I refer to Dr. Reisman‘s October 21 post at Mises Daily, “In Praise of the Capitalist 1 Percent “. (The good Dr. and I go back a few years, as some of my readers may recall.)

In face of growing economic dislocation and discontent, Dr. Reisman serves up his usual, disappointing fare of portraying powerful (and provident) ‘capitalists’ as the victim of goverment and of the yammering mob. We all just KNOW it’s those with much less wealth who are corrupting government, socializing losses via the banking system and trying to raise barriers of entry that divide markets and limit competition, right?

Sure, the rabble may not well understand how capitalism is SUPPOSED to work, but they’re damned right that it isn’t , in large measure as a result of deliberate gaming and cynical socialization of risk by our so-called ‘capitalists’.

Rather serving up useful insights – or even appropriate outrage – Dr. Reisman is serving up smoke screens to protect those who bear the greatest blame for destroying laissez faire capitalism and Hayek’s essential “market morals”:

Hayek on the grim threat posed by the erosion of “market morals”; Who, exactly, is leading us down the primrose Road to Serfdom?

Those whom Reisman is actually defending are not pure capitalists, acting under laissez faire competition, but largely rapacious and irresponsible CEOs of large, listed companies, who, freed from any control of their erstwhile shareholder ‘owners,’ use government to crush competition, etc.

In effect, Dr. Reisman is defending the very people MOST RESPONSIBLE for DESTROYING laissez faire capitalism. For shame, George!

I left the following comment (edited lightly):

In his capable defense of our non-existent system of laissez faire capitalism, the good Dr. Reisman is curiously blind to the ways in which the ‘capitalists’ he defends are themselves BOTH the primary drivers and beneficiaries of the destruction of capitalism that he rightly lauds.

In Reisman Land, it’s always the powerful and corrupt ‘capitalists’ who are the victims of the relatively powerless hoi polloi.

Even Dr. Reisman’s throwaway references to ill-gotten gains shift focus and responsibility from powerful men ACTING to use government to the black box of government, which acts mysteriously and punishes as much as rewards firms: “government is permitted to depart from a policy of strict laissez-faire and thereby arbitrarily reward or punish firms”.

None is so blind as he who will NOT see. Dr. Reisman appears to be lacking a theory of Human Action, or rather, a theory in which men with money, in order to mitigate the rigors of laissez faire competition or to get easy money from selling goods and services to government, sometimes ACTIVELY coordinate their action with men more directly controlling the levers of government.

Instead, Dr. Reisman only sees the small man – laborers, officer workers, professionals and consumers – avariciously acting to use government to tie down and confiscate the wealth of the rich, noble, and heroic yet powerless capitalist.

Does the good Dr. not see that his capitalists, far from free and responsible men, act through GOVERNMENT-CREATED and licensed “limited liability” entities that are selected precisely because they shield the owners from personal responsibility for the harms their firms cause to others and the public and large? And that the intimate government role, the resulting harms and the lack of personal accountability are the very reasons why the victims then band together to petition government to “do something!”, rather than simply chasing the owners and their servants with pitchforks?

I agree with Dr. Reisman that ongoing events are a morality play writ large. But unfortunately Dr. Reisman (like many people now fed up with rampant crony capitalism who now blame ‘capitalism’ and the 1%) describes it to us in black and white.

Perhaps his mother took his Kodachrome away, but can’t we at least expect some shades of gray?

From a tweet I ran across:

https://twitter.com/#!/LJSearles/status/117494404415107073

From a September 20 blog post at CorpGov.net by James McRitchie (emphasis added):

Recently, ICGN held their annual conference in Paris. …

Another truthsayer at the conference was Robert A.G. Monks, whose L’Appel can be read as quickly as fast food but provides nutritional value of a much higher order. Bob lays out a number of observations. I’ll just list a few:

• Our governance systems are chartered and enforced (if at all) nationally, but an increasing percentage of total assets are held “off shore.” Owners, rather than governments or other entities, appear to be the only viable candidates to enforce corporate governance standards.
• Our framework is based on the assumption that shareowners engage and hold management’s accountable for their performance… but the majority of shareowners are passive because of conflicts of interest, cost and collective action problems.
• This leaves public, union and SRI funds as the only ones left on the field, depriving the market of mainstream experience and insights and it allows shareowner activism to be trivialized and dismissed as representing only special interests.
• Wall Street captured a generation of bright professionals that might have gone to more productive employment and investment banking moved from the periphery to the largest industry in land. Money and power; plain and simple greed.
• Corporations insist that government meet their demands, even if they run counter to the interest of citizens… they exercise unusual veto powers.
• The average investor thinks of “business” as an impersonal entity owned by the very rich and managed by over-paid executives. “But the hundreds of millions of shareholders – most of whom are of modest means – are the real owners, the real entrepreneurs, the real capitalists under our system. They provide the capital…”
• The same corporations act as investment banker and financier to companies whose shares it holds in its fiduciary portfolio. “The fundamental law of trusts is unenforced and is treated as merely a verbal inconvenience.”
• Those in power “prefer the present ownerless situation where corporate executive power is accountable to government which it easily dominates.”

Monks contends what may be at risk is the survival of democratic capitalism and the sustainability of the traditional real return on equity investments of 6% plus or minus per annum in excess of inflation. He calls for mobilizing the voting power of institutional shareowners through:

1. an educational program and
2. a political action program

Of course, talking at ICGN, he hopes members will take on these tasks in a more meaningful way. The US Chamber of Commerce intervenes in scores of court cases, such as the SEC’s proxy access rules. Maybe ICGNcould do the same.

There can be no effective corporate governance, until, unless and to the extent that the major institutions become involved. This will not happen until and unless there is a formal legal policy that shareholder activism in the public interest and is the national policy.

Government policy would help, but as Monks also points out, corporate executives exercise unusual veto powers over governments and can “off shore” assets, jobs, and even corporate identity.

I’d love to see ICGNtake up the task of education and political intervention. However, as someone with little influence with ICGN or its member funds, I’m putting my efforts into organizations and social media mechanisms aimed at the individual investor. Individuals create and guide organizations. Institutions may only push for better, less conflicted corporate governance when individuals push them to do so. Perhaps by pushing from both the top and bottom we can somehow meet with success in the middle. … However, if even 50% of retail shareowners were voting, I would bet they would also start putting pressure on the conflicted institutional investors like the mutual funds and university endowments that Monks is focused on.

Internet tools like CorpGov.net, ProxyDemocracy.org, MoxyVote.com, Shareowners.org and ProxyExchange.org have been built on shoe-string budgets. A small amount of money pumped into them and perhaps some consolidation of efforts might go a long way. Also promising would be a push toward an open system of client-directed voting. See comments to the SEC from VoterMedia.org and from James McRitchie. I hope readers will also support such efforts.

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.