeed the Russians managed to hold their own to some extent, despite their economic failings, until the construction of the Berlin Wall in 1961. But the Cuban Missile Crisis the next year finished off their credibility. It’s one thing to be regarded as an undemocratic aggressor, but to be seen as stupid enough to get everyone killed was the end of the line. Even people in the West who wanted fundamental change wrote Moscow off.

A few months after the Cuban Missile Crisis, my Sunday School teacher told the class that some of us would die in a war against communism; there were about a dozen of us. He said that to illustrate the urgency of attending to our souls. I was thirteen.

If the reader has gotten the drift on how Cold War socialization worked, he or she may guess how we reacted: we said nothing, and we didn’t talk about it later, either.

A year later, a history teacher remarked offhand that if the Russians launched their missiles, our government probably wouldn’t tell us, to avoid panic. “Our first warning would be a bright flash,” he said. Again, no one reacted, no one said a word.

The Cuban Missile Crisis also created a new, hard-edged attitude in the West. In 1965-1966, when the Indonesian army massacred 500,000-1,000,000 communists, Western media and politicians openly rejoiced. (Bobby Kennedy was the honorable exception.) But despite the monstrousness of this event, the Soviets and the Chinese were unable to make propaganda hay out of it—nor did they even try much. In the UN, only Albania objected.

[https://en.wikipedia.org/wiki/Indonesian_mass_killings_of_1965%E2%80%9366]

Western countries had suppressed or isolated communist parties early in the Cold War, but this seldom involved prison terms, much less the death penalty, except for spies. Communists were sometimes murdered in the Third World, but even that was unusual except during active fighting. A massacre of large numbers of ordinary communists—along with their families—had never been contemplated during the forties and fifties.

But after the Cuban Missile Crisis that changed. Communists were feared and hated with a new and particular intensity, and brutalization became part of Cold War socialization.

Think how much American socialization had changed in only twenty years. In 1943-1945, American troops fought in Europe, and without being trained or ordered to do so, they spontaneously fed civilians, including Italians and Germans. European civilians had never met an army like that.

[Up Front, by Bill Mauldin. New York: Henry Holt and Company, 1945, pp 65-70]

And although this might have been a surprise to Europeans, it wasn’t to American civilians—-why, anyone would do the same, they thought. The troops were just reflecting the values of their society.

And yet twenty years later Americans were rejoicing at the news that communists—or people accused of being communists—were hacked to death without a fair trial. Further, their families were often killed as well, including newborns.

Naturally, people died so their accusers could seize their land, or because someone owed money they couldn’t pay, or because of unrequited love, or merely out of envy at another’s fine qualities.

At the time, it wasn’t even illegal to be a member of the Communist Party in Indonesia.

Early in the Cold War, Americans assumed the justice of their cause. Our society wasn’t perfect, but we were open-hearted and optimistic; our institutions were better at limiting conflict than those of Europe. We believed in the law; we helped our former enemies via the Marshall Plan. We recoiled in horror at Stalin’s purges and show trials.

But with the Indonesian massacre, (which the CIA helped organize and may even have instigated) we lost our right to feel superior. We had changed, and not for the better. And deep down, we knew it.

Even in the Odyssey, Odysseus orders his followers not to gloat over their dead enemies. It is impious to do so, he tells them. Had Americans become more brutal than people of the Bronze Age?

It was a horrible development, but it’s easy to understand how it happened. Something broke inside us during the Cuban Missile Crisis. We didn’t lose our resolve to resist communism, but we began to hate in a way that alienated us from our own deepest values.

The inevitable reaction wasn’t long in coming. Was it better to revel in the deaths of a million Indonesians, or to hang crystals in your window and put flowers in your hair?  Of course, it didn’t have to be crystals and flowers, it could have been anything. But somehow we had to reject the nihilism of our socialization.

However, the geopolitics hadn’t changed. We still had to defend Europe and Japan from the Soviets. Russia was a real threat, and even the few Marxists around were careful to dissociate themselves from the Kremlin.

The social and cultural solution was brilliant: to oppose Cold War socialization, with all its apathy, despair and brutalization, without opposing the strategy of containment where it made sense. By living in peace, love and joy—in opposition, that is, to Cold War socialization—we could at least demonstrate to our enemies that we meant them no harm.

And better yet, we could actually live. We could be free of fear for whatever time we had left.

[personal memory]

Living in opposition to Cold War socialization was a complex task, of course. How do you question and revise everything you know, everything you value? But people managed, because the psyche is capable of transformation; whenever we think something, we have at that moment the ability to ask ourselves, Is that really true? And is that any way to be?

This complexity of changing one’s socialization was reduced because the situation itself imposed a rough priority order. The highest priority was changing male socialization. The Cold War couldn’t exist without young men accepting a socialization that was simultaneously violent and profoundly passive. During the Cold War, there was no way that young men could, by their efforts and sacrifices, protect their people. In fact, they had to accept that their people could disappear in a nuclear flash at any time. They possessed the brutality of helplessness.

So, hair had to grow. Today, young people long to shock without ever quite succeeding in doing so. But the Sixties were different. Long hair was a clear signal that you opposed the current masculine socialization, and it was stunning in the extreme. You didn’t have to be conservative to worry about the destabilizing effect of such a radical step. Even people who longed for change were often frightened. What comes next?

Much later, in 1972 when Americans were starting to leave Vietnam, I had a conversation about long hair with a woman I knew, a graduate student in English. As an undergraduate, she had been in a sorority. She had graduated from high school in 1965; I was two years younger.

She said, “It seemed to happen almost overnight. In 1967 practically nobody had long hair. We saw hippies on TV, Haight-Ashbury and so on. By early 1968 we started to see a few boys on campus with long hair, and then suddenly it was everyone.”

“Did you have long hair back then?” she asked.

“Yes, I started with a beard, in 1968. And then…..you just stop going to the barber.”

“And you protested the war?”

“Oh yes.”

“And it didn’t bother you when people called you a coward?”

“Not really. That whole perspective didn’t have any credibility with me, with any of us. If we fight a war, we need a good reason. We can’t kill and be killed just because someone might call us a coward otherwise.”

“My father and uncles were so negative about long-haired boys and protestors,” she said. “My father was certain it was just a small minority, maybe communist-inspired, and that we would win the war soon and things would go back to normal. And I accepted that, until the Tet Offensive—then I knew the war was going to continue for a while. My sorority sisters mostly didn’t want the war, and they were getting the same message at home I was getting. What could anyone do? We felt helpless.”

“But then,” she continued, “the protests kept getting bigger and we realized the protestors weren’t giving up; it was like the sun had come out. At least someone was doing something.”

In this conversation, we see the struggle of rival systems of socialization. My acquaintance and her sorority sisters felt exactly what they were supposed to feel: helpless. And they did exactly what they were supposed to do: nothing. This was Cold War socialization in a nutshell—at the time, it was shocking that the Vietnam War was seen as political, and that we could debate it. In a de-politicized society, viewing war as a political issue was revolutionary—and I don’t mean “revolutionary” in ironic air-quotes.

People were dying needlessly, and we took to the streets. What decent man could do otherwise?

On my side of the conversation, I took the best-marked escape route from Cold War socialization: the ideals and vision of the Enlightenment. As a bookish youth, the Enlightenment was accessible to me, and of course it was all around us, fossilized so to speak, in our history, our educational system, our form of government and our holidays. But the Enlightenment was an active and optimistic time, and this implied an agency and resilience that hadn’t been available to Americans since World War II. Once free of the passivity and fear of Cold War socialization, there was no chance I would ever go back; the sense of freedom I felt validated my new way of life.

Note that I didn’t go far afield; I did not question the structure of consciousness (at least in the context of the Vietnam War), I did not adopt a pacifism I believed was unrealistic, and I didn’t switch sides in the Cold War. I read Marx, but I didn’t become a Marxist.

I merely insisted on the right to choose, based on Reason, whether I needed to fight or not. And because I chose the Enlightenment instead of Cold War socialization, my acquaintance understood what I meant, because she and I grew up in the same civilization; we were on familiar—and shared—ground.

And when she said, “it was like the sun came out,” she was right. It was the sun of our new socialization, of our new selves. And this newness was immeasurably ancient as well.

No, we would not accept our own extinction.

Of course, my acquaintance and her sisters turned initially to their parents for guidance. But a circumstance of the times was that youth were on average already better educated than their elders, whose education had often been interrupted by the Depression and World War II. So parents were often instructing their college-age children from a position of relative ignorance, and as I pointed out earlier, family discipline had already been weakened by Cold War socialization.

The media at that time wasn’t monolithic, but almost all major newspapers supported the war; for example, 90% of them endorsed Nixon for re-election in ’72. TV news was more balanced, but Walter Cronkite was something of an outlier. TV news in general resisted either condemning the war or supporting it openly.

An important dividing line was how the media viewed the counterculture and war protestors in particular. Some newspapers violently disparaged the protestors on their editorial pages and even in their news articles; others were more civil. This was important because Nixon and Congressional Republicans worked hard to change the subject from policy to the anti-war movement. Nixon knew he couldn’t win the argument over policy, because he planned all along to withdraw while pretending to fight until the communists were defeated. Politicians often lie to avoid looking bad, but Nixon’s entire Vietnam policy was based on a lie. So, while preparing to withdraw, he demonized the people who were demanding he do just that.

[H.R. Haldeman. This was either in his diaries or his book, The Ends of Power.]

And he likewise demonized the media for portraying the war—and not the anti-war movement—as the real problem.

An important part of Nixon’s narrative was that the “silent majority” supported him, and of course they did until they didn’t. But he and his supporters went further and claimed that most young people weren’t burning their bras or taking LSD, and therefore they loathed everything about the counterculture and loved Nixon and the Republican Party. To describe this as a half-truth would be too generous. The problem was this: people were opposing Cold War socialization in all sorts of ways, and which issue most concisely expressed that opposition? It wasn’t marijuana or other drugs, it wasn’t the Sexual Revolution, it wasn’t rock music or civil rights or Asian spirituality. It wasn’t even the Vietnam War, although we’re getting warmer.

It was conscription, and practically every young person opposed it. Conscription was more basic that the Vietnam War, which would have been impossible without it. Conservative young Catholics who went to mass opposed conscription. Fraternity boys and sorority girls opposed it. Young Baptists opposed it. Rural Southerners might have been a tad more accepting of the draft, but they didn’t speak in favor of it or support it.

[personal memory]

Opposing conscription was a rejection of Cold War socialization, particularly male socialization. Opposition meant choosing civilian life; it meant people had decided to believe they had a future, a remarkable act of faith under the circumstances. The Cold War couldn’t be denied as a geopolitical reality, but we didn’t have to let it into our hearts and minds.

This shift couldn’t have occurred unless the state had lost considerable credibility on matters of war and peace, and this wasn’t entirely due to the Cuban Missile Crisis. We fought half the years from 1950 to 1973—a generation, and without a clear victory. If the domino theory required that level of commitment, then we might very well lose the Cold War in the Third World; the burden was unsustainable.

As I mentioned above, the first priority in the reaction against the Cold War was to change male socialization. The second priority was to restore our connection to nature, but this went far beyond window gardens and bird feeders, because we are ourselves part of nature.

Although I am talking about these developments as “priorities,” the reader should understand that this wasn’t a linear, discrete process; everything affected everything else, and each new development sent out waves of influence in all directions, like a stone dropped in a pond. The overall cultural situation quickly became too complex to understand in real time.

These were “priorities” only in a logical sense: restoring our connection to nature was unthinkable if male socialization was still profoundly nihilistic, to take one example. Of course, these two developments could (and did) proceed in parallel, and they definitely influenced each other. It’s even possible to see them as the same phenomenon appearing in different contexts.

The political side of restoring our connection to nature was the environmental movement, which was careful not to widen its critique to include capitalism. It certainly occurred to some thinkers (Murray Bookchin, to take one example) that environmental destruction was rooted in capitalism, but the mainstream environmental organizations didn’t make that case, for obvious reasons: you couldn’t build a mass movement if you sounded remotely like Pravda.

So they pretended that it was mere coincidence that massive environmental degradation was occurring as a result of capitalist activities. That pretense was a political necessity in 1969; it weakened the environmental movement in the long run, but that’s a different essay.

Leaving the political situation aside, when we set out to restore our connection to nature, what implications did that have for our socialization? One obvious change was that we began to appreciate subjectivity again.

The Cold War was harshly materialistic; it was objective in a brutalist sort of way, and decidedly opposed to the subjective. Of course it was opposed to the subjective; if openly discussing—or even consciously acknowledging—our feelings had become the norm in the Fifties it would have been a disaster, because the entire country was teetering on the edge of despair.

The Fifties were the decade when Americans stopped reading poetry. The audience that had only recently read Shakespeare, Wordsworth, Whitman and Tennyson seemed to have disappeared almost overnight. Even Frost’s audience systematically misunderstood him. People complained bitterly about “modern” poetry; they could have simply read the pre-modern poets their parents and grandparents read, but they didn’t do that either. Reading poetry means opening your heart to the poem, and people who live in mortal fear cannot easily do so.

[Poetry and the Age, by Randall Jarrell. Knopf, January 1, 1953 (First Edition). ASIN: B0007DNO8K]

Poetry had been a significant part of Western subjectivity for millennia, and before the Fifties many educated people read poetry. But Cold War socialization mostly destroyed the taste for poetry. Of course there were poets: Frost and Wallace Stevens, Ginsburg and Snyder, but their audience was a mere remnant. By the ‘70s few English professors read poetry, unless they specialized in a particular author, like Shakespeare or Milton. In other words, most of them didn’t read poetry unless they got paid for it.

The Sixties saw a remarkable return to subjectivity, but it seemed the old Western habits had been partly lost. Poetry, painting, classical and ecclesiastical music, prayer and keeping a diary had mostly fallen by the wayside. In the Sixties, poetry and music sometimes had “protest” as their subject, natural enough under the circumstances. But protest weakened the subjective content of these arts. Classical music was no longer relevant—large numbers of people found it unlistenable; they could no longer find any subjective value in it, and how remarkable is that? And likewise for painting and sculpture. Cold War socialization had drained the life from Western artistic treasures.

Fiction did not disappear, but novels lost much of their gravitas. How convincing could the ending of any novel ever be, as long as nuclear war remained a possibility?

Popular music and drugs were the primary subjective modes in the Sixties, with yoga and meditation trailing in the distance. After a long pause, “journaling” came back into fashion, sometimes for therapeutic purposes.

Pop music and drugs were thin fare compared to poetry, paintings, classical music, prayer and keeping a diary. The old system had a richness and subtlety that was lost. Of course, the older modes of subjectivity were largely discredited during the World Wars, before the rise of Cold War socialization. The invention of nuclear weapons occurred in a context of profound spiritual exhaustion.

In the Sixties, there was an objectification of the subjective—we were drawn to subjective experiences that had a strong objective correlative: sex and drugs; somehow, we couldn’t give up the reductive materialism of Cold War socialization. Even popular music became more limited after about 1970, more homogenized. The folk and blues influences were hardly noticeable, and psychedelic visions were pushed to the fringe.

And in Eastern religions, the objectification of the subjective amounted almost to self-parody, as detailed in Cutting Through Spiritual Materialism by Trungpa Rinpoche.

The objectification of the subjective was also correlated with an uncritical acceptance of individualism. The change in male socialization characteristic of the early counter-culture did not include a critique of individualism, for the good reason that Cold War socialization involved the near-obliteration of Enlightenment individualism. Indeed, the Sixties exalted individualism, for example in Thoreau’s influence on conscientious objectors.

But that was individualism in service to peace, reason and humanity. And at the time, people did not generally understand that refusing the draft was entirely different from snorting cocaine; those two were seen as part of a continuum of countercultural individualism.

To take a single moment as an example, it wasn’t clear in 1967 that a permanent hedonistic drug culture would emerge from the counterculture, and yet here we are, and that’s down to the lack of a critique of individualism. If we didn’t understand that misusing individualism was possible, then we wouldn’t see the probable results of that misuse, including addiction.

Likewise, the idea of liberation changed as time passed. Initially, the primary problem was the threat of nuclear war, and the supporting or compensatory socialization already discussed. Although the threat of nuclear war was a collective problem, Cold War socialization could be seen as an individual problem, or as partly individual. With the rise of feminism and the gay movement, liberation came to be seen as primarily an individual affair: “the personal is political” was easily glossed as “only the personal is political.” But “personal” didn’t mean anything in particular because there was no critique of individualism.

And if not personal, then vaguely cultural or psychological. If asked to describe the current system, contemporary progressives say: racist, sexist, homophobic, transphobic, Islamophobic, etc. They will talk about “toxic masculinity” but they won’t talk about “toxic individualism,” or about capitalism or the class structure. In modern progressivism, there is no system.

Eventually, without a critique of either capitalism or individualism, we ended up with today’s situation, where the only paths to liberation are seen as cultural or individual change. Amazingly, the George Floyd protests did not result in an effective organization or a legislative program. No laws passed Congress to deal with abusive policing or to better train police officers—and as far as I know, none were introduced.

And the same was true of the earlier Occupy Movement. Left-wing movements today never result in real change, nor are they designed to do so. They are designed to change the culture, or something. How did the organizers of the George Floyd protests anticipate their movement would improve policing? Through changing attitudes, or changing the culture? And maybe by defunding the police? They seemed to believe that specific proposals with broad popular support were almost in poor taste; they had no plan to govern.

And maybe around the margins they had some effect—the worst atrocities seem to result in cops being fired more often, and sometimes prosecuted. But as long as the current class structure is unchanged, severe policing of the underclass will continue. The purpose of the current class structure is to prevent non-billionaires from uniting around a common set of political goals, and for that to happen the underclass, the working class and the educated middle class must all face starkly different problems—or believe they do, at any rate.

[see Class and Underclass, above]

So, by a decades-long process of ignoring capitalism and individualism we have reached a point in history where mass movements for change never result in any. We can’t solve collective problems with a “personal is political” approach, and most of our current problems are collective: climate change, the assault on democracy and its replacement by billionaire autocracy, the sharp decline in life expectancy and fertility, the replacement of reasonable values and mores with nihilism.

This political decline or stasis is reflected in pop culture. Aside from some honorable exceptions like Pharrell Williams and Shakira, there isn’t much “there there” in modern popular music, particularly country. It’s pretty clear that Johnny Cash wouldn’t get a contract or even a manager nowadays, to take one example.

Nevertheless, the Sixties left much of lasting value. Over many centuries, autocracies have used militarism and military glory to control their populations, as we see in Russia today. But the legacy of the Sixties made that unusually difficult in America. Only 9/11 made Bush and Cheney’s adventurism possible, and in the long run they paid a high political price.

Linked to this anti-militarism was the re-evaluation of male socialization that took place in the Sixties. Although male socialization still needs a critique of individualism and is tragically undermined by the nihilism of Billionaire Capitalism, still: the Sixties set male socialization on a generally more peaceful path.

And the Sixties left us with a tradition of cultural revolution which, though often trivialized, may yet prove transformative.

Also, the renewal of subjectivity is still with us, for example in widespread and effective psychotherapy. Other examples include mindfulness training, the popularity of yoga and writing classes, and the slow but steady spread of Buddhism.

To sum up: we still know that pursuing military glory is harmful; we haven’t forgotten that boys must learn peace; we honor the life of the spirit; and we still believe in cultural and personal transformation. We never forgot the power of change.

All this we owe to the Sixties.

Further, an understanding of the Sixties can be the foundation for a theory of social change. If we compare the Sixties to the Enlightenment, we immediately see similarities. The religious wars, and the socialization required to sustain those wars, almost destroyed Western civilization. And people of good will reacted to that socialization by developing a vision of reason, tolerance, benevolence, and faith in progress. The parallel to the Cold War and the Sixties is obvious; in both cases people were caught in an unbearable situation and were socialized in monstrous ways, and in both cases they rebelled and turned their faces toward the light. They re-socialized themselves and in doing so they changed civilization; they changed what it meant to be human.

Does humanity need to understand how to change society for the better? The question answers itself—as a matter of fact, we could use some of that. To change society, we need to know how social change occurs, or has occurred in the past. And as we see from the Sixties and the Enlightenment, re-socialization is key.

Do we want to change society? And do we want to understand change? I think we do, but we don’t think it’s possible.

But it is. We can understand both the past and the present, perhaps not perfectly, but well enough to create a better future.

Banking Crisis and the Fed

Interest rates have been low for a long time, and they’ve become part of the structure of our economy. Not since 2007 has the Fed overnight rate been as high as it is now, and for much of the time since the rate has been close to zero.

In some sectors, low interest rates have been used as a substitute for productivity gains, as in the housing market. We don’t have enough construction workers or existing housing, and we aren’t making widespread use of manufactured homes, but at least young people could get cheap mortgages.

In other cases we’ve used low interest rates as a substitute for industrial policy. Small cap companies (as represented by the Russell 2000), often have significant debt, and might go bankrupt with higher rates. But low interest rates effectively keep these companies afloat, and in many cases that’s a net benefit for the people. But we didn’t debate and vote on that, the Federal Reserve just arranged it.

And likewise with some social problems, such as student debt. You may have too much debt, but at least the interest rate isn’t 10%.

Beyond these, there are classically-recognized ill effects of raising interest rates: rising unemployment and bankruptcies, and decreased investment. So raising interest rates was going to cause harm; the only question is whether continuing inflation would be worse, as the Fed believes.

But I questioned whether something important—and unexpected—might break in the face of the Fed’s rapid increases. A year ago, the overnight rate was .08%; today it’s 4.58%, quite a jolt when you realize how deeply baked-in low interest rates are. And the Fed seems to believe it can continue to raise rates to 5% or even 6% without stepping on any rattlesnakes.

I was worried about higher mortgage rates leading to higher rents which could lead to a tipping point on homelessness. Imagine if the whole country had the homeless rate of, say, Portland. I was also worried about cascading bankruptcies among Russell 2000 companies leading to a recession.

And these could both still happen. But what I didn’t expect was a banking crisis, because banks generally benefit from higher interest rates.

But it does make sense. Bonds, especially US Treasury bonds, are a store of value used throughout the global banking system. And these bonds do not usually sit idle—they are used as collateral especially in inter-bank transactions.

When the Fed started raising short-term rates in April of 2022, this reduced the value of bonds issued before that time. Of course, the face value of the bonds is still secure, but the market value decreased significantly. When Silicon Valley Bank ran short of funds, they sold the Treasury bonds they had on hand, for a substantial loss. In normal times—post 2007, pre-2022—they wouldn’t have incurred such a large loss. The bank might still have had a problem, but the rest of the global economy wouldn’t have.

The Federal Reserve has undermined banking stability to the extent that stability depends on bond prices. And since all bond prices are correlated with US government debt, this problem isn’t limited to banks that are holding a lot of Treasury paper.

Bank runs and loss of banking liquidity are a real threat now. This could cause a global recession like the one of 2008-2009; in that light, maybe an inflation rate of 6% isn’t so bad. The urgent task of the Treasury Department and the world’s central banks is to quantify the reliance of banks on bonds for stability and liquidity. Some banks will likely have to close, at least temporarily.

The Federal Reserve and other central banks have clearly raised interest rates too quickly. Also, the single-tool method of fighting inflation needs to be scrapped; using interest rates alone has inherent risks to the larger economy. Temporary tax increases could be used, and the Federal Reserve (or the Treasury secretary) could be given the power to issue “stabilization bonds” in small denominations for US residents only. If we could issue $1000 7% bonds now (with a spread of maturity dates), and then just make the money raised disappear, then that would put a dent in M2. Naturally this might pose some temporary difficulties for banks, but I’m hopeful bankers will focus on the greater good.

Beyond those reforms, it’s time to question whether a private banking system subsidized and otherwise propped up by central banks and deposit insurance, and subject to more-or-less indifferent government regulation is working for us. Is this odd private-public model the right one for the 21st century?

Maybe after two banking crises in 15 years we should make a change?

https://ycharts.com/indicators/overnight_federal_funds_rate_market_daily

Individualism and Ahimsa

Individualism is fundamental to modern culture. It is a guiding principle in our social and political life and difficult issues are often discussed only in terms of individual rights, to the exclusion of any other plausible consideration.

Does individualism always make sense? Clearly, the near-sacralization of gun rights has led to great harm. Of course, if you sell a gun to someone, they probably won’t use it to rob and kill. But if you sell enough guns to enough someones, then you end up with more murders than you would otherwise have had. The question isn’t merely whether an individual has a right to buy an AR-15; we also have to consider whether society can protect itself from mass shootings. Obviously the social need is more important than the individual right in this case, unless you inflate individualism to an absolute value.

If individualism is an absolute value, then we are saying that human life isn’t sacred, but that individual impulses are. We fall into a narcissistic despair, which we can see all around us.

But let’s look at individualism itself more closely. There is clearly a wide range of opinions about what individualism is and what it’s good for. Some see individualism as primarily resistance to the demands of society:

“The word ‘We’ is as lime poured over men, which sets and hardens to stone, and crushes all beneath it, and that which is white and that which is black are lost equally in the grey of it. It is the word by which the depraved steal the virtue of the good, by which the weak steal the might of the strong, by which fools steal the wisdom of the sages.

What is my joy if all hands, even the unclean, can reach into it? What is my wisdom, if even fools can dictate to me? What is my freedom, if all creatures, even the botched and impotent, are my masters? What is my life, if I am but to bow, to agree and obey?

But I am done with this creed of corruption.

I am done with the monster of ‘We,’ the word of serfdom, of plunder, of misery, falsehood and shame.

And now I see the face of god, and I raise this god over the earth, this god whom men have sought since men came into being, this god who will grant them joy and peace and pride.

This god, this one word:

‘I.’”

–Ayn Rand, Anthem

Note that Rand doesn’t talk about the specific demands that society makes on the individual. And I might add, how often are individuals in deep conflict with the society that raised and educated them?

On the other hand, individualism can be seen as a matter of alienation and isolation:

“For everyone now strives most of all to separate his person, wishing to experience the fullness of life within himself, and yet what comes of all his efforts is not the fullness of life, but full suicide, for instead of the fullness of self-definition, they fall into complete isolation.”

–Dostoyevsky, The Brothers Karamazov

And then there’s individualism linked to the broader society:

“Remember always that you not only have the right to be an individual, you have an obligation to be one.”

–Eleanor Roosevelt

https://www.goodreads.com/quotes/tag/individualism

To whom, or what, do we owe that obligation? A narcissist might say “to oneself,” but that’s clearly not what Roosevelt meant.

Instead, she is hinting at a key issue: individualism wouldn’t exist without a culture that socializes people to see themselves as individuals and to act accordingly; individualism is created by society, which had its reasons for doing so. Hence, individualism must include obligations to the society that created it.

And chief among those obligations, as she points out, is to become an individual—-to conscientiously follow that social norm.

So, being an individual is not effortless, and in fact it must be a process, because this obligation cannot be fulfilled overnight. Education, experience and maturity all play a role. You don’t get to be an individual simply by claiming that you are.

Rand, Dostoyevsky and Roosevelt each have their own version of individualism. Of these three which is the most nuanced and balanced? Which is the most realistic? Which is the most sustainable?

And that’s not to deny that sometimes individualism results in a damaging degree of isolation, or that society can sometimes oppress the individual. Dostoyevsky in particular makes a good point.

But still, what is individualism? It is a focus on individual experiences, feelings and thoughts; it is the assumption that adults can make many decisions for themselves without their families or society having veto power; individuals can choose whom to marry, what religion to follow and what education to pursue. They can decide on their diet, their clothes and what music they listen to. They can decide what they value and what they reject.

And note that I said, “many decisions.” Not all—there are limits even to individualism.

Although individualism is pervasive, it is more welcome in some areas than others. It is natural for storytellers and poets to focus on individuals, but organized religion is more problematic. Although free will is part of orthodox Christian belief, Christianity claims to be the final arbiter of value, the ultimate judge of good and evil. This inevitably collides with individualism.

If you think about it, this is an unusual situation. You might suppose that the normal function of religion is to define the values of society, including its ethical system, sexual mores, gender roles, et cetera. Certainly, the people who run Iran think so, and they’re not the only ones. I’m not in favor of such an expansive role for religion, but I can see the Ayatollah’s point: Islam determines what Iranian society values, because there’s no alternative that has any legitimacy, at least to the pious.

With individualism and organized Christianity, we are witnessing the aftereffects of the religious wars of the seventeenth century and the Enlightenment of the eighteenth. We socialize our children to be individuals partly so the West will never again be torn apart by religious wars.

And individualism goes back even further than the Thirty Years War; it has an ancient history. The Iliad is not about the clash of peoples but about individuals: Achilles, Patroclus, Diomedes and Hector. And the Odyssey is at its center the story of a man who cannot find his way home.

And this individualistic bent was not limited to ancient Greece. What could be more individual than the grief of Gilgamesh or Jacob’s vision of the angels?

Without this archaic version of individualism, the archetype of the Hero would be impossible.

But ancient heroes did not take up arms against society or the state religion. It is only when we reach Socrates, who is practically modern, that we encounter an individual in direct opposition to society, particularly at his trial.

And his example is important. In ancient times heroes could fight with monsters or struggle against fate, but as society became more cohesive and perhaps oppressive, the individual emerges in opposition. By late medieval times the shift is complete. We can easily imagine a figure like William Tell fighting a dragon a thousand years earlier, and likewise for Robin Hood. But as much as they resemble their rugged predecessors, they are social rebels. The content of their individualism has changed.

But for other medieval and early modern figures, individualism was rooted in the life of the spirit: Joan of Arc, Meister Eckhardt, Luther, and of course Faust.

For Protestantism, the relationship of the individual to God, unmediated by any human institution, was paramount; the content of individualism was God’s grace and guidance. This strengthened the individual conscience against collectivism (particularly the collectivism of the Roman Catholic Church) and fostered a stronger sense of responsibility.

And building on that, the Enlightenment saw the content of individualism as Reason, moderation, and a devotion to justice. Voltaire and Benjamin Franklin are examples—as were Lincoln and FDR.

The idea that individualism has content implies that individualism isn’t necessarily a “good thing,” as Martha Stewart would say, and people in many eras and cultures seem to have preferred collectivism. Fascism and communism both attempted to control or de-emphasize individualism, especially the Enlightenment model of individualism. The control was accomplished by indoctrinating the individual with values decided on by the party or the ministry of propaganda. Here individualism was co-opted by the collective.

There is a ticklish problem of distinguishing between the socialization people receive in an open, democratic society, which necessarily involves shared values and beliefs—hard work, the rule of law, duty to one’s country, and so on—-and the indoctrination that occurs under fascism and communism, which also includes an emphasis on duty, obedience to the law, and industriousness. The difference can be subtle, but democratic socialization also includes truthfulness, integrity, and our common humanity.

And democratic socialization is something we decided on ourselves, over many generations; it wasn’t designed by a dictator or a destructive political movement.

Several years ago, I heard a spokesman for the American Conservation Union (ACU) say that the rights of the individual are the basis of the conservative movement. Although I doubt that, I admired his clarity and succinctness.

Should our socialism be based on individual rights? This is a vital question. We are so used to thinking of our Constitutional rights that we can’t articulate the rights we really need: the right to be free of misinformation, the right to not be killed by our economy, the right to climate stability, the right to a good, useful education, the right to have children without living in poverty, the right not to be ruled by billionaires. These are all collective rights that benefit individuals as well, and that is the sort of rights our socialism should emphasize: rights that are claimed and exercised by humanity as a whole, but which also benefit individuals.

The old Constitutional (and common-law) rights sometimes still matter, but what’s the use of the right to either go to church or watch football on Sunday? We live in a profoundly destructive system, and the rights that count are the ones we can use to change that system. Fighting for your right to party is absolutely nowhere.

And we need to realize that discussions about individual rights can be profoundly misleading. Is gun control about the right to purchase a weapon? No, it’s mostly about gun manufacturers’ right to sell weapons versus the right to life of everyone else. It’s a conflict between capitalism and the well-being of the people.

To sum up: individualism is not an absolute value; human life is. Individualism has content, and this content can either diminish human life or make it more abundant.

If the content is selfishness and resentment, then that diminishes the individual and everyone around him; it diminishes the human race.

But if the content is reasonableness and compassion, courage and self-sacrifice, then that’s entirely different; everyone benefits.

If people think that individualism is an absolute value—perhaps in the belief that it’s the same as freedom—then this amounts to a denial of the bonds that unite human beings.

But far from being an absolute value, modern individualism itself is a social construct. Individualism is socialized into people in the West, and to what purpose? It’s to create personalities who are capable of making reasonable social, political and economic choices. So modern individualism and Reason are, since the time of the Enlightenment, strongly correlated.

Individualism is therefore a mechanism of rational change. Western civilization, so clearly the result (and cause) of centuries of change, has developed a mode of socialization to help people shape that change in beneficial ways. At least in theory….

But individualism can be co-opted. It’s easy to convince people that their destructive impulses and habits are rights, e.g. the “right” to smoke in hospitals, the “right” to drink margaritas at 7 am, the “right” to scream racial slurs at people on the street.

This co-opted version of individualism legitimizes anarchic and divisive behavior, and de-legitimizes (by indirect association) Enlightenment individualism, the sort that Eleanor Roosevelt meant.

And today we must use that genuine individualism, the one that comes from education and suffering,  to oppose billionaire capitalism and the immense harm it causes.

And consistent with ahimsa, no one has the right to do harm.

Inequality, Productivity and M2

Inequality is a momentous question for socialism. It’s like peering into the Grand Canyon, and wondering how people get down there, and how they get back up. So much of the human experience, from ancient times until now, is bound up in poverty and inequality. How can we do justice to all that?

If we accept inequality, then do we accept that there are degrees of human dignity?

If we reject inequality, then are we rejecting the conditions of life? Are we tilting at windmills?

Goethe wrote that the only way to accept the clear superiority of another is through love. But what is the other, the fortunate object of this love, supposed to feel? Does this love lead to a stronger society?

I would say this: the capitalist view of society (and inequality) is instrumental; society and its inequalities exist to support capitalism. What if, instead, we saw society as a home for the life of the spirit? What sort of society would we build? How would we think about inequality?

So, given the above considerations, what do socialists do about inequality? How should we approach this problem? What exactly do we mean by “inequality”? And what have the people who came before done about it?

◊◊◊

There are two broad approaches to reducing inequality: redistribution and increased productivity.

Redistribution is often popular because it offers immediate relief. And in places like Latin America where the rich are mostly descended from conquerors, the poor see redistribution as simple justice—their ancestors were robbed, and they want to right that wrong. In Latin America (and in Russia), it’s hard to argue that property isn’t theft.

And redistribution is a common—we might even say normal—activity of governments. All governments redistribute wealth. Public education and veterans’ benefits couldn’t exist without it.

Redistribution often transfers wealth to the wealthy, who ceaselessly lobby for tax cuts, direct subsidies, and other benefits. Since 1980 in America, redistributed wealth has flowed almost entirely upward.

But for socialist movements redistribution has its hazards. The process may seem chaotic—may in fact be chaotic—and the benefits are often only temporary. To take one example, the Labour Party’s policy of decentralized “unofficial” strikes in the ‘70s and ‘80s was a piecemeal redistributive program, but the ensuing inflationary spiral eventually turned public opinion against the trade unions and Labour itself. (The trade unions didn’t cause the inflation, but their strategy made it worse.)

On the other hand, increasing productivity is slower than redistribution but less chaotic and usually more sustainable. Sometimes this takes the form of infrastructure changes, like the REA or TVA during the New Deal, other times job training and education are the main approach. The meticulous training of industrial workers in Germany, promoted by the SPD, has been highly successful and is the foundation of Germany’s economy.

From a political standpoint, productivity improvements are less polarizing than redistribution, at least under industrial capitalism, because everyone can see the benefit of having skilled workers. On the other hand, redistribution can have dramatic short-term benefits which build political support.

To choose the right policies to address inequality, we must clearly specify what we mean by “inequality.” There is wage inequality, however we define that, and there is wealth inequality, a particular problem in the Americas.

Also, there’s “equality of opportunity,” a term that includes (at least) access to capital and good education or job training. This form of inequality, and policies to reduce it, are my main subjects in what follows.

Media discussions of “equality of opportunity” are seldom adequate to the scope of the problem—this is not merely a matter of a few hundred poor or minority youths getting into elite universities every year; if the quality of K-12 education wasn’t so “variable” then the  number of disadvantaged youths at elite universities would take care of itself, assuming the right financial aid.

And by “variable” I mean that some of our K-12 schools should be shut down, while the AP programs at the better public high schools match up well with the best private schools in the country. But this isn’t just a matter of school districts because the children of well-educated people seem to do well everywhere.

And when I talk about schools being shut down, I don’t just mean schools in the poorest areas. Even the schools in working class neighborhoods and rural areas are often far from adequate. Evidence for that includes our low adult literacy rate:

https://nces.ed.gov/pubs2019/2019179/index.asp

The functionally illiterate are about 20% of the adult population. Innumeracy is also a widely discussed problem, but it appears no one has quantified it. As a society, are we are so innumerate that we can’t estimate our own innumeracy?

In theory, we should reform the public schools from top to bottom to provide all American schoolchildren with the best education in the world. We wouldn’t see the full effects of that reform for 10-20 years, and where is the constituency for that change? Poorly educated parents no doubt want better for their children, but they cannot understand the scope of the problem or envision what good public schools would look like. Innumeracy is the best example—how are parents who struggle with fractions supposed to evaluate their children’s mathematical knowledge? Almost the worst thing about ignorance is having no way to understand how ignorant you are, or how ignorant your children are. Without a sense of the scale of the problem, is a solution possible? A blind child can imagine seeing his mother’s face or the food he eats, but he can’t imagine the vastness of space, or a bird in flight. The parents, and even the teachers, can only picture incremental improvements over what they already know, but America’s need is greater than that.

And reforming the schools would do nothing to fix the education and training deficits of today’s work force. It won’t fix adult illiteracy and innumeracy; it won’t turn fast-food workers into diesel mechanics or home builders or software engineers.

What follows is my proposal for increasing productivity. To set the stage, I want to make two points. First, as I present the proposal, the reader may reasonably question whether America can afford it. But as Keynes said, “anything we can actually do, we can afford.” That is, if we can produce something, we can afford to finance it—although Keynes is careful to point out that time is always a factor: “We can have almost anything we like, given time.”

https://www.bradford-delong.com/2020/05/john-maynard-keynes-how-much-does-finance-matter.html

Another way to state this is: the productive power (including services) of society is usually tightly correlated with its financial power. Absent a banking crisis or some other unusual event, we can ordinarily buy everything we produce, and if we can’t buy it with cash, we can borrow the money we need, and re-pay the debt without much risk of default.

In the case of my proposal, we have to ask ourselves, could we afford to dedicate more labor and resources to education, particularly if this resulted in a more productive workforce and greater economic growth? Of course we could! We can spend as much as we choose on education. If this sounds inappropriately optimistic, it’s because most people think about the impact of education on their household budgets, especially college costs, which often seem  overwhelming.

However, if you look at the problem of educational costs at the macro level, we see that education is an industry; through collective effort we produce education and when we put it to use it improves the overall productivity of the economy—like electricity or the internet. The way we finance education is currently a burden to most of the population, so people are naturally wary of spending more, but the financing model can and should change.

The only real problem in increased spending is if there’s little need or demand for more education. We don’t see much of this today—educational supply and demand seem fairly well matched. But if we expanded our educational capacity, would demand follow? If we build it, will they come?

This demand (if it materializes) would be among adults, including prospective college students, since children already have to go to school. Expanding access for adults is absolutely critical for several reasons: the high rates of adult illiteracy and innumeracy; the low level of social mobility, especially among adults with a high school education or less; low levels of productivity growth; the widespread effect of burnout, which probably indicates that people are stuck in the same job or profession too long. And the K-12 system can only benefit from having better-educated parents.

But with adults, cost is a crucial concern. Also, adults will need to choose, of their own free will, additional education or job training.

This choice allows us to match educational supply with demand. Even if every adult receives an educational grant, not all will use it. People with satisfactory jobs may decide to focus all their energy on work and leave the grant unused. Using census and income data, we should be able to estimate how many of the grants will be used, and polling data should give us an idea of what sorts of education people would want. In other words, we should be able to estimate educational demand under this scheme, which would allow us to manage the costs.

That is the big picture on whether we can afford this plan, although there will be complexities. Still, it’s worth keeping in mind Keynes’ advice: “anything we can actually do, we can afford.”

The second general point I need to make is that this essay is something like a thought-experiment. This is a proposal, but it’s also an effort to get people to think big about repairing the damage that’s been done to the American people by Billionaire Capitalism. The details of the proposal are important, but the objectives are more important.

The objectives are as follows:

  • To create the most skilled and productive work force in the world. Without a thriving economy and an expanding middle class, we cannot stabilize our politics and defeat Billionaire Capitalism. And without a prosperous and stable America, democracy (outside Europe) may not survive. With this program, we should see significant productivity improvements in five years or less, and in eight to ten years we should lead the world in worker productivity. Higher wages will follow.
  • To reduce the underclass drastically or even eliminate it entirely. A corollary of this is to eliminate or greatly reduce class and racial disparities in education.
  • To revitalize the working class. As it stands now, there is little social mobility for people who only complete high school. This must change; there has to be a path forward for everyone in America.
  • To take pressure off families who plan to send their children to college or to an expensive trade school. This will help stabilize middle- and working-class families.
  • To solve the student loan problem. People who have already graduated from college will be able to pay off their student loans using grants.
  • To create seed capital for new businesses and farms; this is a program to improve productivity in general, not solely through education. People can use these grants to start new businesses or expand existing ones, and that most definitely includes farmers. Much of America’s economic dynamism comes from small businesses, and yet they often struggle, partly because large businesses, especially banks, deny them access to capital. These grants would help fix that problem. And yes, small ◊businesses could (in many cases) use these grants to pay off existing debt.

Let’s take a deep breath and re-read the objectives. This proposal will radically change our economy and our class structure for the better. It will unleash the power of our people to create a better future for all.

The proposal is this: every American gets a productivity grant of $250,000 which they can use to further their education or fund their businesses. Education is defined as broadly as possible; it will include trade schools, apprenticeships, remedial adult education, as well as ◊junior college and university education, both undergraduate and graduate.

Is $250,000 far too much money? This needs to be a big number, because we are asking people to achieve things they’ve never before contemplated. And if they fail once or even twice, they will have enough money to start over again.

And the wisdom of our people tells us: “go big or go home.”

There will need to be checks and balances, of course, to avoid fraud or misuse, and the financing will require careful handling. The effect on the money supply and the potential for inflation must both be considered.

But first we must insist on some principles:

  • No means testing. We need to establish the precedent that socialist programs ordinarily benefit everyone, just like Social Security and Medicare do. And making the grants available to all strengthens the program politically; even wealthy people with a net worth of a few million would be delighted to have these grants for their children, even if they never use them for themselves.
  • These grants are not transferable or inheritable. They are designed to increase the productivity of the entire economy, not to build “family wealth.”
  • These grants cannot be revoked except for fraud and sedition. People who attempt to bilk this program can and should have their grants revoked permanently or suspended for a number of years. Those who engage in sedition can and must be excluded from this program, except in the interest of reconciliation. However, people convicted of ordinary crimes should not be excluded; one of the objectives, remember, is to eliminate the underclass or to greatly reduce it in size. The people who have the ability to seize this opportunity should be given every chance, whatever their past missteps.
  • This is not a Universal Basic Income (UBI). It’s not to be used for ordinary living expenses, with one important exception. To avoid the perverse incentive of people trying to use up their grants so as not to “lose” them, at age 65 people can draw up to $1000 per month from their unused balance; the average monthly stipend, using reasonable assumptions, would be $691 (see Appendix). So even if they never use any of their grants for education or business, at least they can look forward to a more comfortable retirement.

Having people in classes or trade schools who don’t really want to be there, but who don’t want to “waste” their grants, doesn’t help anyone.

When I say this grant isn’t to be used for ordinary living expenses, obviously there will be gray areas. If a young person in a small town wants to move to a city to find work, then the grant might be used to pay for the move and for the initial costs of renting an apartment, especially if he or she has a job offer in hand. The high cost of housing in this country has reduced the traditional mobility of our work force.

And in the case of the homeless, getting a roof over their heads might be all some of them need to find a job. Obviously if someone goes from being unemployed to having a job—any job—there’s an immediate increase in productivity.

And there are unemployed people who could find a job if they only had reliable transportation. Yes, I believe grant money could be used for a bus pass or the down payment on a used car. There needs to be some limit on these kinds of expenditures, of course.

But we need to be realistic about the situation of the working poor. Absent a sharp increase in the minimum wage, what the working poor will need first from their grants may seem like ordinary living expenses—work clothes, bus fare, help with the gas bill. As long as we don’t lose focus on the overarching goal of increasing productivity, I believe the grants can used for these kinds of expenses, at least temporarily.

But let’s consider the administration of this program more broadly. There will have to be a bureaucracy staffed by people who have the skills of both a loan officer and a guidance counselor. For example, if someone is functionally illiterate, they won’t get grant money to go to junior college—unless the junior college knows the situation and will teach them how to read. Many junior colleges may see that as an opportunity.

Academic prerequisites will have to be met, and small business grants will get the same scrutiny that a bank—or the SBA—would apply to a loan application. People who want money for their businesses will have to write a business plan, and if they can’t write one, they will have to take a class (paid for by grant money) to learn how.

And there will be restrictions on the type of small businesses eligible for grants. The businesses need to be productive; flipping houses will not be eligible for grant money but building houses will be. These grants shouldn’t contribute to inflationary bubbles—you won’t get grant money to invest in the stock market and buying up farmland merely to lease it out won’t qualify either. However, buying land to farm it yourself would qualify—if you know how to farm. But grant money could also be used to learn to farm, by taking courses at an agricultural college or serving an apprenticeship.

To sum up, the administration will provide a smooth path for students and entrepreneurs to meet their long-term goals. If an individual lacks a basic skill like literacy or an advanced skill like writing a business plan, then the administrator will arrange for that training before the grantees go forward. Secondly, the administration will ensure that the grants result in higher productivity. Lastly, the grants cannot contribute to inflationary or speculative bubbles.

The grantees will have a great deal of latitude in choosing their goals, but in extreme cases the administrators may refuse funding for hopelessly unrealistic goals. Not everyone is cut out to be a rodeo clown.

◊◊◊

Let’s turn to the cost and related economic issues, such as inflation.

According to the last census, there are 331,449,281 people in the United States. At $250,000 per grant, the program cost comes to $82.9 trillion. Of course, some of the grant money will never be disbursed—people die, they have the perfect job already, and so on. Still, a massive amount of money. We must ensure that the benefits to our people are proportional to this treasure.

This is the total obligation for everyone alive today, but it isn’t the annual cost. When the grant program is enacted, there will probably be a surge of expenditures for the first few years. However, let’s first look at the annual cost at steady state, after things have stabilized.

The calculations are detailed in the Appendix, but, using reasonable assumptions, the steady-state cost would be $996 billion, of which about 35% would be payments to people 65 and older.  

$996 billion is a lot of money, about 3.9% of estimated 2022 GDP; however, for comparison, the M2 money supply increased by $4.16 trillion from Feb. 2020 to Feb. 2021, and $2.14 trillion from Feb. 2021 to Feb. 2022.

Of course, 2020 and 2021 were not normal times, because of the pandemic. But the pandemic years aside, M2 has grown on average about 3.7% of GDP per year.

Recent M2 Growth before the Pandemic

YearM2 growth, (Billions 2022 dollars)M2 increase as % of GDP
2019$11204.52%
2018$5982.48%
2017$7773.30%
2016$10694.63%
2015$8283.64%

https://fred.stlouisfed.org/series/M2SL

https://www.usinflationcalculator.com/

https://en.wikipedia.org/wiki/List_of_countries_by_past_and_projected_GDP_(nominal)

Since the annual cost of this program will be roughly equal to the average increase in M2, I propose that we finance this program through the money supply. There is no good reason that increases in the money supply must go through the banks or the bond market, but there’s every reason to use the money supply to improve productivity. This would necessarily change how the Federal Reserve manages the money supply, but it wouldn’t be a change for the worse.

The Fed’s tactics in 2009-2010 really only re-capitalized the banks, without increasing the money supply much; the banks, having had the scare of their lives in 2008, were quite reluctant to loan out the money the Fed had created for them. Regrettably, they were less reluctant to hand out executive bonuses and pay raises, which led to asset inflation in New York real estate, collectible art and possibly even the stock market.

Not a penny of TARP money or the Fed’s increases in money supply went to improving productivity. What a wasted opportunity!

https://seekingalpha.com/article/4384862-money-printing-2020-vs-2008

And the current situation starting is 2020 is similar. The M2 money supply increased by over $6 trillion, and there was nothing in it to further individual productivity. Granted, Biden’s infrastructure package included funds for communication and transportation improvements which will indirectly increase worker productivity. But no one ever got a pay raise because they drove to work over better roads.

https://en.wikipedia.org/wiki/Infrastructure_Investment_and_Jobs_Act

So, when this program reaches steady state it can be largely paid for by normal growth in the money supply. Granted, some of the growth in money supply is driven by the federal deficit, and that money is already spent, so to speak. But the broad point that the growth in money supply doesn’t currently increase productivity is still true. Even if we have to sell bonds to partly finance this program, or raise taxes, the increase in productivity will increase economic growth and tax revenues. “Anything we actually do, we can afford to do,” especially if it results in sustainable economic growth and higher wages.

The reader might ask, what about inflation? First of all, if the money supply isn’t growing any faster than normal, then there shouldn’t be any extra inflation. Instead of funneling money through the banks, with the potential for delay and corruption, increases in the money supply go directly into education, job training and capital for small businesses.

Secondly, the increases in productivity will cancel out any inflationary pressures. In fact, these grants might have a deflationary effect, in the same way that Moore’s Law is effectively deflationary. If a key factor in the economy becomes more productive for the same price (as with integrated circuits) then that reduces the overall inflation rate. And that’s true whether we’re talking about CPUs or labor.

So, the Fed will need to increase the money supply above “normal” to reflect the increased productivity of the labor force. If productivity increases, then the economy grows, and the money supply must grow along with it. And after all, one of the primary goals here is a sustained increase in wages.

So the money supply and inflation shouldn’t be problematic once the program reaches steady state. But what about before then?

Once this program is enacted, we could see a situation where 10%-20% of the workforce immediately applies for grants. If most of those are applying for educational and job-training benefits (and not to fund small businesses), then that could be quite difficult. If 10% of the workforce enrolls in full-time classes over the first month or two, then we will have a recession unless we counteract that abrupt loss of productivity.

Counter-measures could include:

  • Encourage grantees to keep their jobs and attend night or weekend classes. This might work well for literacy programs, for example. But part-time study won’t be practical in all cases.
  • Since our labor force participation rate is rather low (see figure below), we could prioritize grants for people who are out of the labor force but who are otherwise employable. This would definitely blunt the effects of the immediate loss of productivity.
  • Bring in foreign workers on temporary visas to make up part of the labor shortfall.
  • Prioritize the one-time grants I mentioned earlier: paying moving expenses to find a job, paying for bus passes for the unemployed, etc.
  • Give employers incentives to offer part-time work to grantees.
  • College students who receive grant money (which would be all that apply) could be encouraged to take part-time and summer jobs.
  • Prioritize grants for people who only want short training programs of a few weeks, so they could get back in the workforce quickly. If they want to come back for more training later, then at least the program will be past the ramp-up period.
  • Structure the program so that grants are staggered over the first year or two. Those who have to wait should go through the screening process, so they will know that their grants have been approved, effective at some specific date in the future. That way they’ll have a clear path forward, and be able to plan.

https://fred.stlouisfed.org/series/CIVPART

But the Fed must be ready to quickly increase the money supply to avert or soften a recession during the first year or so of this program. The ramp-up period will be a challenge, but if we prepare properly, it should go well enough.

I should note that if the ordinary growth in money supply doesn’t cover the cost of the grant program, then short-term bonds can be issued, with the Fed retaining the option to call in the bonds at any time—that is, to repay them early. These bonds would be issued in fairly small denominations to US residents only. The advantage is that the Fed can use these bonds in case Quantitative Easing is required. Instead of buying T-bills from Japanese banks or Saudi billionaires, which has no effect on the domestic money supply, the Fed has a class of bonds it can buy—totally at its own discretion—which will have a much more immediate effect on M2.

The sum up this section: the grants program can be mostly funded through normal increases in money supply. Instead of routing new money through banks and the bond market, it can be directly applied to increasing productivity. The grant program’s annual cost will be approximately the growth of M2 in a normal year. Bonds can be issued to cover any gaps.

Inflation shouldn’t be a problem. Productivity gains should cancel out any inflationary pressures, and no additional money supply will be needed.

The ramp-up of the grants program will require care; if in the first few months too many workers leave the workforce for training then the abrupt loss of productivity will likely cause a recession. There are reasonable counter-measures but the Fed and Congress must be ready if needed to rapidly increase the money supply to avert a recession.

◊◊◊

Let’s look at the effects on the American educational system. Of the $996 billion annual cost for the grants program (see above), about $647 billion would go to education, job training and small-business capital. This is nearly the amount spent on PK-12 education in 2018-2019: $667 billion.

https://nces.ed.gov/fastfacts/display.asp?id=372#PK12-expenditures

The amount spent by states and localities on higher education was $311 billion in 2019.

https://www.urban.org/policy-centers/cross-center-initiatives/state-and-local-finance-initiative/state-and-local-backgrounders/higher-education-expenditures

The total amount spent by 2-year and 4-year public universities and colleges in 2018-2019 is (I believe) $401 billion, although the table in the link below seems to indicate $401 million—but the units are nowhere defined. But if it’s 401 something, it must be $401 billion.

https://nces.ed.gov/programs/digest/d20/tables/dt20_334.10.asp

For private colleges and universities, the number is $219 billion in 2018-2019.

https://nces.ed.gov/programs/digest/d20/tables/dt20_334.30.asp

The point here is that $647 billion per year for adult education, job training and small business capitalization would be revolutionary. It’s slightly less than what we spend on PK-12 education and apparently slightly more than we’re spending on 2-year and 4-year education. (At least in 2018-2019.)

$647 billion per year is an enormous opportunity for our people to better themselves—-and an equally big opportunity for scammers in high places. Here are some potential problems:

  • That states and localities will reduce their support for higher education and thereby drain money from the grantees and ultimately from the grant program. We can reasonably suspect that the grant money thus diverted would become tax cuts targeted at the richest citizens.
  • That universities would increase tuition, reduce financial aid and then increase their president’s salary and build a new football stadium. The grant administrators can impose requirements on universities that accept grant money, to prevent tuition increases above the rate of inflation. $647 billion a year provides enough leverage to end runaway inflation in tuition. Universities that refuse this requirement will be limited to students who aren’t using grant money.
  • Short of malfeasance, there will probably be significant inflation in educational costs. To address this, one idea is a system of National Universities, which will be first-class institutions with Ph.D. programs and research, but also with vocational and technical programs. This isn’t as innovative as it might sound:

https://www.online.colostate.edu/certificates/construction-management/

https://www.online.colostate.edu/certificates/silviculture/

But the National Universities would have to offer some standard vocational and technical courses. For now, building trades would be a high priority, because of our severe housing shortage.

There are a number of struggling small colleges that might welcome the opportunity to become National Universities.

To give an idea of the scale, I think we would need at least 100 new universities.

(I will write another essay on the National University idea later.)

Another possibility is to drastically expand the two-year college system.

  • Large numbers of for-profit trade schools will spring up. Some of them will be scams, and others will suffer from inexperience and disorganization. Regulation is the only answer here. There will have to be national standards for curricula, although not so tightly defined as to choke off innovation.

All that aside, we may see a flowering of education and culture. When Sequoia developed the Cherokee syllabary, it was adopted with great enthusiasm. There are cases of Cherokees meeting each other on hunting trips, where one band had learned to read and write, and the other hadn’t even heard of the invention. They all sat down on the spot, and the literate ones taught the others, drawing in the dirt with a stick.

I want our people to have the same intoxicating experience of learning. I want their lives to open upward into the light.

People may come up with marvelous new methods of learning; we live in hope.

◊◊◊

I hope my readers appreciate that this proposal will result in sweeping change. This program will make our labor force the most productive in the world, putting our economy on a path of sustained, low-inflation growth. It will transform the class structure and revive the equalitarian spirit of our people.

Readers may also have noted how different this proposal is from the usual policy proposals of the American Left. And why is it so different?

It’s different because we have a coherent ideology—most particularly an analysis of the American class structure in Class and Underclass, but also an understanding of the history of Western Civilization, the Enlightenment and the role of education in the creation of the modern world, as detailed in White Pride and What Our Mind Cannot Grasp.

In the background of this essay on educational grants is also a critique of capitalism and Billionaire Capitalism, as set forth in A Higher Power, Is Billionaire Capitalism a Thing?, and Why is Billionaire Capitalism Bad at Pandemics?

Regrettably, the American Left doesn’t have a critique of capitalism. Bernie Sanders is the most forthright in his opposition to capitalism, but he talks about it mostly using a catchphrase: “casino capitalism.” There’s no analysis, and so there’s no basis for prioritization. And if you can’t prioritize, you can’t govern. But no one takes governing seriously on the Left.

If you want serious progressive policies that will actually work, then you need a critique of capitalism and the class structure.

And to the best of my knowledge, you can only get that here.

Appendix:

There are some qualitative assumptions that need to be made at the beginning, and then there another set of quantitative assumptions to bring the original assumptions into focus.

First, the qualitative assumptions:

  • Some people will use all their grant money before they turn 65.
  • Some people will use none of their grant money before they turn 65.
  • (The first two assumptions imply a third group: people who use only some of their grant money before age 65.)
  • The program will be broadly popular.

Next, the quantitative assumptions:

  • On average, people will use 60% of their grants ($150,000) by age 65. This “usage” statistic is important in calculating the annual cost of the program.

We can treat “usage” numbers as a normal distribution. (It may not be a perfectly normal distribution, but we will get some insight unless the real distribution is highly skewed or discontinuous).

The part of the distribution that’s => 1 corresponds to those who use their entire grant before age 65:

And the area <= 0 corresponds to the people who use none of their grant money before age 65:

So, given that 24.5% of the population uses all their grant money before age 65, and that 15.05% uses none of it, then we can calculate:

  • That the people who use only some of their grants before age 65 use on average 58.7%, or about $147K. This implies that almost everyone (85% of the population) will see a substantial increase in their productivity.
  • The annual cost of the program, and the proportion of the funds that will go to education and business versus the amount that will go to a retirement stipend.
  • The average retirement stipend.

Who Stole the Radio Money?

How can we account for the lack of oomph, the dysfunction, shown by the Russian military?

There is a lot of anecdotal evidence of what appears to be incompetence or demoralization. Often the anecdotes have Russian soldiers doing (apparently) senseless things–like abandoning vehicles or burning weapons–which must be symptomatic of larger problems. Why abandon a vehicle? Either there is no fuel, or the vehicle has broken down due to poor maintenance, or the danger of a road ambush is too great, forcing the troops to travel on foot cross-country.

And of course there is the Russian air force, or rather, there isn’t. The world’s third largest air force has scarcely put in an appearance. Is this due to a lack of pilot training or aircraft maintenance? Is there no fuel?

The sinking of the Moskva is a particularly focused example of this problem. The ship was sunk 65 nautical miles offshore, far enough that its defenses had several minutes to respond and destroy the incoming missiles. Why didn’t this happen? The Ukrainian missiles themselves were based on an old Soviet design; these were not cutting-edge Western weapons.

But once struck, why did the ship sink? The watertight bulkhead doors should have kept the ship afloat—-if they were really watertight and correctly sealed. And maintenance is required—the gaskets must be inspected regularly and replaced as needed.

Russian reports have mentioned a fire, and if that is true, why wasn’t the fire extinguished? Were the fuel tanks ruptured? But a modern ship can fill a room with inert gas, displacing the oxygen. And that’s not to mention the presence of a crew of 500, all of which should have been well-trained in fighting fires.

To account for all this, we should note that armies and navies do not exist in a social and political vacuum; they grow out of a particular society and reflect it in many ways. The medieval Hapsburgs could have adopted the tactics of the Swiss and perhaps by doing so have triumphed over them. But heavily armored knights were an integral part of society; the upper class was the military caste, and their efficacy in war justified their privileged position—-and by extension, the monarchy which organized and led the armies, and the church whose leaders were also drawn from the upper class.

The Hapsburg military system couldn’t be rejected or altered without destabilizing the class structure. Eventually monarchs did adopt Swiss tactics, but this was only after armies had been professionalized and the social position of the landed gentry and aristocrats had changed so that not all landowners were soldiers.

Russia is the most fully realized Billionaire State, and Billionaire Capitalism exists to concentrate wealth. The Russian army and navy may be inefficient at combat but are they inefficient….at concentrating wealth? No. Every year the Duma passes a detailed military budget totaling about $65 billion, and most of that ends up in the hands of plutocrats, by one method or another. In some cases, the billionaires control factories that make weapons and uniforms, but in other cases the money is simply “stolen.” I use quotation marks because in a Billionaire State, almost everything worth owning is owned by billionaires, and so “stealing” from the defense budget is a bit like Trump ordering a burger and fries from one of his hotel restaurants. Of course he doesn’t pay, and it’s not theft, either.

So in the Duma’s budget there is money for encrypted field radios, but the Russian troops show up on the battlefield with cellphones, which the Ukrainians hack into at will. Where did the money go? The beauty of Billionaire Capitalism is that everyone knows where it went, but no one can do anything about it. What does “property” mean under Billionaire Capitalism? It means anything a billionaire possesses, by whatever means. Ordinary people don’t own anything; they may possess something temporarily, but if a billionaire seizes it, there is no recourse.

To find out who “stole” the radio money and put them in prison would require a different definition of property, and that would of course be profoundly destabilizing. And in this case it might well have been Putin himself or his generals who appropriated the funds. The troops will just have to make due with cellphones.

This difference in the definition of property is an important distinguishing characteristic between industrial capitalism (as it developed in the West) and Billionaire Capitalism. Under industrial capitalism, even modest holdings of property were—and are—ordinarily secure. Even a blacksmith owned his own tools, just as surely as a Duke owned his estates.

Correlated with Billionaire Capitalism’s expansive concept of property is its concept of efficiency, which again is quite different from that of industrial capitalism. Under industrial capitalism, efficiency means efficacy at creating wealth. It means the production of useful goods and services at a cost less than the sales price. There is value-added, in other words.

But efficiency in Billionaire Capitalism means the ease and speed with which already-existing wealth can be concentrated in the hands of the few.

Industrial capitalism’s efficiency requires engineering, planning, invention, and skilled workers. Billionaire capitalism’s efficiency requires political power and secret bank accounts.

Western armies and navies are mostly patterned after factories. Everyone has a job to do, and wasting time or money is discouraged. But the armies and navies of Billionaire States are patterned after ruthless political parties and crooked banks.

So of course the Moskva sank. Someone had skimmed off the money for bulkhead gaskets and put it in a Cyprian bank account. Someone else sold the inert gas to a foreign shipping company and put the money in a Panamanian bank. And so on: with the firefighting equipment, the anti-missile defense system, etc.

You could sail the Moskva into port and it looked impressive; you could order it to fire missiles at defenseless targets and as long as it had missiles that would work too. Parts of the Moskva were just like a real warship—particularly its appearance.

But it was a product of its society and political system, and so it sank.

J.D. Vance has a Story

https://www.washingtonpost.com/magazine/2022/01/04/jd-vance-hillbilly-elegy-radicalization/

J.D. Vance wrote a book critical of his family, hometown, and ethnic group; it sold well and he got a movie deal out of it; Ron Howard directed it. He’s a graduate of Yale Law School, a friend and mentee of Peter Thiel, and has gone from never-Trumper to opposing vaccine mandates. Vance has worked in venture capital, though he did not study engineering. He is now running for the Senate in Ohio and is all-in on Trump. He has an online persona as a nasty right-wing troll, and he’s on record as saying that Americans shouldn’t be concerned with Ukraine’s problems. He has converted to Catholicism and thinks that’s the solution to America’s culture wars. He recently grew a beard.

Is there anything in the preceding paragraph that says “likable” to you? And yet J.D. Vance is sad because people don’t like him; he blames the limitless malice of the “elites.” The worst example of this elite malice is apparently that critics mostly didn’t like the movie based on his book. Right, liberal movie critics are exactly what George Orwell was talking about!

Still, even unlikable people have their share of light:

Ironically, this breakup seemed to bring Vance closer to certain critics who had accused him of blaming low-income Appalachians for their own problems. In his book, Vance cited the research of Harvard economist Raj Chetty, which found that a region’s lack of social mobility was strongly correlated to its percentage of single-parent households. Subsequently, he has been more likely to cite MIT economist David Autor’s work on globalization, which estimates that imports from China cost the United States about a million manufacturing jobs in the first decade of the 21st century. By 2020, Vance was tweeting that the legacy of Reaganite-Thatcherite conservatism was “the rise of China, the decimation of the American family, and a lot of tax cuts for the rich.” As his friend Sohrab Ahmari — one of the leading intellectual proponents of national conservatism — suggested to me, Vance had eventually come around “to the correct conclusion of his memoir.”

When we spoke on the phone, I told Vance I found it noteworthy that his book dissected the “learned helplessness” of Scotch-Irish hillbilly culture, while now he plays up external factors. He pushed back on my characterization, arguing that it made sense to talk about one thing in a memoir and the other in a Senate race. Besides, they weren’t mutually exclusive. Take “trade and industrial policy and fatherlessness,” he said. “We should understand deindustrialization as, in part, something that decimates working-class families, and, of course, when you destroy working-class families, then a whole lot of social pathologies move in.”

“National Conservatism” is a movement that includes a number Catholic intellectuals. Adherents are cultural and religious conservatives but not opposed to social programs that benefit the working class. There’s an isolationist and protectionist strain in their thinking, and Pat Buchanan appears to be an influence. Ross Douthat has adopted at least some of their ideas, particularly around social support for pregnant women who might otherwise abort. (see: Ross Douthat and “Just-this-one-thing”)

The problem with National Conservatism is no one can fix American’s social or cultural problems without:

  1. A critique of capitalism. America is the most successful capitalist country in the world, and all our problems either stem from, or are deeply intertwined with, capitalism. My critique is that capitalism is a system of socialization which is economically useful but fatally destructive and dehumanizing in other ways. (See A Greater Power, Air Safety and Capitalism, “the very rich are not like you and me”, Mother’s Milk and Potosi).
  2. An understanding of the American class structure. Vance, Douthat and others like them throw the word “elites” around a lot, without any understanding of the class structure itself. They don’t even realize that the American class structure has a purpose. (See: Class and Underclass).

I hope National Conservatism can do some good, I really do. But it can’t just ignore capitalism—and particularly Billionaire Capitalism—and get anywhere. People like Vance and Douthat and Kevin Williamson are mostly reactive. They sense that liberalism doesn’t have all the answers, which is fair enough, but then they freak out and act as if liberalism has betrayed them in some deeply personal way. To them, liberalism is the enemy.

I have my own disagreements both with liberalism and with identity politics, which Vance and Douthat seem to believe are the same. But liberalism has an honorable history, and Paul Krugman and other liberals often do excellent work.

And in any case, ranting about the illusions and blind spots of liberals is uninteresting to me. Yes, they don’t have all the answers, but I would rather develop my own vision.

At least liberals (for the most part) are not actively furthering the cause of Billionaire Capitalism, which is a threat to humanity and civilization. JD Vance, by his support of Trump, is.

It’s odd that Vance can see the damage de-industrialization did in his native Ohio, without wondering how it came about and who benefited. Nowhere was the transition from industrial capitalism to Billionaire Capitalism more dramatic and damaging than in the industrial Midwest, and it hurt Vance’s own family. And yet Vance supports Trump—and Putin! — without the slightest understanding that Trump and Putin are now the leaders of Billionaire Capitalism, the same political and economic movement that destroyed Vance’s hometown and his childhood.

Does Vance ever stop to think that the “social pathologies” he mentions might include voting for self-destruction?

NATO and Russia

Putin and his supporters justify the invasion of Ukraine by claiming that NATO is “expanding” and threatening Russia.

The fact that this is untrue shouldn’t divert us from a close examination of this claim, because it may provide insight into the real motivations of Putin and his Billionaire State.

First, is NATO actually expanding, and what is the nature of this expansion, if it exists?

https://en.wikipedia.org/wiki/Enlargement_of_NATO

Here is a summary of NATO’s expansion, since its founding:

The most recent accessions to NATO are: Albania and Croatia (2009), and Montenegro and North Macedonia (2020). None of these countries border Russia, but they all border Serbia. NATO and these new Balkan members clearly want to guard against a revival of Serbian nationalism, and associated genocide of non-Serbs. The only other country that borders Serbia is Bosnia and Herzegovina, which is trying to get into the EU, and may eventually join NATO.

The new members added from 1999-2004 are mostly countries which in living memory have been occupied or invaded by the Soviet Union. Occupation by the Soviet Union, we need to remember, always included executions, prison camps and a wide network of secret police informants, extending into many aspects of everyday life. These countries include: the Czech Republic (as part of Czechoslovakia), Hungary, Poland, Bulgaria, Estonia, Latvia, Lithuania, Romania, and Slovakia (as part of Czechoslovakia). Slovenia, as part of the old Yugoslavia, was never occupied by the Soviet Union.

All these countries have legitimate security concerns based on their experience of being occupied and oppressed by the Soviet Union, the predecessor of Russia. This occupation—we might say colonization—condemned these countries to underdevelopment and powerlessness for 45 years, leaving behind a social and psychological legacy of helplessness, mistrust and anger.

For example, when the Stasi files were opened in East Germany, people were stunned to discover that friends, teachers, clergymen and even family members had been spying on them. This may have been better organized in Germany, but similar networks of informants existed in all the East Bloc countries.

And in addition to mere spying, there’s this:

https://en.wikipedia.org/wiki/Zersetzung

These nations are all understandably determined not to fall back under Russian domination. If European countries—including Ukraine—want to join NATO, Putin and Russia have no one to blame but themselves.

However, there has been no NATO expansion since 2004 in which Russia was a factor. The frontier between NATO and Russia has been largely stable since then, with one exception: Hungary is now strongly under the influence of Putin. Hungary is still officially a member of NATO, but it isn’t even allowing shipments of weapons to Ukraine to cross its territory; functionally, it is no longer a NATO ally. And if it’s not helping in even a minor way in this crisis, would it send troops if Putin attacked Poland or Slovakia? Putin has neutralized Hungary.

What does it mean to be a member of NATO, in practical terms? A new member’s military organization has to be consistent with NATO, at least to some extent. The communication protocols and the ammunition are standardized, but the armies and navies are not integrated and obviously the newer members still have some Soviet-era equipment, such as the MIGs that both Poland and the Czech Republic use.

This is a fairly loose alliance. If the strategic goal was to invade Russia, the different armies and air forces would be much more tightly integrated, with (for example) German and American divisions completely standardized in organization, equipment, and training, and with the units integrated down to the brigade level—that is, a German brigade and American brigade might be grouped into the same division.

But if the strategic goal is to defend (in depth) against a Russian invasion, then the national armies would have to be independent—-as they are today. Estonia and Bulgaria wouldn’t be fighting the same war, and don’t need the same organization.

There are US troops in Europe, but the bulk of the combat units are in Germany, not Eastern Europe; it’s not as if NATO is massing its troops close to Russian territory.

Realistically, how does NATO threaten Russia? Yes, it “threatens” Putin’s attempts to re-create the Soviet Union in some form, along with the Warsaw Pact, but that is after all its purpose. NATO has always been mostly focused on preventing Russia from dominating Europe; if this is a threat then it’s a toothless one, because NATO has been around for three generations without a single bullet being fired at a Russian soldier.

Maybe it “threatens” Putin’s pretense that Russia is a normal country which is no danger to anyone? But no NATO propaganda campaign could equal the brutality and atrocities of the invasion of Ukraine; Russia is not a normal country, and it is a threat to the world.

But perhaps it’s not NATO, but something else that Putin fears, with which NATO is associated? Could NATO be a synecdoche for Westernization in general?

But “Westernization” is vague, and there are bound to be some parts of Westernization that Putin objects to more than others. To really get at his motives, we need to look more deeply.

To Putin, the fall of the Soviet Union was a great historic tragedy, and his thinking seldom strays far from the Soviet model. Sending tanks into Ukraine to set up a puppet government is exactly what Khrushchev did in Hungary in 1956, and what Brezhnev did in Czechoslovakia in 1968.

Putin has no doubt thought deeply about why the USSR lost the Cold War with the West, and one clue to his thinking is that he has never tried to revive Soviet economic policies. Like many historians, he seems to believe that the West won because of its greater economic productivity.

Having lived through those times, I remember that the public understanding of this difference was slow to develop. In 1946, the USSR was still recovering from massive war damage and casualties, and no one assumed the economy of Poland would ever match, say, that of France. Some cities and countries had obviously benefited greatly from capitalism for centuries, and most of those were in the West. Neither London nor Amsterdam ended up in the East Bloc, and neither did Paris or Zurich or New York. Given this historic Western advantage, it was still a fair question whether centrally planned economies might be better in the long run.

But instead, as time passed it became clear that the West was outdistancing the East. By the late ‘60s it was quite obvious, and the point of sharpest contrast was in Germany. The extraordinary performance of West Germany compared to the poor, slow-moving DDR was undeniable.

And in Berlin, the difference was particularly dramatic; in the ‘70s, West Berlin practically glittered with prosperity, while East Berlin was all concrete and mildew. The DDR had to wall its people in, as if the entire country were a prison.

People in both the East and West concluded this difference was due to the superiority of the Western system. What else could they think?

When there are two areas with similar history, geography and ethnicity, but with different political and economic systems, then any major differences between these areas in economic growth, life expectancy and overall well-being can reasonably be attributed to a difference in the two systems. And this is what happened with East and West Germany, most visibly in Berlin. I call this the Checkpoint Charlie Effect.

Now, what if Ukraine joined the EU and prospered? Bear in mind that Putin thinks Ukrainians are really Russians. What if, in a few years, the average Ukrainian lived much better than the average Russian? This would be a Checkpoint Charlie Effect—an apples-to-apples comparison proving that Putin’s Billionaire Capitalism was inferior to EU Capitalism.

To add some context here, let’s look at GDP (in a couple of flavors) of Russia, Ukraine and selected countries in Eastern and Central Europe, along with the US numbers for reference.

GDP (nominal and PPP) per capita, by country

IMF estimate 2022

CountyGDP(nominal) per capita, $GDP(PPP) per capita, $Ratio of GDP(PPP) to USA
Ukraine4,95813,9430.20
Russia11,66529,4850.43
Poland19,05635,9430.53
Romania16,29332,9500.48
Czech Republic28,07742,9560.63
Germany54,65356,9560.83
Estonia29,73539,7290.58
Moldova5,24013,8790.20
Latvia21,48939,7290.58
Finland56,83351,8670.76
Slovenia31,02640,8200.60
USA74,72568,3091.00

I include GDP(PPP) because it measures the standard of living for the average citizen. Because of the difficulty of measuring cost of living anywhere, much less in every country in the world, GDP(PPP) has some real limitations, particularly in comparing advanced countries to each other. But large differences in PPP certainly tell us something.

Another problem is that GDP(PPP) per capita is the mean purchasing power per person, not the median; in Russia in particular, with its extremes of inequality, that’s a problem. The GDP(PPP) numbers might be taken to indicate that the average Russian lives as well as the average Romanian, but that’s almost certainly not true. The median numbers for both countries would quite likely tell a different story.

But these numbers do indicate:

  • The dramatic advantage of belonging to the EU, especially for former East Bloc countries.
  • The advantage of never having had a communist government—as exemplified by Finland, the US and (largely) Germany.
  • That Ukraine and Moldova—former East Bloc countries which are not members of the EU—are the poorest countries in this sample by far.

In other words, if Ukraine were admitted to the EU, it would have room for rapid improvement. The people appear well-educated and if they work to improve their economy with the same vigor they’ve shown in facing Russian tanks then they could double their standard of living in fairly short order.

So if Ukraine were admitted to the EU, it’s positioned to rapidly create a Checkpoint Charlie Effect on Russia’s southern border. I believe preventing that is Putin’s specific motivation, not to imply that’s his only reason.

But having found this specific motive, let’s also look at the overall context. Can Billionaire States and democracies live in peace? I doubt it.

Billionaire capitalism implies an extreme concentration of wealth, and this necessarily puts pressure on the majority. Their wages are lower, their opportunities are less, and their health, education and life expectancy are all worse—-all due to the burden of billionaire parasitism.

How do billionaires explain this to vast majority? They don’t—-instead they change the subject, and they generally change it to nationalism or religion.

But there are places where Billionaire Capitalism doesn’t hold much sway, most notably the EU. And whatever mistakes the EU bureaucracy might make, ordinary people are bound to have much better outcomes in the EU than under Billionaire Capitalism. To live in a society designed to concentrate wealth forever is to be under constant pressure, even if you are skilled and educated.

Billionaire States like Russia will always feel “threatened” by places where the people have a good chance to live decent and meaningful lives. Conflict between these two systems is nearly inevitable.

Let’s hope that conflict doesn’t lead to the end of civilization.

Helping Putin

Russia has asked China for military equipment, and perhaps other help, in its war against Ukraine:

https://www.cbsnews.com/news/russia-asks-china-for-military-help-in-war-with-ukraine-u-s-officials-say/

What can this mean? Does Russia really need military equipment?

Or is Putin testing the waters, trying to see whether China will help Russia evade sanctions?

Whatever Putin’s motivation, this is a natural experiment which may reveal the motivations and thinking of China’s leaders.

One hypothesis about China is that it is not a pure example of billionaire capitalism, although heaven knows it has plenty of billionaires. Because China’s prosperity depends on manufacturing, which implies a middle class composed of managers, engineers, accountants, skilled workers and sub-contractors, its predominant socialization must be realistic, honest, and generally cooperative. No manufacturing sector can exist without those values. However authoritarian and corrupt the government may be, there is an indispensable part of society which is (perhaps passively, even unconsciously) opposed to that authoritarianism and corruption.

It may be possible to test this hypothesis by China’s response to Putin’s cry for help. Will China throw Putin a lifeline? On the merits of the case, I would say no. If you or I were in Xi’s shoes, would we do Putin any big favors? Favors that Putin will, in all likelihood, be unable (or unwilling) to re-pay?

Sure, Xi might be willing to help a little, just to placate a neighbor, but what is Xi’s underlying attitude to Putin and Putin’s regime in Russia? He doesn’t seem to mind if Putin puts pressure on the Americans or Europe, but does Xi want a stronger and more aggressive Russia on his northern border? Does he actually want Putin’s invasion of Ukraine to succeed? He most likely does not—but if he does, that tells us something.

If I were Xi I would see Putin as an unpredictable neighbor with a nuclear arsenal that could destroy China in minutes. I would prefer a weaker Russia, governed by someone with more serotonin than Putin.

Yes, Xi probably likes the precedent Putin is trying to set, that of regional powers using force to subdue or absorb smaller neighbors. But he may be realistic enough to see that the effective “precedent” is how fiercely the West and Ukraine are resisting Putin’s invasion. What Putin is doing in Ukraine won’t help Xi with Taiwan—quite the contrary. Furthermore, Xi has been slow on the uptake during this crisis. He genuinely believed that Russia wouldn’t invade, or so he told American diplomats. And he failed to see the implications for his frequently used “national sovereignty” argument. If China supports Putin’s invasion of Ukraine—or even if it doesn’t oppose it strongly—then it loses credibility whenever it asserts “national sovereignty” in response to criticism of its Uighur and Hong Kong policies. What about Ukraine’s sovereignty, people will ask?

What could Putin give Xi in return for help evading Western sanctions? Rubles are practically worthless now outside Russia, and although China might like some cheap Russian oil, the risks probably outweigh the benefits. After all, the oil wouldn’t be free, and China can easily afford to buy oil on the world market without antagonizing the West. China doesn’t need Russian oil; it does need access to Western markets.

Xi might like to have Outer Manchuria back, which the Russians seized in the mid-1800s. This would include Vladivostok, but even proposing that to Putin would be risky. Right now, Putin doesn’t seem to regard China as a threat, but that could change in a heartbeat.

And of course, China and Russia are bound to have differences in the future. For example, China’s Belt and Road initiative implies a reduction in Russian influence in Central Asia and the Middle East.

But what if? What if, despite the above considerations, Xi does want Putin’s invasion of Ukraine to succeed? Why in the world would he want that?

There are three possibilities:

(1) China is a Billionaire State, just like Russia, and Xi and Putin share approximately the same ideology. This conclusion would require an explanation for the social and cultural differences between China and Russia—and for the fact that Xi himself seems to hold Chinese billionaires in low regard. However, despite their differences, Russia and China might be more similar than they appear on the surface.

(2) Xi Jinping believes that anything that destabilizes the West, that frightens Europe and humiliates America is a good thing. Here we trip over a contradiction in China’s foreign policy: China is a world power because of its manufacturing sector, but this sector is far too large for China’s domestic market; China must export and in fact it originally developed its manufacturing primarily for that purpose. So stable trade relationships are a high priority for China.

However, to distract the Chinese people from the severe inequality of their society, the corruption and lack of basic human rights, China beats a nationalist drum day and night. And this isn’t just for propaganda purposes; there is an argument to be made that in their day the US and the UK used their economic power to build global political and economic systems, and that China will inevitably do the same.

But that argument only works if you don’t look at the details. The British brought public health measures, education and a legal system that made commerce possible. They got rid of pirates and bandits, and they built railroads. Of course, no one wants to be colonized, but the British did bring a model of civil society that had some distinct benefits. If you think that’s a post-colonial rationalization, go ask the people in Hong Kong. The rights they attempted to defend against Xi were derived from the Enlightenment and from Europe, and if the gods favor their cause, they will seize those rights again in a heartbeat.

American hegemony wasn’t as hands-on as British colonialism was, but it emphasized free-trade and regional alliances, and in the immediate post-war era it insisted on democracy. So there were benefits, especially for countries was like Germany and Japan, where democracy hadn’t taken root before WWII.  

As an aside, note that Chinese manufacturing success was made possible by the American global system, which allowed more-or-less free trade between countries with different political systems.

The problem the Chinese have in building a global empire is that they have nothing to offer the people they are attempting to colonize. What are you going to give us that’s better than the American system?  Xi actually seems to believe that people want to be freed from the yoke of democracy and civil liberties.

Without an attractive ideology, the Chinese cannot build a global system of their own without destabilizing and destroying the existing Western system. If the Western system didn’t work anymore, then the Chinese system might become the only choice.

But destabilizing the existing global system can’t happen without destabilizing and weakening the countries that founded that system or which benefit from it: the US, Europe, Japan, and the rest of what we used to call the Free World. This is absurd: China cannot have stable trade relationships with countries it is attempting to de-stabilize.

This is the fundamental contradiction at the heart of Chinese foreign policy. The Western global economy implies competition between nations, but not outright or covert aggression; there is an unwritten political constitution which everyone has to accept—there are limits. The West is now in the process of expelling Russia from the global economy because Putin doesn’t accept those limits.

Both Russia and China have treated that economic system as a given, as if it were a public utility; it’s not. It was created by the US and its allies to serve their interests after World War II, and it was modified to include Russia and China after the Cold War, again to serve the long-term interests of the US and its allies. The hope at that time was that Russia and China would be among those allies. But Russia and (perhaps) China don’t want to be part of that alliance anymore, so they can’t be part of the global economy, either. The logic here is not at all obscure—the West will not allow Russia (or China) to use the global economic system to destroy that same system. Lenin said that the last capitalist would sell the rope used to hang him, but that was just a joke.

The only way any nation can replace the current global system is to come up with something better, and China and particularly Russia have nothing to offer there.

(3) One of China’s long-term goals is to make Russia an economic colony. If this were a novel, that would be a good ending.

Seriously, Xi goes to a lot of trouble to convince Putin that’s not his goal, but of course the Chinese would colonize Russia if it were risk-free. But in fact the risks are enormous.

So, which of these explanations do I prefer? Although (1) may or may not prove true in the long run, (2) is the best and most direct explanation if Xi were to help Russia. Helping Putin has no tangible benefit to China—-it only makes sense as an anti-Western move. In other words, Xi would have to be willing to alienate his business associates in service to a nationalist “wolf warrior” policy—I might even say fantasy.

But helping Russia at this point would be another sign that China has misread the situation. Russia appears increasingly unlikely to win the military struggle in Ukraine, and it’s already suffered a bruising and perhaps decisive defeat politically and economically. The West has decided to erase 30 years of economic integration with Russia. We are now returning to the trade system of the Cold War, where the default was no trade, and any exceptions were all bi-lateral and carefully negotiated at the highest levels. Of course, there was always a bit of trade with Finland and other neutral countries, but nothing that rose to the level of global importance. And Western banks did loan the USSR money, even in Stalin’s time.

But no one will be loaning Putin money, and how would he spend it if they did? Russia can no longer do EFTs as before. The old system of allowing Russia mostly free trade and free access to global banking is dead. Remember those 16,000 Syrian mercenaries that Putin announced he was hiring? How was Putin planning to pay them? In rubles, stuffed in manila envelopes?

Most of these sanctions will be long-lasting, perhaps permanent. Prohibiting travel to and from Russia may be next. And then the West may go on an Easter Egg Hunt through offshore banks, freezing any account that belongs to a Russian citizen.

Nothing China can do will lessen the impact of sanctions on Russia in any significant way, because it cannot change the decision to decouple Russia’s economy from the West. For Europe in particular this is a matter of self-defense. If the Ukraine invasion hadn’t been vigorously opposed by the West, the consequences would have been immediately dire for Poland and the Baltic states and perhaps Romania as well. Would a NATO that didn’t dare send anti-tank weapons to Ukraine really fight a war to protect Latvia? And in that case Lithuania and Estonia would also be doomed and NATO credibility would be kaput. Then Putin would start putting pressure on Poland. And with every success, his fear of the West would weaken.

Xi has no doubt realized that some of what the West is doing to Russia it could also do to China if events took an unfortunate turn. Ending trade entirely with China would be difficult, but any significant reduction would leave a mark.

And cutting China off from Western capital markets would be damaging. China’s recent economic growth has been partly driven by building housing and a modern infrastructure, and that requires borrowing. Not all of China’s borrowing is from the West, but the loss of Western capital would be significant.

China is not accustomed to recessions. How would the people react?

Although China may well do the sensible thing, this crisis is sobering. Are unprovoked invasions the inevitable endgame of Billionaire Capitalism? Putin uses Russian nationalism, Xi uses Han nationalism, Trump uses white nationalism and the Saudis use extreme Islam—-in every case to unite their citizens against outsiders and to blunt any reform movement that might take inspiration from other countries.

But nationalism is built for war; it’s not good for much else. Putin’s Russia is the most fully realized Billionaire State, and here we are, watching the Russian army commit a hundred war crimes a day against the Ukrainians, a Slavic Orthodox people whose only crime is not wanting to live under Putin’s thumb.

Russia doesn’t need this war, not in the least. But a country kept at a fever pitch by intensive nationalist propaganda may come to feel that war is inevitable—even a great relief when it finally breaks out.

Nationalist propaganda, originally just a tool of Billionaire Capitalism, often takes on a life of its own. Propaganda is just a narrative, and we structure our lives around narratives; simply living without a story or myth is difficult for us, although it’s often the best path.

People have died for the sake of illusions, that is, false narratives. We may hope and pray with all our passion that the human race does not disappear because we believed nationalist nonsense.