I ran across the following at the NACD Directorship website: (emphasis added)

Governance guru blames investors for crisis

From columnist Anand Giridharadas of the New York Times on September 9 (emphasis added):

when Ms. Palin strode onto the stage last weekend at a Tea Party event in Indianola, Iowa. Along with her familiar and predictable swipes at President Barack Obama and the “far left,” she delivered a devastating indictment of the entire U.S. political establishment — left, right and center — and pointed toward a way of transcending the presently unbridgeable political divide.

The next day, the “lamestream” media, as she calls it, played into her fantasy of it by ignoring the ideas she unfurled and dwelling almost entirely on the will-she-won’t-she question of her presidential ambitions.

So here is something I never thought I would write: a column about Sarah Palin’s ideas.

There was plenty of the usual Palin schtick — words that make clear that she is not speaking to everyone but to a particular strain of American: “The working men and women of this country, you got up off your couch, you came down from the deer stand, you came out of the duck blind, you got off the John Deere, and we took to the streets, and we took to the town halls, and we ended up at the ballot box.”

But when her throat was cleared at last, Ms. Palin had something considerably more substantive to say.

She made three interlocking points. First, that the United States is now governed by a “permanent political class,” drawn from both parties, that is increasingly cut off from the concerns of regular people. Second, that these Republicans and Democrats have allied with big business to mutual advantage to create what she called “corporate crony capitalism.” Third, that the real political divide in the United States may no longer be between friends and foes of Big Government, but between friends and foes of vast, remote, unaccountable institutions (both public and private).

In supporting her first point, about the permanent political class, she attacked both parties’ tendency to talk of spending cuts while spending more and more; to stoke public anxiety about a credit downgrade, but take a vacation anyway; to arrive in Washington of modest means and then somehow ride the gravy train to fabulous wealth. She observed that 7 of the 10 wealthiest counties in the United States happen to be suburbs of the nation’s capital.

Her second point, about money in politics, helped to explain the first. The permanent class stays in power because it positions itself between two deep troughs: the money spent by the government and the money spent by big companies to secure decisions from government that help them make more money.

“Do you want to know why nothing ever really gets done?” she said, referring to politicians. “It’s because there’s nothing in it for them. They’ve got a lot of mouths to feed — a lot of corporate lobbyists and a lot of special interests that are counting on them to keep the good times and the money rolling along.”

Because her party has agitated for the wholesale deregulation of money in politics and the unshackling of lobbyists, these will be heard in some quarters as sacrilegious words.

Ms. Palin’s third point was more striking still: in contrast to the sweeping paeans to capitalism and the free market delivered by the Republican presidential candidates whose ranks she has yet to join, she sought to make a distinction between good capitalists and bad ones. The good ones, in her telling, are those small businesses that take risks and sink and swim in the churning market; the bad ones are well-connected megacorporations that live off bailouts, dodge taxes and profit terrifically while creating no jobs.

Strangely, she was saying things that liberals might like, if not for Ms. Palin’s having said them.

“This is not the capitalism of free men and free markets, of innovation and hard work and ethics, of sacrifice and of risk,” she said of the crony variety. She added: “It’s the collusion of big government and big business and big finance to the detriment of all the rest — to the little guys. It’s a slap in the face to our small business owners — the true entrepreneurs, the job creators accounting for 70 percent of the jobs in America.”

Is there a hint of a political breakthrough hiding in there?

The political conversation in the United States is paralyzed by a simplistic division of labor. Democrats protect that portion of human flourishing that is threatened by big money and enhanced by government action. Republicans protect that portion of human flourishing that is threatened by big government and enhanced by the free market.

What is seldom said is that human flourishing is a complex and delicate thing, and that we needn’t choose whether government or the market jeopardizes it more, because both can threaten it at the same time.

Ms. Palin may be hinting at a new political alignment that would pit a vigorous localism against a kind of national-global institutionalism.

On one side would be those Americans who believe in the power of vast, well-developed institutions like Goldman Sachs, the Teamsters Union, General Electric, Google and the U.S. Department of Education to make the world better. On the other side would be people who believe that power, whether public or private, becomes corrupt and unresponsive the more remote and more anonymous it becomes; they would press to live in self-contained, self-governing enclaves that bear the burden of their own prosperity.

No one knows yet whether Ms. Palin will actually run for president. But she did just get more interesting.

Just saw a post by Stephan Kinsella from last month on the main blog, and couldn’t resist a little fun with his closing paragraph, which I tweaked slightly: http://blog.mises.org/10479/why-objectivists-hate-anarchy/comment-page-4/#comment-801811

So: limited liability corporations are the most important of all capitalist organizations.

And you can’t have corporations in anarchy, since corporations (and their essential characteristics like limited liability of shareholders) come from artificial edicts by the legislature of a state.

So, we must have a state. QED.

(Just playing.)

TT

Some further thoughts on corporations are here: http://mises.org/Community/blogs/tokyotom/search.aspx?q=corporation

I just recently stumbled upon INET.

According to award-winning business and energy journalist Anthony Harrington:

It is now widely believed that the 2008-09 global crash discredited the classical economic model of efficient markets beyond repair and that what is needed is a new vision. In fact the financier George Soros believes this so strongly that he has almost single-handedly funded a new body, The Institute for New Economic Thinking, or iNet, the governing board of which includes the Nobel Laureate economist Joseph Stiglitz. 

Though its chief funder George Soros remains confused, this new group appears to have recognized the bankruptcy of current mainstream economic thinking and to be moving in productive directions. I was encouraged by the following interview, for example:,

Domenico Delli Gatti – Microfoundations for the Vision of Minsky

They also listened at their inaugural conference at King’s College, Cambridge last year to this good paper on Hayek and Keynes by Bruce Caldwell.

Of course, they could use some help from Austrians; otherwise, this effort could very easily turn into re-hashed arguments for government intervention.

Here’s the aggregate blog feed of the participating New Thinkers. Below, a video by some of the founding economists:

YouTube: What is the Institute for New Economic Thinking?

[View:http://www.youtube.com/watch?v=SdZgD1DCNq4:550:0]

I have blogged any number of times on the importance of communities, and on how governments and statist corporations are undermining them. Is anyone at LvMI paying attention to the importance of actually cultivating and supporting voluntary society (as opposed to simply fighting government) and anyone thinks that corporations are key players in statism?

On June 13, I noted that Interesting new research shows that THE key to disaster recovery is the strength of the local community (‘social capital’), NOT Government action . I referred to political scientist Daniel P. Aldrich.

In his short July 4 post, Friends and Neighbors Living in Caring Communities, Peter Boettke also shines a spotlight on the importance of informal society. Boettke refers to a July 4 piece at NPR, The Key To Disaster Survival? Friends And Neighbors, that refers prominently both to Daniel Aldrich and to Emily Chamlee-Wright and her extensive research on Katrina (which Boettke says is “fundamental for anyone hoping to understanding this issue”).

Another important and noted voice is Rebecca Solnit, whose writing I intend to cover more;

• ‘Paradise Built in Hell:’ How Disaster Brings Out the Best in People, Time Tuesday, March 22, 2011 (interview)
• A Paradise Built in Hell; Rebecca Solnit’s latest book explores communities that rise to the challenge of disaster. Yes! Magazine, Aug 13, 2010
• A Paradise Built in Hell: Rebecca Solnit on “The Extraordinary Communities that Arise in Disaster”, NPR, August 13, 2009 (interview with audio clip)
• A Paradise Built in Hell; The extraordinary communities that arise in disaster. FailureMag.com (interview)
• Rebecca Solnit, BOMB Magazine, by Astra Taylor, Fall 2009 (interview with audio clip)

I have commented extensively on the decision last year by the Scalia majority in the Supreme Court’s decision in Citizens United.

An important point is that it is perfectly clear that (1) the Founders hated corporations and were seeking to protect inviduals against government in the First Amendment, and that (2) in the Fourteenth Amendment the Congress and states were trying to secure the liberty of freed slaves and non-citizens (like the many Chinese at work on railroads) against excesses by states. But the most important point is that corporations are not real flesh-and-blood people, but the creations of states, which thus have every right to condition the grant of corporate status (and the special benefits included in such grant, such as legal entity status, limited liaibility of shareholders, unlimited purposes, unlimited life, etc.) on a curtailed ability to influence political decision-making. Limits on “corporate speech”do not, of course, pose any limits on the rights of speech of the individuals who own, manageor work within particular corporations).  Related points are that the incentives faced by decision-makers within corporations are different from those faced by individuals within communities, that corporations have special advantages over citizens in seeking to influence government, and that corporations are becoming increasing entangled in rent-seeking behaviors.

These are fundamental points that far too many are overlooking.

I recently stumbeld across a June 23 article at The Atlantic by Garrett Epps, a former reporter for The Washington Post, who is a novelist and legal scholar, and teaches courses in constitutional law and creative writing for law students at the University of Baltimore. Epps was writing in response to further, recent judicial developments in the wake of Citizens United.

While I don’t agree wholly with Epps and find his analysis incomplete, I thought it worth bringing his article to your attention. Epps kindly agreed to allow me to cross-post his article here.

I note that the bolding is mine:

Constitutional Myth: Corporations Have the Same Free-Speech Rights as Individuals

By Garrett Epps

Taken seriously, Citizens United requires that corporations and individuals be afforded equal rights to political speech, unqualified. . . . Thus, following Citizens United, individuals and corporations must have equal rights to engage in both independent expenditures and direct contributions. They must have the same rights to both the “apple” and the “orange.”

 I tweeted this earlier today, and thought I’d share with all you other fathers out there.

@Tokyo_Tom Don’t Miss! Samuel L. Jackson narrates “Go the F**k to Sleep” | Nerve.com http://bit.ly/ko5Un0 #p2 #tpp #tcot #tlot

Yeah, it’s a bit NSFW, but if the Wall Street Journal can post about it, I suppose I can too.

As WSJ notes:

Samuel L. Jackson’s audio version is available for free, for now.

German film director Werner Herzog also recorded a reading of the book, which the New York Public Library played for an audience last night. A bootleg video of the recording hit YouTube.

Enjoy! More here.

Yesterday I stumbled across a blog post by Joel S. Hirschhorn, a self-described libertarian who is author of Delusional Democracy, the Chair of the Independent Party of Maryland and co-founder of Friends of the Article V Convention (www.foavc.org), one of the first of the growing movements to rally citizens at the state level to seek to check excesses by the federal government.

While I think Joel is right to be angry about the state of ‘capitalism’ and of our politics, he doesn’t quite have his finger on the problem and thus his proposed solutions seem quite a bit off.

Joel’s post is here: Two Capitalisms; he urges that we learn from Germany; I abjur. I quote below key passages:

Maximizing financial returns to reward corporate bigwigs and stockholders even though the actions greatly harm the US economy and society results from US companies practicing bad, immoral capitalism. Think of this development as the conquest of Wall Street over Main Street, of those who make money over those who create and make products, of those who promote economic inequality over those who value the middle class.

The power elites that have succeeded in perverting capitalism have also succeeded in making much of the American public so dumb and distracted that they no longer function as informed and effective citizens, which has allowed the government to be hijacked by the rich and powerful through a two-party plutocracy.

Selfish capitalism was exemplified by the role of Fannie Mae in creating the economic disaster by perverting the housing market, as conservative David Brooks correctly concluded; he noted “the leadership class is fundamentally self-dealing;” it practiced “shameless self-enrichment” which produced disastrous results.

To be clear, the conflict is not between capitalism and socialism, the way right wing ideologues talk, but between the good and bad kinds of capitalism, which those on the left need to learn how to talk about. Bad, greed-driven, too-big-to-fail capitalism has ruined the US for all but the rich which have sucked off much of the nations wealth.

A fine analysis by Harold Meyerson on the difference between the highly successful German economy and the dismal US one drives home the crucial differences between the two forms of capitalism. The need is for the US to learn from the more successful German, good form of capitalism and develop policy reforms that could rejuvenate the US economy by curbing the bad form of capitalism. The ideas that Republicans keep advocating are all wrong because all they want to do is promote bad capitalism, which only serves the interests of the rich and powerful, not ordinary Americans, not the middle class, and not workers. Peter Coy has also assembled great information on what can be learned from other nations.

The German economy makes the US one look like it is on its deathbed. The German tripartite system has business, labor and government working together. Faced with the same competition from low wage developing countries and the entire globalization condition, Germany has a booming manufacturing sector that constitutes almost twice the share of the economy than that in the US. And even in the current global economic recession German unemployment is 7 percent. The tripartite system has kept German labor unions strong and, therefore, protects the middle class whose pay has risen at roughly the same rate as top incomes. This is in stark contrast to the rich-getting-richer and unionbusting situation in the US. Indeed, the top 1 percent in the US are seeing their proportion of total income rise dramatically, even as their German counterparts are seeing their share of total income shrink. German corporate boards are required by law to have an equal number of management and employee representatives. By law! Germany’s stakeholder capitalism benefits the many unlike the US where selfish capitalism benefits the upper class and brutalizes everyone else. Corporate power has not captured the German government the way it has hijacked the US government.

Our answers cannot lie in more government, but on rolling back the government interventions that insulate corporations (and their shareholders and executives) from markets, communities, and from the adverse consequences of their behavior. What interventions?

• The whole regulatory state, which substitutes political battles and micro-management for stricter enforcement of private and community property rights;
• Public company regulations, which raise barriers to capital markets (and thus barriers to entry) and which substitue a busybody by inept and corruptible government for shareholder vigilance;
• Deposit insurance, that substitutes a card-house of prudential government regulations – that encourage moral hazard and games by bankers, traders, investment bankers and rating agencies rather than prudence – for oversight by depositors and their proxies; and
• The initial government grant of limited liability to shareholders, which not only encourages shareholders not to worry to closely about the risks that ‘corporate’ actions pose to third parties, but has fuelled the growth of the regulatory state and external pressure by advocates of the ‘precautionary principle’.

Anger over our perverted ‘capitalism’ is perfectly fine and appropriate – nay, essential. But let’s have some clearer thinking, please.

In the wake of the recent deaths and illnesses in Germany from a dangerous strain of E. coli, thinker and former banker Matt Ridley – who’ve I discussed before in the context of nuclear crony capitalism –  has an article in the June 11 Wall Street Journal on “When Precaution Trumps Public Safely“.

As I thought Matt’s post to be curiously uncurious as to the factors driving the ‘precautionary principle’, I ventured to address the deficiency with a thought or two of my own, and left the following comment at Matt’s blog:

Matt, ever wondered where the ‘precautionary principle’ comes from?

Ever heard of ‘once burned, twice shy’?

It seems clear to me that the insistence of many on the precautionary principle has it roots in massive externalities (pollution) by government activities and by corporations, those great pools of anonymous and irresponsible capital who shareholders, freed by the government grant of limited liability from downside risks, decided to turn a blind eye to risk management.

If we want more risk-taking, we should demand more responsibility by investors. Saying that it’s the common man who has to have the greatest skin in the game is a recipe for continued stonewalling.

Tom

Daniel P. Aldrich is an up-and-coming political scientist who got interested in disaster recovery when New Orleans was hit by Hurricane Katrina a few months after he had moved there with his family.

He has also spent quite a bit of time living and studying in Japan; I ran across him recently in connection with my reading and blogging on post-earthquake, post-tsunami and post-Fukushima nuclear power plant disaster Japan; he’s mentioned prominently in the NYT article excerpted in my preceding post.

According to his bio at Purdue University, Aldrich:

received his Ph.D. and M.A. in political science from Harvard University, an M.A. from the University of California at Berkeley, and his B.A. from the University of North Carolina at Chapel Hill. Daniel has focused on the ways in which state agencies interact with contentious civil society over the siting of controversial facilities such as nuclear power plants, airports, and dams. His current research investigates how neighborhoods and communities recover from disasters. He has published a number of peer-reviewed articles along with research for general audiences. His research has been funded by grants from the Abe Foundation, IIE Fulbright Foundation, the National Science Foundation, the Reischauer Institute at Harvard University, the Weatherhead Center for International Affairs, and Harvard’s Center for European Studies. He has been a visiting scholar at the Japanese Ministry of Finance, the Institute for Social Science at Tokyo University, Harvard University, the Tata Institute for Social Science in Mumbai, the Institut d’etudes politiques de Paris (Sciences Po), and the East West Center in Honolulu, Hawaii. He has spent more than three years conducting fieldwork in Japan, India and France.

His research and writing on disasters and resilience is very interesting and speaks to the importance of strong communities of the type that governments and their corprate agents frequently do their best to seek to erode. Here is his own description and set of links to that work:

Externalities of Strong Social Capital: Post Tsunami Recovery in Southeast Asia forthcoming in Journal of Civil Society

Much research has implied that social capital functions as an unqualified “public good,” enhancing governance, economic performance, and quality of life (Coleman 1988; Cohen and Arato 1992; Putnam 1993; Cohen and Rogers 1995). Scholars of disaster (Nakagawa and Shaw 2004; Adger et al. 2005; Dynes 2005; Tatsuki 2008) have extended this concept to posit that social capital provides nonexcludable benefits to whole communities after major crises. Using qualitative methods to analyze data from villages in Tamil Nadu, India following the 2004 Indian Ocean tsunami, this paper demonstrates that high levels of social capital simultaneously provided strong benefits and equally strong negative externalities, especially to those already on the periphery of society. In these villages, high levels of social capital reduced barriers to collective action for members of the uur panchayats (hamlet councils) and parish councils, speeding up their recovery and connecting them to aid organizations, but at the same time reinforced obstacles to recovery for women, Dalits, migrants, and Muslims. These localized findings have important implications for academic studies of social capital and policy formation for future disasters and recovery schemes.

Social Science Perspectives on Disasters in Perspectives on Politics

In this extended review, I discuss three recent books on disaster: Governing after Crisis: The Politics of Investigation, Accountability, and Learning edited by Arjen Boin, Allan McConnell, and Paul ‘T Hart, Learning from Catastrophes: Strategies for Reaction and Response , edited by Howard Kunreuther and Micheel Useem, and The Next Catastrophe: Reducing Our Vulnerabilities to Natural, Industrial, and Terrorist Disasters by Charles Perrow. All three books invoke the market and state as core forces at work in mitigation and disaster recovery, overlooking the critical role of social capital.

Separate and Unequal: Post-Tsunami Aid Distribution in Southern India published in Social Science Quarterly

Objective. Disasters are a regular occurrence throughout the world. Whether all eligible victims of a catastrophe receive similar amounts of aid from governments and donors following a crisis remains an open question. Methods. I use data on 62 similarly damaged inland fishing villages in five districts of southeastern India following the 2004 Indian Ocean tsunami to measure the causal influence of caste, location, wealth, and bridging social capital on the receipt of aid. Using two-limit tobit and negative binomial models, I investigate the factors that influence the time spent in refugee camps, receipt of an initial aid packet, and receipt of 4,000 rupees. Results. Caste, family status, and wealth proved to be powerful predictors of beneficiaries and nonbeneficiaries during the aid process. Conclusion. While many scholars and practitioners envision aid distribution as primarily a technocratic process, this research shows that discrimination and financial resources strongly affect the flow of disaster aid.

The Power of People: Social Capital’s Role in Recovery from the 1995 Kobe Earthquake forthcoming in Natural Hazards

Despite the regularity of disasters, social science has only begun to generate replicable knowledge about the factors which facilitate post-crisis recovery. Building on the broad variation in recovery rates within disaster-affected cities, I investigate the ability of Kobe’s nine wards to repopulate after the 1995 Kobe earthquake in Japan. This article uses case studies of neighborhoods in Kobe alongside new time-series, cross-sectional data set to test five variables thought to influence recovery along with the relatively untested factor of social capital. Controlling for damage, population density, economic conditions, inequality and other variables thought important in past research, social capital proves to be the strongest and most robust predictor of population recovery after catastrophe. This has important implications both for public policies focused on reconstruction and for social science more generally.

Fixing Recovery: Social Capital in Post-Crisis Resilience in The Journal of Homeland Security June 2010

Disasters remain among the most critical events which impact residents and their neighborhoods; they have killed far more individuals than high salience issues such as terrorism. Unfortunately, disaster recovery programs run by the United States and foreign governments have not been updated to reflect a new understanding of the essential nature of social capital and networks. I call for a re-orientation of disaster preparedness and recovery programs at all levels away from the standard fixes focused on physical infrastructure towards ones targeting social infrastructure. The reservoirs of social capital and the trust (or lack thereof) between citizens in disaster-affected communities can help us understand why some neighborhoods in cities like Kobe, Japan, Tamil Nadu, India, and New Orleans, Louisiana displayed resilience while others stagnated. Social capital – the engine for recovery – can be deepened both through local initiatives and interventions from foreign agencies.

Aldrich Presentation on 25 March 2010 BUILDING RESILIENCE conference

Despite the clear and present danger from disasters, social scientists have yet to provide strong, quantitative evidence about which factors influence the pace of recovery. Using data from four megadisasters over the 20th and 21st century – the 1923 Tokyo earthquake, the 1995 Kobe earthquake, the 2004 Indian Ocean tsunami, and the 2005 Hurricane Katrina – Aldrich argues that social infrastructure is the critical factor in recovery.

The Crucial Role of Civil Society in Disaster Recovery and Japan’s Preparedness for Emergencies in Japan aktuell 3/28

This article is concerned with the empirical puzzle of why certain neighborhoods and localities recover more quickly than others following disasters. It illuminates four mainstream theories of rehabilitation and resilience, and then investigates a neglected factor, namely the role of social networks and civil society. Initial analyses underscore the important role of trust and connectivity among local residents in the process of rebuilding. After examining the role of civil society in Japan’s preparedness for emergencies, the article concludes with some policy recommendations for governments and nongovernmental actors involved in disaster relief.

This paper, entitled the The Need for Comparative Research, was prepared for a conference at the Jamsetji Tata Centre for Disaster Management in February 2008, and sets out some initial ideas which have motivated this project.

Some of Aldrich’s newspaper articles are linked here.

I expect I’ll be commenting further on his work.