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Saturday, February 27, 2010

Civilization and self-restraint

Today's post is one that I have been intermittently planning for years. It goes to the heart of the issues around which most of what I have to say here revolves: issues of civic responsibility, personal freedom, rationality on the one hand and emotion on the other. It deals, I think, with the truly critical issue of the last 45 years, the issue that will decide what kind of United States, and what kind of world, our children and grandchildren are going to live in. It will also, I suspect, meet with varying reactions even from long-standing readers. But the time, in any event, has come to attempt it. I could try to define the issue in a few simple sentences, but I'm not sure they would be the most effective way to convey what I am getting at. Instead, I shall begin by contrasting the America of 45 years ago--the deceptive peak, if you will, of a particular form of American civilization that I described at the end of American Tragedy.--with the America of today. Here are two sets of facts about the America of 1965--social, political, and economic.

1. Premarital sex and homosexual sex were culturally taboo, banned by law, and, for various reasons, quite difficult to engage in. Birth control was only just becoming generally available, especially non-intrusive birth control. Divorce was much less common than it is today and much harder to obtain. Language and depictions of the human body in movies and published art, to say nothing of television, were both severely restricted. Black Americans were in the process of achieving genuine legal equality, which they had secured in part by arguing, in word and deed, that they desired only to live lives comparable to those of white Americans. School prayer had recently been declared unconstitutional by the Supreme Court, and the influence of religion in American life was probably at an all-time low. Women, though increasingly well educated, were generally confined (there were always a few determined exceptions) to various kinds of low-paying work, and had essentially no recourse against sexual harassment.

2. The election of 1964 had just registered an overwhelming verdict in favor of the role of the federal government enshrined by the New Deal and increased still further in postwar America. Lyndon Johnson had won 44 states and over 60% of the vote over Barry Goldwater, sweeping huge Democratic majorities into office. True, in a fateful sign of things to come, the 91% marginal tax rates that dated from the 1930s had just been substantially cut, but income and corporate taxes were still at historically very high levels, while the payroll tax (and social security benefits) remained very low. But Johnson was about to use the election victory to complete the civil rights revolution by passing the Voting Rights Act, and to pas Medicare over Republican cries of socialized medicine and the end of American freedom. The country had run budget deficits in most years since the war but they were very low by present-day standards. Public education was probably never better, overall, or cheaper, than it was in the mid-1960s, especially at top state universities. Good private universities cost about 1/3 what they do now, even allowing for inflation. Meanwhile, the government still maintained a large, conscript-fed peacetime Army--one that was about to be radically expanded to fight the Vietnam War.

3. The unemployment rate was 4.5% and inflation for the last year was about 1%. The stock market tended to advance and decline along with the rest of the economy. It was tightly regulated--margin was limited to 50%. The Glass-Steagall Act separated commercial and investment banking. The antitrust laws were still vigorously enforced. Financial careers were not glamorous and were not the most profitable. The United States was still fundamentally a country of engineers, rather than of lawyers and MBAs.

Let us now compare each of these situations to what we face today.

1. Sexual mores are, of course, much looser in practice all over the country, while far more controversial. Abortion and homosexuality are now both legal, although neither is genuinely accepted by a significant minority of Americans. Religion has vastly increased its political role in American life, largely thanks to sexually charged issues of abortion and homosexuality. Women have achieved at least equality in many sectors of the work force. Black Americans occupy leading positions in many areas of American life. People are much freer to express their feelings and to assess the effects of their upbringing upon their emotional life. Then as now, millions rely upon drugs to get through life, although they use less nicotine, somewhat less alcohol (particularly on the coasts), far more cocaine, and far more new legal drugs that had not yet been invented. Freedom of expression in mainstream entertainment is far great than it was, although it is already on a down slope again (adults in movies and on TV are now customarily shown having sex with their underwear on.) Rates of divorce have skyrocketed, although they are stabilizing, and the illegitimacy rates which were beginning to cause concern among minority populations in the mid-1960s now characterize the whole population. At a personal level, America is a much freer nation than it was then, and on the whole I certainly believe that that is a good thing.

2. The role of federal and state governments in American life remains very large but is also far more controversial. Governments are spending far more on health care and on benefits for the elderly, both paid for by regressive taxes that barely existed forty years ago. They are spending much less on infrastructure and education (especially since states and localities are crippled by a recession that was quite unimaginable in 1965), and much, much more on prisons. (Many states, including the largest, California, now spend far more on prisons than on higher education.) The federal government is running a huge deficit. Taxes on the higest brackets are less than half what they were in 1965, while the payroll tax is more than twice as high. Income inequality is of course much greater. The percentage of private sector workers in unions has fallen by more than 50%. The education provided by universities today is--believe me--far inferior to what my contemporaries and I encountered in the mid-1960s, even though it costs much, much more.

3. The United States has largely de-industrialized and runs a huge long-term trade deficit. The financial sector occupies far more of our resources and dominates the economy, largely because regulations have been stripped away over the last 30 years. The religion of the market--which was at least as uninspiring in 1965 as religion in general--has become so generally accepted that businessmen and financiers no longer seem to feel the slightest responsibility even to consider the broader implications of any decisions they make--such as the successive decisions by Goldman Sachs about which we learned last week, to both help the Greek government hide its debt, and then, more recently, to start selling bets on a possible Greek government default. Despite the worst financial collapse since 1929 we have been unable to pass any meaningful reforms.

The changes reflected in paragraph one have been, in my opinion, beneficial; the changes in paragraphs 2 and 3 have been catastrophic. The question that I have been intermittently asking myself for years is whether it would have been possible to have adopted new personal mores without at the same time destroying the political and economic achievements of earlier generations. It is a question that could be the subject of many long books, ones which I do not at the moment intend to write myself, and which involves very profound questions of human nature which we generally prefer to avoid. At bottom the question boils down to the extent of the connection between self-restraint and civilization.

I don't think any reasonable person can deny that there is some such relationship. Obedience to law is not natural, but must be learned. (The United States military is now engaged in honor-based societies like Iraq and Afghanistan where established legal procedures have never supplanted vendettas and extreme family discipline as a means of settling disputes.) Modern economies emerged along with new rules of commercial behavior, and gradually, as the 19th century gave way to the 20th, society became convinced that economic behavior had to be tightly regulated to prevent abuses of economic power. And political liberty, of course, was achieved only in the course of struggles lasting centuries. Another important aspect of the development of modern life was the restriction of religion to the private sphere.

Today many of us recognize many of the restraints of earlier times as unnecessary or even cruel. Society, we have found, can function more than adequately in a much freer sexual climate. Although many Americans still resist this conclusion, homosexuality obviously is not a threat to the foundations of our civilization. We have also discovered that the industrialized world can not only survive, but prosper, without large standing armies. The power of parents over their offspring has gradually ebbed over the last few centuries, and that is undoubtedly a good thing.

Yet the other restraints which civilization had built up more recently, including restraints upon economic activity and political power, seem to me to be at least as necessary as they ever were--and they have been overthrown at least as thoroughly. Few of our politicians seem to recognize any obligation beyond doing what they find necessary to rally their "base" and secure re-election. So far President Obama's attempts to get the whole nation to focus on very real problems have not been very effective. The nation, both nationally and locally, has become ungovernable. Our higher educational system has become so anarchic as to make itself largely irrelevant to society's real needs.

Now that I have formally broached this topic, I'm sure I'll be returning to it frequently in months and years ahead. Looking around the world, I do think that it is possible to combine greater personal freedom with civic and economic discipline. That in large measure is what the Western Europeans have managed to do, at least so far. Why the United States, which did so much to create the modern interventionist state, has gone so violently in the other direction in the last 40 years is a complex question, but the European example suggests that it need not have done so. In any case, for the moment we must face the facts: we have loosened all these restraints drastically, and the general relaxation has probably been part of a single process. We need more civic and economic discipline, and it is not yet clear where it will come from. It is indeed ironic, in fact, that conservative Republicans, who are so anxious to restore some of the old restrictions upon personal behavior, have so totally embraced the loosening of economic restraints and the weakening of political institutions. The Democratic Party could do a lot worse than to explicitly endorse an opposite combination of freedom in the private sphere, and more cooperation and regulation in the public and economic ones.

Saturday, February 20, 2010

The Next Round on Health Care

Politics is a never-ending war by peaceful means, to paraphrase Clausewitz, and thus, like war and sporting events, induces violent emotional swings in its participants. A single battle, goal, or touchdown can plunge participants and viewers from the heights of joy to the depths of despair, and in each of these spheres the most effective players are the ones who can keep their heads when all around are losing theirs and focus upon long-term trends rather than short-term fluctuations. (One of the more important points in my post last week, I think, was how difficult it has become for major players in today's economy to do anything but give in to short-term emotional binges, even when they know they are doomed to end badly.) Three weeks ago the Massachusetts senatorial election dealt a devastating blow to Democratic morale and convinced Republicans that they are on the way to a return to power. In the last few days, however, there are signs that the White House may have regrouped, drawn appropriate conclusions, and prepared a dramatic move forward of its own.

The White House has indicated that the President will present a new health care bill of its own before the projected bipartisan summit with Republican leaders--a summit which they may well decide to boycott. But they have coupled that announcement with leaks that the new bill may proceed through the reconciliation process, that is, that it may circumvent the filibuster rule in the Senate and pass by a simple majority. That, it seems to me, will surely be necessary now to get any bill at all. But 8 Democratic Senators have now gone further, and suggested that this bill include the public option--the opportunity for citizens to buy into medicare--that the House passed but the Senate never even voted on, because it could not command 60 votes. Returning to my war metaphor, this amounts to escalation--and with the Republicans obviously determined, as Jim DeMint put it almost a year ago, to "break" the President by defeating any health care plan, that is entirely appropriate. More to the point, it means that the health care reform bill might actually accomplish something, and that it might squarely put the issue of public vs. private interests back on the table. And there is no question that where health care is concerned, public and private interests are in conflict.

As most readers probably know already, health care costs are increasing again, dramatically. This, given our system, is inevitable. With millions more people out of work--most of them relatively young and healthy--millions fewer are receiving employer-based health care. That means the insurance companies are taking in less, and to keep their balance sheets healthy, they have to charge continuing customers more. That in turn will encourage more healthy people to do without health insurance, making it more expensive for those who keep it. This is the "death spiral" that Paul Krugman wrote about on Friday. In a European country, as Krugman has pointed out, health care for all has the kind of first claim on the national budget that social security and medicare have here, and an economic downturn would not make it more expensive, except insofar as it makes more people sick.

If the Democrats and the Administration really want to take a more populist tack, they might point out that the "health care crisis" is not a crisis at all for either the insurance companies or the drug companies. Because they can fix their prices and, in the case of the drug companies, do so well off of medicare, they are not suffering significantly, if at all, from the economic crisis (although they have laid off personnel.) Here are some findings from a recent government of the situation in the insurance industry: "Profits for the 10 largest insurance companies rose 250 percent from 2000 to 2009, 10 times faster than inflation. . . .The top five for profit insurers -- WellPoint, UnitedHealth Group Inc., Cigna Corp., Aetna Inc. ad Humana Inc. took combined profits of $12.2 billion, up 56 percent from 2008, the report found. The chief executives of the top five insurers received $24 million on average in 2008, the report said." (For a full story on the report, go here.

The drug companies are rebounding handsomely as well. In the last ten years they have managed both to increase sales and to substantially increase the percentage of their revenue distributed as profits--and several have shown an extroardinary rebound during 2009. Merck in 2009 had sales of $27.4 billion and profits of $12.9 billion--a significant decrease in sales from $40 billion in 2000, but an increase in profits from only $8 billion in that year. Pfizer, which spends much more money on marketing than Merck, has increased its sales by about 60% since 2000, to $50 billion, and more than doubled its profits, to $8 billion. Bristol Myers sales are about the same now as in 2000, at $18 billion, but profits have more than doubled, to $10.6 billion. (All the recent figures are from earnings reports that I found summarized on the web.) The chief executives of both the insurance companies and the drug companies are of course drawing salaries and bonuses in the tens of millions. These are all expenses which the citizenry of Canada, Britain, France and Germany do not have to pay, and that's a big reason why they pay so much less for health care than we do. And as the President has repeated again and again, we can't afford this any longer.

Now this brief look at the health care situation, like the somewhat longer look I took last week at the big banks, suggests two things. First of all, both our financial system and our health care system are severely dysfunctional for the average American and society as a whole. Secondly, both dispose of enormous resources and owe their profits, indeed, to continuous, massive, highly effective lobbying in Washington. (Susan Bayh, wife of Evan Bayh, the "centrist" Democrat who just decided to retire from the Senate and salt away the $13 million in his campaign chest, is on the board of Wellpoint Insurance, by the way.) They are not going to surrender their privileges and their enormous share of national income without a fight. And in the hyperpartisan political atmosphere of crisis in which we live today, at least one party--in the case of health care, the Republicans--was very likely to wind up in their corner. The Democrats, up until now, have been trying to pass a major reform without upsetting the insurance and drug industries too much. It didn't work.

Barack Obama belongs to Generation X, a Nomad generation. Previous Nomad generations have only come into the White House after the end of a great national crisis--Washington and Adams from 1789 to 1800, Grant and his Gilded Age successors beginning in 1869, and Truman and Eisenhower from 1946 to 1960. With the major exception of John Adams, these men successfully pursued the kind of bipartisan, consensus government that Obama as sought himself. They could do so because the great, violent political struggles of their era were over, and had hammered out a new consensus--particularly in the cases of Eisenhower and Truman. We are at least a decade and probably more from reaching that point. Meanwhile we need a leader who understands that getting us pointed in the right direction, by any means necessary, is more important than bipartisan consensus--and that he must indeed choose between the two.

Saturday, February 13, 2010

The Triumph of Milton Friedman

The truly influential lobbies and movements in American politics become bipartisan. They understand the American people's nasty habit of taking their frustrations out on the party in power, and take out insurance accordingly. Neither AIPAC, nor the NRA, nor the AARP in its glory years (which have passed along with most of the GI generation), needs to worry too much about election results: they are far too deeply entrenched in both parties to be set back by the whims of the electorate. The same is true, we can now see, of drug companies and health insurance giants, who successfully turned the Democratic reform proposals into such a joke, in many ways, that the people lost interest in them. (The New York Times today reports that Billy Tauzin, the former Democratic-turned-Republican Congressman from Louisiana who became the drug industry's leading lobbyist, is in trouble with his employers because he had assumed the bill would pass, and struck a deal with the White House which they now regret.)

Over the last couple of weeks I read a fascinating book, How Markets Fail, by John Cassidy, a British-born journalist who writes frequently on financial issues of The New Yorker. Cassidy has the kind of flexible intellect that a career in journalism (unlike one in the academy) can still produce, and his book does many things. Not only does it trace the development of economic thought over the whole of the twentieth century, with particular emphasis on the irrational faith in markets that has come to dominate the profession (and loving attention to the hardheaded individuals who have repeatedly exposed the fallacies behind that faith), but he also has written a concise history of the changes in our financial structure over the last thirty years or so and of the current financial crisis. And by the time I reached the end of the book, I understood a great deal about the Obama Administration's very limited response to that crisis, and about the depth of the crisis we now face and exactly how hard it may be to get out of it. I cannot remotely do justice to Cassidy's book in a single post but I will focus on the most important things it taught me.

Like everything I read about economics, the book transported me back almost 45 years, to my freshman year at college, where Economics 1 was my best course. (My section man tried hard to talk me into switching my major from history, but fortunately--as we shall see--I didn't.) Unlike most such courses today, from what I can make out, the one--taught by a committee of leading Harvard economists, including Otto Eckstein and John Kenneth Galbraith--combined basic theory--we looked at lots of graphs--with a good deal of reading about how the world actually worked. In the first half of the course we focused on microeconomics, learning about rational behavior among firms and consumers--but even then, I could see, and indeed was encouraged to see, that the microeconomic models seldom if ever described real behavior. Firms obviously spent much of their time, energy and money trying to subvert the competitive market to create an artificial advantage, most notably through advertising, which might induce consumers to pay more for their product than for another similar one. Price fixing among oligopolies remained endemic--and so on. In our last meeting, our section man warned us that a lot of work remained to be done in microeconomics.

He and his senior colleagues waxed far more enthusiastic about contemporary macroeconomics. Keynesians all, they believed they had solved the great problem of their youth, cyclical depressions. Running small deficits (certainly by later standards!) to stimulate the economy had now become economic orthodoxy, and the country was in the middle of a boom that eventually lasted (with the help, sadly, of the Vietnam War) for eight years. We spent time on monetary policy, and the Harvard department included at least one believer in the idea that interest rates alone could satisfactorily regulate the economy, but focused more on fiscal policy. Government spending, we learned, was good for the economy, if only because the government, unlike private individuals, spent everything it received, increasing the stimulating effect on the economy.

During one class we were introduced to the work of a University of Chicago eccentric named Milton Friedman--one of the rare birds who had resisted Keynesian orthodoxy and believed in very limited government and free markets. "It's good for you to be exposed to this," said the section man--but Friedman, as it turned out, was destined to be far more influential over my lifetime than any of the other economic thinkers we studied that year, including Keynes. And his influence, I now understand, also lies behind the Obama Administration's response to the financial crisis.

Let us not get too far ahead of ourselves too quickly. Several things brought down the Keynesian consensus. One was another pillar of contemporary orthodoxy, free trade. By 1965-6 German competition was already putting some pressure on Detroit, and during the next decade Japanese competition began to make tremendous inroads. The combined power of big industries and big unions was both keeping wages and prices high in the US and weakening us against foreign competition. The Vietnam War put a big hit into the value of the dollar, making these problems still worse. The Democratic coalition broke up over civil rights and foreign policy. The patient Milton Friedman and his acolytes were ready to jump into the breach. Government, they argued, was the problem, not the solution. Left to its own devices (and with careful management of the money supply by the Federal Reserve Board), the economy would thrive. Yes, we would always suffer from a "natural" level of unemployment--a delightfully flexible concept, since it could be adjusted to match whatever unemployment happened to be--but the market would inevitably create the best economy that we could have.

Now it is one of Cassidy's great insights to focus on Friedman's analysis of the Great Depression, which he obviously had to work into his model somehow to retain any credibility at all. Something, obviously, had gone horribly wrong from 1929 through 1933, and Friedman had to identify it. He decided the that the crisis had gotten so bad, essentially, for just one reason: the Federal Reserve Board had responded to the initial stock market crash by tightening credit instead of expanding it. Had they behaved properly, he argued we would have had no depression at all. That allowed him to dispense with the kinds of explanations that had been popular at the time--particularly the idea that the Depression began and continued because too few people had enough money to spend, and that only a redistribution of income, brought about largely by government policies, could get us out of it.

Friedman also believed in small government and balanced budgets--but when Ronald Reagan rode Friedman's ideas into power in 1981, those aspects of his ideas went out the window. Paul Volcker, the Fed chairman, decided to wring inflation out of the economy by raising interest rates to unprecedented levels. The result was the worst downturn since the 1930s, and the beginning of the deindustrialization of America that has only accelerated ever since--but inflation was brought under control. Ironically, Reagan's tax cuts meanwhile supplied the biggest Keynesian stimulus to the economy since the Second World War. It was not until sometime in Reagan's second term that unemployment had fallen to 1980 levels, but the monetarist orthodoxy was firmly established. Few people also noticed the fiscal consequences of Reagan's policies: that an enormous tax burden had been shifted from higher income tax brackets to average American workers, whose payroll taxes soared and began funding a large portion of the federal budget. The idea of free markets in general was also firmly established, and the undoing of New Deal restrictions on financial markets began.

And here we come to the crux of the matter. Since Reagan, no Administration--not Bush I or Bush II, Clinton, or Obama--has really questioned the monetarist orthodoxy. The economics profession has decided that markets always work, and the economists who actually manage our economy have decided that their role is to make cheap credit flow. This was particularly true under Alan Greenspan, the friend and disciple of Ayn Rand, another intellectual who in the 1960s ranked as a right-wing nut, but whose great days of influence lay before her. What is particularly devastating about these economic principles, both inside and outside the academy, is that they militate against any serious look at what is actually happening in the American economic world. There is no need to ask how many farms are being lost, how many plants closed, and how many semi-skilled service jobs are being eliminated or outsourced to the Indian subcontinent, if one simply assumes that the market is always right and any outcome must lead to greater economic progress. Throw in the deregulation of the banking industry and a gigantic accumulation of debt, and the near-collapse of our economic system in 2008 follows.

I am not spending much time on the nuts and bolts of Cassidy's argument, but one point was so striking that I have to mention it. It concerns the kind of herd behavior which, rather than rational thought, actually guides men and women in the marketplace. A number of well-placed traders, analysts and fund managers did realize during the dot-com bubble and then later during the housing bubble that things had gotten hand and that a crash was inevitable, but they found it impossible to act on their beliefs because to do so would cut their short-term gains and very possibly cost them their jobs. That was another illustration of Keynes's definition of a sound banker--not a banker who is never ruined, but one who is ruined along with all the others.

Now as I and others have been remarking for a year now, none of the Obama economic team, led by Larry Summers and Tim Geithner, seriously questions any of the orthodoxy of the last twenty years or the changes--such as the creation of the mega-banks--that they have brought about. Cassidy even quotes Summers (the nephew of neo-Keynesian giant Paul Samuelson) to the effect that he had learned to appreciate the wisdom of Milton Friedman. But the key man in all this, in more ways that one, is Ben Bernanke, who has just been nominated and confirmed for another term as Chairman of the Federal Reserve Board. The press routinely describes Bernanke as a specialist in the Great Depression, which in a sense is true--much of his academic work, which I have now dipped into a bit myself, does indeed deal with the Depression. It does not, however, deal with how we actually got out of it, through New Deal public works programs and, ultimately, the mobilization for the Second World War. Instead, Bernanke's work takes off from Milton Friedman's idea that the depression was caused, deepened and prolonged by failures in the credit markets to which the Fed did not appropriately respond.

A particularly striking example of Bernanke's approach is his article, "Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression,"
The American Economic Review, Vol. 73, No. 3 (Jun., 1983), pp. 257-276, which explicitly begins with Friedman's idea that a drop in the money supply caused the depression and tries to supplement it with other closely related explanations. As an orthodox monetarist, Bernanke apparently believed (and could well believe today) that a natural process should inevitably match available capital to the most productive uses available, therefore raising the economy to the highest possible level of activity. He suggests in this article that this was not happening during 1930-33 because lenders could not tell good borrowers from bad ones, and credit markets therefore froze up. Credit became either more expensive or altogether unavailable. Bernanke did give the federal government credit for aggressive steps to restore the health of the financial system after 1933, but he said nothing, in this article at least, about other New Deal measures, including the curtailment of agricultural supply to raise prices or the introduction of huge public works programs. Fix the financial markets, the article implied, and everything else will take care of itself.

Knowing how Bernanke (and, pretty clearly, Summers and Geithner as well) think explains a very great deal about Administration rhetoric. Summers declared months ago that the recession was over. The President repeatedly brags of having avoided another Great Depression--because the collapse of major financial institutions has been avoided and the stock market has begun rising again. The President also focuses on the need to loosen credit markets, ignoring the comments of various business owners to the effect that what they really need is not loans, but customers with money to spend. This is not to say that many Bush and Obama Administration measures were not indeed absolutely necessary to prevent something worse--they probably were, although they have also left in place the megabanks that, as Cassidy clearly shows, got us into this mess and very likely will do so again. The problem is that the Administration is betting both its own future and the economic health of the American people on the idea that Milton Friedman and his disciples were right: that the only measure necessary to avoid the Great Depression was the proper handling of the money supply and credit markets. If Friedman's ideas fail this new real-world test, the economic and political consequences will be incalculable.

The Administration has, of course, bowed to Keynes by passing its stimulus package of approximately $800 billion in its first months in office. That package, however, turns out to have been a defensive rather than offensive measure: it saved tens of thousands (at least) jobs in state and local government, but it has not put significant numbers of unemployed back to work. The deficit has increased to about $1.2 trillion annually at the moment--an increase of a trillion dollars in just a few years. In a nation with a GDP of about $14 trillion, that is a great deal of money--but it is an order of magnitude less than the $10 trillion which, the International Monetary Fund estimates, has been pledged by various governments and central banks to back up the worthless assets of financial institutions. Far more money, in short, has been spent to bail out the irresponsible financial institutions who got us into this mess (and Cassidy shows just how), than to put ordinary men and women back to work--even though the evidence that those institutions can actually create a healthy economy is dubious at best. Very few economists remain outside the monetarist consensus, even though a few of those that do, including Paul Krugman, Joseph Stiglitz and James Galbraith, remain highly visible. None of them has been appointed to a major policy position.

I admit that I was shocked, reading Cassidy, to see how far economics in the academy had departed from reality over the last few decades. I should not have been, since developments in my own discipline are just as bad, but I was. The collapse of history will also have serious political effects, but the people of the world will pay a much higher price for the collapse of economic thought if Friedman, as I believe, turns out to have been fundamentally wrong. We really have no idea how we shall ever get US unemployment down to even five or six per cent--levels which were regarded as a failure when I started Economics 1. We are, once again, gambling, for the time being, that the system will take care of itself. If it does, it will be the first time--and we cannot predict what political developments will have taken place before our economic elite is forced to face reality.

Friday, February 05, 2010

A Different Kind of Christian

A couple of months ago I heard a Terri Gross interview with a writer named Jeff Sharlet, who had just published a book entitled The Family: The Secret Fundamentalism at the Heart of American Power. The Family, sometimes called The Fellowship, is an elite group of fundamentalist Christians founded in the 1930s in Seattle by Abram Vereide, and headed for several decades by Doug Coe, now thought to be in semi-retirement. Sharlet’s book is long and difficult, his writing florid and often opaque. He spends several chapters on various founders of charismatic American fundamentalism such as Jonathan Edwards (whom Strauss and Howe described as Prophet of the Awakening Generation) and Charles Finney, from the Transcendental Generation that gave us the Civil War. He also, in my opinion, exaggerates the influence that Coe and others have had on various bloody episodes in American foreign policy, such as our support for the bloody Indonesian purges after the coup of 1965 and later on the island of East Timor. (While Doug Coe may have encouraged President Suharto on his path, the cooperation of the CIA in the first case and the encouragement of Henry Kissinger in the second were far more important.) But the book remains an extremely important eye-opener to those seeking to understand contemporary political Christianity from the outside, and to grasp exactly why it has emerged as such a formidable political force.

I should perhaps interrupt my narrative with a disclaimer. Believing as I do that religion should be private manner, I always hesitate to criticize religious beliefs in print. Like many other devout agnostics tending towards atheism, I instinctively give religious people the benefit of the doubt as regards their motivation, and certainly do not begrudge them what comfort their religion offers them. I also see Christianity as one of the foundations of western civilization as it has evolved (although I have no truck with the patently false idea that it was a primary inspiration for the Declaration of Independence or the Constitution, an idea which Sharlet himself does not completely reject.) What this book showed me is that my view of Christianity is too narrow. The kind of fundamentalism preached by Doug Coe has become politically powerful precisely because it is so free of doctrinal subtlety and so focused upon this world rather than the next. It is—avowedly—a political strategy patterned after the great revolutionary movements of our time. While its divine hero is Jesus, Stalin, Mao and Hitler stand high in its Pantheon of earthly exemplars because of their “commitment” and clever political strategy. This kind of Christianity has nothing to do with humility, with rendering unto Caesar that which is Caesar’s, or which enduring the pain of this world in hopes of joy in the next. It is focused above all—like Orwell’s Party in 1984—on earthly power, and it has achieved a great deal of that.

Sharlet—who seems, like myself, to be an unreligious product of a Jewish-Christian marriage—did his original research by infiltrating the Family, specifically Ivanwald, a training camp for young men in Arlington, Virginia. (Another Family institution is C Street, the Capitol Hill townhouse that is home to various conservative Congressmen.) There he was introduced to a doctrine often summarized in half an equation: “Jesus plus nothing.” (The book spends a lot of time trying to figure out exactly what that sum is supposed to equal.) The young acolytes at Ivanwald are encouraged to engage Jesus directly, to become an extension of his will. Coe and others have delivered the same message to many prominent businessmen, to dozens of legislators on Capitol Hill (from Strom Thurmond, Frank Carlson of Kansas, Homer Capehart of Indiana, Charles Colson of Watergate fame, and other notables of my youth to Sam Brownback of Kansas, Mike Stupak of Pennsylvania, and many others today. Hillary Clinton, though not actually a member, is a kind of comet passing in and out of the Family’s orbit, and cooperated with it on one or two pieces of legislation. Just two days ago, however, at The Family's National Prayer Breakfast, both she and Barack Obama attacked Family-sponsored legislaton in Uganda that would make homosexuality a crime.)

The Family, following a Communist model, works through cells—prayer cells in its case—one of which approached Gerald Ford in 1975 to urge him to forgive the sins of Richard Nixon. (I do not doubt that this story is true, but once again I question whether it had the critical role in Nixon's pardon that Sharlet seems to give it.) It is a true fellowship, a cadre of men working to recreate the world in their own image—which they have decided, without very little scriptural foundation so far as I can see, is Jesus’s image as well. It prefers to work in secret, and no less a figure than Ronald Reagan, during his Presidency, remarked that that was why it had been so influential. (Ed Meese is another important acolyte.)

What is equally striking is what Sharlet did not find in his sojourn among these particular faithful. Although they did some daily Bible reading, it was neither thorough nor particularly penetrating. They liked sound bites, not subtlety. Nor is the family directly interested in organized Churches or in direct appeals to millions of Americans. Its power certainly has advanced in parallel with that of various megachurhes and organizations like James Dobson’s Focus on the Family, but its gaze fixes intently upon the rich and powerful. The brightest light that burst upon me as I read this book solved a mystery that had profoundly shocked me when I first learned of it a few years ago: how was it possible that George W. Bush had never regularly attended a church, not even when he was in the White House? The answer, evidently, is that he was recruited in the 1980s by a similar movement (though not, as far as Sharlet ever found out, by the Family itself), which persuaded him that a personal relationship with Jesus could make all his earthly works serve the divine order. (In a rare lapse, my favorite TV show, Jeopardy, recently repeated the myth that Billy Graham converted Bush to evangelical Christianity. In fact Bush was converted by a more eccentric figure, Arthur Blessit, who began his career in the 1960s as what was then called a "Jesus freak.") And Bush, like so many others, henceforward felt no need for data, analysis, or consensus when reaching decisions. Revelation now governed his life and his thought, elevating him far above all the professors and fellow students he could never equal at Yale. The war in Iraq was one result.

The Family’s theology, therefore, flatters the ego of various political leaders around the world—and rare is the leader whose ego suffers from an excess of humility in the first place. Because it is concerned above all with power, the Family is ecumenical, and has included Protestants, Catholics, Jews and even Muslims in its prayer cells. (Sharlet has very little to say about Israel or Zionism, but it is not surprising that political Evangelicalism has seized upon the book of Revelation as a reason to embrace Zionism as a necessary step towards the end times and Christ’s return to earth. The Family is still centered in the United States, where the Zionist lobby is a formidable ally or opponent. The same logic probably has a lot to do with its numerous alliances with big business and its “free market” theology.)

The rise of faith-based politics represents a new stage both in the development of American politics and of western civilization itself. Few Americans—and least of all fundamentalist Americans—realize that the United States came into being at one of the least religious moments in modern history. Skepticism and deism were rampant all over the North Atlantic world in the late eighteenth century, the age of Enlightenment. My own reverence for the Constitution goes to its attempt to create a lasting, free government, based not only on the principles of the British Constitution as it had evolved over the centuries, but also on their observations of human frailty and the difficulty of restraining authority, especially legitimate authority. It was no accident that the word “god” appeared nowhere in the Constitution’s text. Religion has played an important role in American politics in various times and places since the founding, of course. Both sides of the slavery controversy cited it (leading to the formation of the Southern Baptist and Southern Methodist denominations), and Protestants gave us the Prohibition movement and all its consequences. Catholicism both helped unify big-city voters and alarm many Protestants, Jews and secularists who thought Catholics wanted to exploit governmental power to further their own religious agenda (which, before Vatican II at least, was indeed sometimes the case.) But the extent to which a particular kind of fundamentalism dedicated to free markets, homophobia, opposition to birth control and a forthright foreign policy has come to dominate one of our two political parties is quite unprecedented. Should it return to power it will, I think, definitely alienate the more secular parts of the world—including most of Europe and East Asia—for a long time to come. It will also make it impossible rationally to address our domestic problems, as we managed to do 80 years ago. I am glad to have been born in the midst of another great age of rationalism, and sad that I have spent my adult life watching it fade away.

Monday, February 01, 2010

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