Trump’s New Corporatist Plunder Will Cost U.S.

05 Friday Sep 2025

Posted by Nuetzel in Central Planning, Protectionism, Socialism

Tags

AMD, central planning, CHIPS Act, Corporatism, Don Boudreaux, Donald Trump, Extortion, fascism, Golden Share, Howard Lutnick, Intel, MP Materials, National Security, Nippon Steel, NVIDIA, Protectionism, Public debt, Scott Bessent, Socialism, Tad DeHaven, TikTok, U.S. Steel, Unfunded Obligations, Veronique de Rugy

Since his inauguration, Donald Trump has been busy finding ways for the government to extort payments and ownership shares from private companies. This has taken a variety of forms. Tad DeHaven summarizes the major pieces of booty extracted thus far in the following bullet points (skipping the quote marks here):

June 13: Trump issues an executive order allowing the Nippon Steel-US Steel deal contingent on giving the government a “golden share” that enables the president to exert extensive control over US Steel’s operations.
July 10: The Department of Defense (DoD) unveils a multi-part package with convertible preferred stock, warrants, and loan guarantees, making it the top shareholder of rare earth metals producer MP Materials.
July 23: The White House claims an agreement with Japan to reduce the president’s so-called reciprocal tariff rate on Japanese imports comes with a $550 billion Japanese “investment fund” that Trump will control.
July 31: Trump claims an agreement with South Korea to reduce the so-called reciprocal tariff on South Korean imports comes with a $350 billion South Korean-financed investment in projects “owned and controlled by the United States” that he will select.
August 11: The White House confirms an “unprecedented” deal with Nvidia and AMD that allows them to sell particular chips to China in exchange for 15 percent of the sales.
August 12: In a Fox Business interview, Bessent points to the alleged investments from Japan, South Korea, and the EU “to some extent” and says, “Other countries, in essence, are providing us with a sovereign wealth fund.”
August 22: Fifteen days after calling for Intel CEO Lip-Bu Tan to resign, Trump announces that the US will take a 10 percent equity stake in Intel using the CHIPS Act and DoD funds, becoming Intel’s largest single shareholder.

Each of these “deals” has a slightly different back story, but national security is a common theme. And Trump says they’ll all make America great again. They are touted as a way for American taxpayers to benefit from the investment he claims his policies are attracting to the U.S. However, all of these are ill-advised for several reasons, some of which are common to all. That includes the extortionary nature of each and every one of them.

Short Background On “Deals”

The June 13 deal (Nippon/US Steel), the July 10 deal (MP Materials), and the August 22 deal (Intel) all involve U.S. government equity stakes in private companies. The August 11 deal (NVIDIA/AMD) diverts a stream of private revenue to the government. The July 23 and July 31 deals (Japan and South Korea) both involve “investment funds” that Trump will control to one extent or another.

The August 12 entry adds “expected” EU investments with some qualification, but that bullet quotes Treasury Secretary Bessent referring to these investments as part of a sovereign wealth fund (SWF). Secretary of Commerce Lutnick now denies that an SWF will exist. My objections might be tempered slightly (but only slightly) by an SWF because it would probably need to place constraints on an Administation’s control. That might give you a hint as to why Lutnick is now downplaying the creation of an SWF.

I object to the Nippon/US Steel “deal” in part (and only in part) because it was extortion on its face. There is no valid anti-trust argument against the deal (US Steel is the nation’s third largest steelmaker and is broke), and the national security concerns that were voiced (Japan! for one thing) were completely bogus. Even worse, the “Golden Share” would give the federal government authority, if it chose to exercise it, over a variety of the company’s decisions.

The Intel “deal” is another highly questionable transaction. Intel was to receive $11 billion under the CHIPS Act, a fine example of corporate welfare, as Veronique de Rugy once described the law. However, Intel was to receive its grants only if it stood up four fabrication facilities. But it did not. Now, instead of demanding reimbursement of amounts already paid, the government offered to pay the remainder in exchange for a 9.9% stake in the company. And there is no apparent requirement that Intel meet the original committment! This could turn out a bust!

The MP Materials transaction with the Department of Defense has also been rationalized on national security grounds. This excuse comes a little closer to passing the smell test, but the equity stake is objectionable for other reasons (to follow).

The Nvidia/AMD deal has been justified as compensation for allowing the companies to sell chips to China, which is competing with the U.S. to lead the world in AI development. This is another form of selective treatment, here applied to an export license. The chips in question do not have the same advanced specifications as those sold by the companies in the U.S., but let’s not let that get in the way of a revenue opportunity.

While nothing about TikTok appears on the list above, I fear that a resolution of its operational status in the U.S. presents another opportunity for extortion by the Trump Administration. I’m sure there will be many other cases.

Root Cause: Protectionism

The so-called investment funds described in the timeline above are nearly all the result of trade terms negotiated by a dominant and belligerent trading partner: the U.S. My objections to tariffs are one thing, but here we are extorting investment pledges for reductions in the taxes we’ll impose on our own citizens! Additionally, the belief that these investments will somehow prevent a general withdrawal of foreign investment in the U.S. is misguided. In fact, a smaller trade deficit dictates less foreign investment. The difference here is that the government will wrest ownership control over a greater share of less foreign investment.

Trump the Socialist?

Needless to say, I don’t favor government ownership of the means of production. That’s socialism, but do matters of national security offer a rationale for public ownership? For example, rare earth minerals are important to national defense. Therefore, it’s said that we must ensure a domestic supply of those minerals. I’m not convinced that’s true, but in any case, fat defense contracts should create fat profit opportunities in mining rare earths (enter MP Materials). None of that means public ownership is necessary or a good idea.

All of these federal investments are construed, to one extent or another, as matters of national security, but that argument for market intervention is much too malleable. Must we ensure a domestic supply of semiconductors for national security reasons? And public ownership? Is the same true of steel? Is the same true of our “manufacturing security”? It can go on and on. The next thing you know, someone will argue that grocery stores should be owned by the government in the name of “food security”! Oh, wait…

Trump the Central Planner

Government ownership takes the notion of industrial planning a huge step beyond the usual conception of that term. Ordinarily, when government takes the role of encouraging or discouraging activity in particular industries or technologies, it attempts to select winners and losers. The very idea presumes that the market is not allocating resources in an optimal way, as if the government is in any position to gainsay the decisions of private market participants who have skin in the game. This is a foolhardy position with predictably negative consequences. (For some examples, see the first, second, and fourth articles linked here by Don Boudreaux.) The fundamental flaw in central planning always comes down to the inability of planners to collect, process, and act on the information that the market handles with marvelous efficiency.

When government invests taxpayer funds in exchange for ownership positions in private concerns, the potential levers of control are multiplied. One danger is that political guidance will replace normal market incentives. And as de Rugy points out, the government’s potential role as a regulator creates a clear conflict of interest. In a strong sense, a government ownership stake is worse for private owners than a mere dilution of their interests. It looms as a possible taking, as private owners and managers surrender to creeping government extortion.

Financial Malfeasance

In addition to the objections above, I maintain that these investments represent poor stewardship of public funds. The U.S. public debt currently stands at $37 trillion with an entitlement disaster still to come. In fact, according to one estimate, the federal government’s total unfunded obligations amount to additional $121 trillion! Putting aside the extortion we’re witnessing, any spare dollar should be put toward retiring debt, rather than allowing its upward progression.

As I’ve noted before, paying off a dollar of debt entails a risk-free “return” in the form of interest cost avoidance, let’s say 3.5% for the sake of argument. If instead the dollar is “invested” in risk assets by the government, the interest cost is still incurred. To earn a net return as high as the that foregone from interest avoidance, the government must consistently earn at least 7% on its invested dollar. But of course that return is not risk-free!

A continuing failure to pay down the public debt will ultimately poison the debt market’s assessment of the government’s will to stay within its long-run budget constraint. That would ultimately manifest in an inflation, shrinking the real value of the public debt even as it undermines the living standards of many Americans.

One final thought: Though few MAGA enthusiasts would admit it even if they understood, we’re witnessing a bridging of two ends of the idealogical “horseshoe”. Right-wing populism and protectionism meet the left-wing ideal of central planning and public ownership. There is a name for this particular form of corporatist state, and it is fascism.

Promises and Policies: Grading the Candidates

29 Tuesday Oct 2024

Posted by Nuetzel in Election

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2024 Election, Abortion, Abraham Accords, Barack Obama, Capitalism, Climate Change, Corporatism, DEI, Dobbs, Donald Trump, Elon Musk, fascism, Federal Reserve, First Amendment, Fossil fuels, Housing, Hysteria, Immigration, Inflation, Israel, Joe Biden, Kamala Harris, Medicaid, Medicare, Obamacare, Renewable energy, Second Amendment, Social Security, Supreme Court, Tariffs, Tax Policy, Ukraine, Vladimir Putin

Wow! We’re less than a week from Election Day! I’d hoped to write a few more detailed posts about the platforms and policies of Kamala Harris and Donald Trump, but I was waylaid by Hurricane Milton. It sent us scrambling into prep mode, then we evacuated to the Florida Panhandle. The drive there and back took much longer than expected due to the mass exodus. On our return we found the house was fine, but there was significant damage to an exterior structure and a mess in the yard. We also had to “de-prep” the house, and we’ve been dealing with contractors ever since. It was an exhausting episode, but we feel like we were very lucky.

Now, with less than a week left till the election, I’ll limit myself to a summary of the positions of the candidates in a number of areas, mostly but not all directly related to policy. I assign “grades” in each area and calculate an equally-weighted “GPA” for each candidate. My summaries (and “grades”) are pretty off-the-cuff and not adequate treatments on their own. Some of these areas are more general than others, and I readily admit that a GPA taken from my grade assignments is subject to a bit of double counting. Oh well!

Role of Government: Kamala Harris is a statist through and through. No mystery there. Trump is more selective in his statist tendencies. He’ll often favor government action if it’s politically advantageous. However, in general I think he is amenable to a smaller role for the public than the private sector. Harris: F; Trump: C

Regulation: There is no question that Trump stands for badly needed federal regulatory reform. This spans a wide range of areas, and it extends to a light approach to crypto and AI regulation. Trump plans to appoint Elon Musk as his “Secretary of Cost Cutting”. Harris, on the other hand, seems to favor a continuation of the Biden Administration’s heavy regulatory oversight. This encourages a bloated federal bureaucracy, inflicts high compliance costs on the private sector, stifles innovation, and tends to concentrate industrial power. Harris: F; Trump: A

Border Policy: Trump wants to close the borders (complete the wall) and deport illegal immigrants. Both are easier said than done. Except for criminal elements, the latter will be especially controversial. I’d feel better about Trump’s position if it were accompanied by a commitment to expanded legal immigration. We need more legal immigrants, especially the highly skilled. For her part, Harris would offer mass amnesty to illegals. She’d continue an open border policy, though she claims to want certain limits on illegal border crossings going forward. She also claims to favor more funds for border control. However, it is not clear how well this would translate into thorough vetting of illegal entrants, drug interdiction at the border, or sex trafficking. Harris: D; Trump: B-

Antitrust: Accusations of price gouging by American businesses? Harris! Forty three corporations in the S&P 500 under investigation by the DOJ? The Biden-Harris Administration. This reflects an aggressively hostile and manipulative attitude toward the business community. Trump, meanwhile, might wheedle corporations to act on behalf of certain of his agendas, but he is unlikely to take such a broadly punitive approach. Harris: F; Trump: B-

Foreign Policy: Harris is likely to continue the Biden Administration’s conciliatory approach to dealing with America’s adversaries. The other side of that coin is an often tepid commitment to longtime allies like Israel. Trump believes that dealing from a position of strength is imperative, and he’s willing to challenge enemies with an array of economic and political sticks and carrots. He had success during his first term in office promoting peace in the Middle East. A renewed version of the Abraham Accords that strengthened economic ties across the region would do just that. Ideally, he would like to restore the strength of America’s military, about which Harris has less interest. Trump has also shown a willingness to challenge our NATO partners in order to get them to “pay their fair share” toward the alliance’s shared defense. My major qualification here has to do with the candidates’ positions with respect to supporting Ukraine in its war against Putin’s mad aggression. Harris seems more likely than Trump to continue America’s support for Ukraine. Harris: D+; Trump: B-

Trade: Nations who trade with one another tend to be more prosperous and at peace. Unfortunately, neither candidate has much recognition of these facts. Harris is willing to extend the tariffs enforced during the Biden Administration. Trump, however, is under the delusion that tariffs can solve almost anything that ails the country. Of course, tariffs are a destructive tax on American consumers and businesses. Part of this owes to the direct effects of the tax. Part owes to the pricing power tariffs grant to domestic producers. Tariffs harm incentives for efficiency and the competitiveness of American industry. Retaliatory action by foreign governments is a likely response, which magnifies the harm.

To be fair, Trump believes he can use tariffs as a negotiating tool in nearly all international matters, whether economic, political, or military. This might work to achieve some objectives, but at the cost of damaging relations more broadly and undermining the U.S. economy. Trump is an advocate for not just selective, punitive tariffs, but for broad application of tariffs. Someone needs to disabuse him of the notion that tariffs have great revenue-raising potential. They don’t. And Trump is seemingly unaware of another basic fact: the trade deficit is mirrored by foreign investment in the U.S. economy, which spurs domestic economic growth. Quashing imports via tariffs will also quash that source of growth. I’ll add one other qualification below in the section on taxes, but I’m not sure it has a meaningful chance.

Harris: C-; Trump: F

Inflation: This is a tough one to grade. The President has no direct control over inflation. Harris wants to challenge “price gougers”, which has little to do with actual inflation. I expect both candidates to tolerate large deficits in order to fulfill campaign promises and other objectives. That will put pressure on credit markets and is likely to be inflationary if bond investors are surprised by the higher trajectory of permanent government indebtedness, or if the Federal Reserve monetizes increasing amounts of federal debt. Deficits are likely to be larger under Trump than Harris due in large part to differences in their tax plans, but I’m skeptical that Harris will hold spending in check. Trump’s policies are more growth oriented, and these along with his energy policies and deregulatory actions could limit the inflationary consequences of his spending and tax policies. Higher tariffs will not be of much help in funding larger deficits, and in fact they will be inflationary. Harris: C; Trump: C

Federal Reserve Independence: Harris would undoubtedly like to have the Fed partner closely with the Treasury in funding federal spending. Her appointments to the Board would almost certainly lead to a more activist Fed with a willingness to tolerate rapid monetary expansion and inflation. Trump might be even worse. He has signaled disdain for the Fed’s independence, and he would be happy to lean on the Fed to ease his efforts to fulfill promises to special interests. Harris: D; Trump: F

Entitlement Reform: Social Security and Medicare are both insolvent and benefits will be cut in 2035 without reforms. Harris would certainly be willing to tax the benefits of higher-income retirees more heavily, and she would likely be willing to impose FICA and Medicare taxes on incomes above current earning limits. These are not my favorite reform proposals. Trump has been silent on the issue except to promise no cuts in benefits. Harris: C-; Trump: F

Health Care: Harris is an Obamacare supporter and an advocate of expanded Medicaid. She favors policies that would short-circuit consumer discipline for health care spending and hasten the depletion of the already insolvent Medicare and Medicaid trust funds. These include a $2,000 cap on health care spending for Americans on Medicare, having Medicare cover in-home care, and extending tax credits for health insurance premia. She supports funding to address presumed health care disparities faced by black men. She also promises efforts to discipline or supplant pharmacy benefit managers. Trump, for his part, has said little about his plans for health care policy. He is not a fan of Obamacare and he has promised to take on Big Pharma, whatever that might mean. I fear that both candidates would happily place additional controls of the pricing of pharmaceuticals, a sure prescription for curtailed research and development and higher mortality. Harris: F; Trump: D+

Abortion: The Supreme Court’s 2022 decision in Dobbs v. Jackson essentially relegated abortion law to individual states. That’s consistent with federalist principles, leaving the controversial balancing of abortion vs. the unborn child’s rights up to state voters. Geographic differences of opinion on this question are dramatic, and Dobbs respects those differences. Trump is content with it. Meanwhile, Harris advocates for the establishment of expanded abortion rights at the federal level, including authorization of third trimester abortions by “care providers”. And Harris does not believe there should be religious exemptions for providers who do not wish to offer abortion services. No doubt she also approves of federally funded abortions. Harris: F; Trump: A

Housing: The nation faces an acute housing shortage owing to excessive regulation that limits construction of new or revitalized housing. These excessive rules are primarily imposed at the state and local level. While the federal government has little direct control over many of these decisions, it has abetted this regulatory onslaught in a variety of ways, especially in the environmental arena. Harris is offering stimulus to the demand side through a $25,000 housing tax credit for first-time home buyers. This will succeed in raising the cost of housing. She has also called for heavier subsidies for developers of low-income housing. If past is prologue, this might do more to line the pockets of developers than add meaningfully to the stock of affordable housing. Harris also favors rent controls, a sure prescription for deterioration in the housing stock, and she would prohibit software allowing landlords to determine competitive neighborhood rents. Trump has called for deregulation generally and would not favor rent controls. Harris: F; Trump B

Taxes: Harris has broached several wildly destructive tax proposals. Perhaps the worst of these is to tax unrealized capital gains, and while she promises it would apply only to extremely wealthy taxpayers, it would constitute a wealth tax. Once that line is crossed, the threat of widening the base becomes a very slippery slope. It would also be a strong detriment to domestic capital investment and economic growth. Harris would increase the top marginal personal tax rate and the corporate tax rate, which would discourage investment and undermine real wage growth. She’d also increase estate tax rates. As discussed above, she unwisely calls for a $25,000 tax credit for first-time homebuyers. She also wants to expand the child care tax credit to $6,000 for families with newborns. A proposed $50,000 small business tax credit would allow the federal government to subsidize and encourage risky entrepreneurial activity at taxpayers’ expense. I’m all for small business, but this style of industrial planning is bonkers. She would sunset the Trump (TCJA) tax cuts in 2026.

Finally, Harris has mimicked Trump in calling for no taxes on tips. Treating certain forms of income more favorably than others is a recipe for distortions in economic activity. Employers of tip-earning workers will find ways to shift employees’ income to tips that are mandatory for patrons. It will also skew labor supply decisions toward occupations that would otherwise have less economic value. But Trump managed to find an idea so politically seductive that Harris couldn’t resist.

Trump’s tax plans are a mixed bag of good and bad ideas. They include extending his earlier tax cuts (TCJA) and restoring the SALT deduction. The latter is an alluring campaign tidbit for voters in high-tax states. He would reduce the corporate tax rate, which I strongly favor. Corporate income is double-taxed, which is a detriment to growth as well as a weight on real wages. He would eliminate taxes on overtime income, another example of favoring a particular form of income over others. Wage earners would gain at the expense of salaried employees, so one could expect a transition in the form employees are paid over time. Otherwise, the classification of hours as “overtime” would have to be standardized. One could expect existing employees to work longer hours, but at the expense of new jobs. Finally, Trump says Social Security benefits should not be taxed, another kind of special treatment by form of income. This might encourage early retirement and become an additional drain on the Social Security Trust Fund.

The higher tariffs promised by Trump would collect some revenue. I’d be more supportive of this plank if the tariffs were part of a larger transition from income taxes to consumption taxes. However, Trump would still like to see large differentials between tariffs and taxes imposed on the consumption of domestically-produced goods and services.

Harris: F; Trump C+

Climate Policy: This topic has undergone a steep decline in relative importance to voters. Harris favors more drastic climate interventions than Trump, including steep renewable subsidies, EV mandates, and a panoply of other initiatives, many of which would carry over from the Biden Administration. Harris: F; Trump: B

Energy: Low-cost energy encourages economic growth. Just ask the Germans! Consistent with the climate change narrative, Harris wishes to discourage the use of fossil fuels, their domestic production, and even their export. She has been very dodgy with respect to restrictions on fracking. Her apparent stance on energy policy would be an obvious detriment to growth and price stability (or I should say a continuing detriment). Trump wishes to encourage fossil fuel production. Harris: F; Trump: A

Constitutional Integrity: Harris has supported the idea of packing the Supreme Court, which would lead to an escalating competition to appoint more and more justices with every shift in political power. She’s also disparaged the Electoral College, without which many states would never have agreed to join the Union. Under the questionable pretense of “protecting voting rights”, she has opposed steps to improve election integrity, such voter ID laws. And operatives within her party have done everything possible to register non-citizens as voters. Harris: F; Trump: A

First Amendment Rights: Harris has called for regulation and oversight of social media content and moderation. A more descriptive word for this is censorship. Trump is generally a free speech advocate. Harris: F; Trump A-

Second Amendment Rights: Harris would like to ban so-called “assault weapons” and high-capacity magazines, and she backs universal background checks for gun purchases. Trump has not called for any new restrictions on gun rights. Harris: F; Trump: A

DEI: Harris is strongly supportive of diversity and equity initiatives, which have undermined social cohesion and the economy. That necessarily makes her an enemy of merit-based rewards. Trump has no such confusion. Harris: F; Trump: A

Hysteria: The Harris campaign has embraced a strategy of demonizing Donald Trump. Of course, that’s not a new approach among Democrats, who have fabricated bizarre stories about Trump escapades in Russia, Trump as a pawn of Vladimir Putin, and Russian manipulation of the 2016 Trump campaign. Congressional democrats spent nearly all of Trump’s first term in office trying to find grounds for impeachment. Concurrently, there were a number of other crazy and false stories about Trump. The current variation on “Orange Man Bad” is that Trump is a fascist and a Nazi, and that all of his supporters are Nazis. And that Trump will use the military against his domestic political opponents, the so-called “enemy within”. And that Trump will send half the country’s populace to labor camps. The nonsense never ends, but could anything more powerfully ignite the passions of violent extremists than this sort of hateful rhetoric? Would it not be surprising if at least a few leftists weren’t interested in assassinating “Hitler” himself. This is hysteria, and one has to wonder if that is not, in fact, the intent.

Can any of these people actually define the term fascist? Most fundamentally, a fascist desires the use of government coercion for private gain (of wealth or power) for oneself and/or one’s circle of allies. By that definition, we could probably categorize a great many American politicians as fascists, including Barack Obama, Joe Biden, Donald Trump, and a majority of both houses of Congress. That only demonstrates that corporatism is fundamental to fascist politics. Less-informed definitions of fascism conflate it with everything from racism (certainly can play a part) and homophobia (certainly can play a part) to mere capitalism. But take a look at the demographics of Trump’s supporters and you can see that most of these definitions are inapt.

Is the Trump campaign suffering from any form of hysteria? It’s shown great talent at poking fun at the left. Of course, Trump’s reactions to illegal immigration, crime, and third-trimester abortions are construed by leftists to be hysterical. I mean, why would anyone get upset about those kinds of things?

Harris: F; Trump: A

“Grade Point Average”

I’m sure I forgot an area or two I should have covered. Anyway, the following are four-point “GPAs” calculated over 20 categories. I’m deducting a quarter point for a “minus” grade and adding a quarter point for a “plus” grade. Here’s what I get:

Harris: 0.44; Trump: 2.68

Hmmm

That Word “Liberal” … I Don’t Think That Means What You Think It Means

03 Wednesday Jan 2024

Posted by Nuetzel in Conservatism, Liberalism, Socialism

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Adam Smith, Capitalism, Classical Liberal, Conservatism, Consumer Sovereignty, Corporatism, Free Markets, Freedom of Speech, Friedrich Hayek, Liberalism, Libertarianism, MAGA, monopoly, Monopsony, Nate Silver, Natural Rights, Non-Aggression Principle, Perfect Competition, Progressivism, Property Rights, Public goods, Religious Freedom, Right to Life, Scott Sumner, social engineering, Socialism, State Capacity, State Religion, statism, The Wealth of Nations

Leftism has taken on new dimensions amid its preoccupation with identity politics, victimhood, and “wokeness”. Traditional socialists are still among us, of course, but “wokeists” and “identitarians” have been on the progressive vanguard of late, rooting for the deranged human butchers of Hamas and the dismantling of liberal institutions. This didn’t happen overnight, of course, and traditional socialists are mostly fine with it.

An older story is the rebranding of leftism that took place in the U.S. during the first half of the 20th century, when the word “liberal” was co-opted by leftists. Before that, a liberal orientation was understood to be antithetical to the collectivist mindset long associated with the Left. Note also that liberalism retains its original meaning even today in much of Europe. Often we hear the term “classical liberal” to denote the “original” meaning of liberalism, but the modifier should be wholly unnecessary.

Liberalism Is Not “In-Betweenism”

In this vein, Nate Silver presents a basic taxonomy of political orientation in a recent Substack post. It includes the diagram above, which distinguishes between socialism, conservatism, and liberalism. Silver draws on a classic essay written by Friedrich Hayek in 1945, “Why I am Not a Conservative”, in which Hayek discussed the meaning of the word “liberal” (and see here). Liberalism’s true emphasis is a tolerance for individual rights and freedoms, subject to varying articulations of the “nonaggression principle”. That is, “do as you like, but do no harm to others”.

We often see a linear representation distinguishing between so-called progressives on the left and conservatives on the right. Of course, a major hallmark of leftist thinking is extreme interventionism. Leftists or progressives are always keen to detect the slightest whiff of an externality or the slightest departure from the perfectly competitive market ideal. They seem eager to find a role for government in virtually every area of life. While it’s not a limiting case, we can substitute socialism or statism for progressivism on the far left, as Silver does, whereby the state takes primacy in economic and social affairs.

Conservatism, on the other hand, is a deep resistance to change, whether institutional, social, and sometimes economic. Conservatives too often demonstrate a willingness to use the coercive power of the state to prevent change. Hayek noted the willingness of both socialists and conservatives to invoke state power for their own ends.

Similarly, religious conservatives often demand state support beyond that afforded by the freedom to worship in the faith of one’s choice. They might strongly reject certain freedoms held to be fundamental by liberals. Meanwhile, socialists often view mere religious freedom as a threat to the power of the state, or at least they act like it (e.g. see here for an example).

Like conservatives, dedicated statists would doubtless resist change if it meant a loss of their own power. That is, they’d wish to preserve socialist institutions. On this point, witness the vitriol from the Left over what it perceives as threats to the public school monopoly. Witness also the fierce resistance among public employees to reducing the scale of the administrative state, and how advocates of entitlements fiercely resist decreases in the growth rate of those expenditures.

Silver, like Hayek, objects to the traditional, linear framework in which liberals are thought to occupy a range along a line between socialism and conservatism. He objects to that because real liberals value individual liberty as a natural human right, a viewpoint typically abhored by both socialists and conservatives. There is nothing “in between” about it! And of course, conservatives and progressives are equally guilty in their mistaken use of the word “liberal”.

Mapping Political Preferences

Liberty, statism, and conservatism are not exactly orthogonal political dimensions. Larger government almost always means less economic liberty. At a minimum, state dominance implies a social burden associated with public monopoly and monopsony power, as well as tax and welfare-state incentive problems. These features compromise or corrupt the exercise of basic rights. On the other hand, capitalism and its concomitant reliance on consumer sovereignty, individual initiative, free exchange and secure property rights is most in harmony with true liberalism.

For conservatives, resistance to change in support of a traditionally free market economy might offer something of a contradiction. In one sense, it corresponds to upholding market institutions. However, free markets allow new competitors and new technologies to undermine incumbents, who conservatives sometimes wish to defend through regulatory or protectionist measures. And conservatives are almost always too happy to join in the chorus of “price gouging” in response to the healthy operation of the free market in bringing forth supplies.

All that is to say that preferences involving liberty, statism, and traditionalism are not independent of one another. They cannot simply be mapped onto a three-dimensional space. At least the triangular representation gets liberalism out of the middle, but it’s difficult to visualize other ideological positions there. For example, “state religionism” could lie anywhere along the horizontal line at the top or even below it if certain basic liberties are preserved. Facism combines elements of socialism and a deformed version of capitalism that is properly called corporatism, but where would it fall within the triangle?

Big Government Liberalism?

Silver says he leans heavily toward a “big government” version of liberalism, but big government is hard to square with broad liberties. Granted, any well-functioning society must possess a certain level of “state capacity” to defend against private or public violations of individual rights, adjudicate disputes, and provide true public goods. It’s not clear whether Silver’s preferences lie within the bounds of those ambitions. Still, he deserves credit for his recognition that liberalism is wholly different from the progressive, socialist vision. It is the opposite.

The “New” Triangle

Silver attempts to gives the triangular framework a more contemporary spin by replacing conservatism with “MAGA Conservatism” and socialism with “Social Justice Leftism” (SJL), or “wokeism”. Here, I’m treating MAGA as a “brand”. Nothing below is intended to imply that America should not be a great nation.

The MAGA variant of conservatism emphasizes nationalism, though traditional conservatives have never been short on love of nation. For that matter, as a liberal American, it’s easier to forgive nationalist sentiments than it is the “Death to America” refrain we now hear from some SJLs.

The MAGA brand is also centered around a single individual, Donald Trump, whose rhetoric strikes many as nativistic. And Trump is a populist whose policy proposals are often nakedly political and counterproductive.

SJL shares with socialism an emphasis on various forms of redistribution and social engineering, but with a new focus on victimhood based on classes of identity. Of SJL, Silver says:

“Proponents of SJL usually dislike variations on the term ‘woke’, but the problem is that they dislike almost every other term as well. And we need some term for this ideology, because it encompasses quite a few distinctive features that differentiate it both from liberalism and from traditional, socialist-inflected leftism. In particular, SJL is much less concerned with the material condition of the working class, or with class in general. Instead, it is concerned with identity — especially identity categories involving race, gender and sexuality, but sometimes also many others as part of a sort of intersectional kaleidoscope.”

The gulf between liberals and SJLs couldn’t be wider on issues like free speech and “equity”, and equality of opportunity. MAGAns, on the other hand, have some views on individual rights and responsibility that are largely consistent with liberals, but reflexive populism often leads them to advocate policies protecting rents, corporate welfare, and protectionism.

Divided Liberalism

Liberalism emphasizes limited government, individual autonomy, and free exchange. However, there are issues upon which true liberals are of divided opinion. For example, one such area of controversy is the conflict between a woman’s right to choose and the fetal right to life. Many true liberals disagree over whether the rights of a fetus outweigh its mother’s right to choose, but most would concede that the balance shifts to the fetus at some point well short of birth (putting aside potential dangers to the mother’s life). Open borders is another area that can divide true liberals. On one side, the right to unrestricted mobility is thought to supersede any public interest in enforcing borders and limiting the flow of immigrants. On the other side, questions of national sovereignty, national security, as well as social and state capacity to absorb immigrants take primacy.

Don’t Call Lefties “Liberal”… They’re Not!

True liberalism (including most strains of libertarianism) recognizes various roles that a well-functioning state should play, but it also recognizes the primacy of the individual and individual rights as a social underpinning. As Hayek noted, true liberals are not resistant to change per se, unlike conservatives. But modern progressives demand changes of the worst kind: that the state should intervene to pursue their favored objectives, laying claim to an ever-greater share of private resources. This requires government coercion on a massive scale, the antithesis of liberalism. It’s time to recognize that “progressives” aren’t liberals in any sense of the word. For that matter, they don’t even stand for progress.

I’ll close with a quote from Adam Smith that I cribbed from Scott Sumner. Unfortunately, Sumner does not give the full reference, but I’ll take his word that Smith wrote this 20 years before the publication of The Wealth of Nations:

“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things. All governments which thwart this natural course, which force things into another channel, or which endeavour to arrest the progress of society at a particular point, are unnatural, and to support themselves are obliged to be oppressive and tyrannical.”

Musings and Misgivings of a Likely Trump Voter

24 Thursday Aug 2023

Posted by Nuetzel in Politics

≈ 2 Comments

Tags

Comparative advantage, corporate taxes, Corporatism, Donald Trump, eminent domain, Energy Production, Entitlement Reform, Illegal Immigration, Industrial Policy, Inflation tax, Legal Immigration, Medicare, Modern Monetary Theory, Nationalism, Populism, Protectionism, Social Security, Spending Growth, statism, The Wall

Choosing between the lesser of evils is a bummer, but that’s often the reality for voters. That goes almost without saying… our choices are politicians! I’ll certainly be in that quandary if Donald Trump is the Republican nominee for president in 2024, which looks increasingly likely. I held my nose and voted for him — twice — primarily because the Big Government solutions promoted consistently by Democrats are so awful.

At this point I’m not fully on board with any GOP candidate. That could change, but not yet. Now, if you’re a Trump supporter and you think the rambling opinions below are too critical of your guy, cut me some slack. I’m not a “Never Trumper”. I’m a “Never Statist”. And while I’ve never had much faith that Trump is with me on that count, he will almost surely be the lesser of evils.

The Abused Politician

Trump has been subjected to despicable treatment by political opponents since well before his inauguration in 2016, and his abusers in and out of government never let up. Many of the charges and accusations against him have been pure fiction and at this point represent obvious election interference. So I’m somewhat sympathetic to him despite some of his positions and often disagreeable manner. Still, I credit him for being a fighter, and as an aside, I’ll add that I actually enjoy some of his rants. He has the style of a nasty stand-up comic, which gives me some occasional laughs.

I agree with Trump on certain policy matters. On others, including some fundamental points, I find it hard to trust him as a leader, and I said that long before he was elected in 2016. He claims not to be a politician, but he is a politician through and through. He’s also a populist. And while populism can serve as a valuable check on certain excesses of government, it often cuts the wrong way, favoring what I like to call “do-somethingism”. That usually means public intervention. Populism is a perfectly natural home for a “pick-and-choose” statist like Trump, however. Moreover, I’m not happy that he refused to debate his opponents, and that too was a purely political decision.

Malign Neglect

If you need proof of Trump’s base instincts as a politician, look no further than his refusal to engage on the subject of entitlement reform. It’s no secret that both Social Security (SS) and Medicare are technically insolvent. This is probably the most important fiscal issue the country will face in the foreseeable future.

Without reform, SS benefits will be cut 23% in 2034. That would bring certain outrage among seniors and anyone approaching retirement. Sure, it’s a decade down the road, but addressing it sooner would be far less painful. Does Trump favor a huge cut in benefits? Probably not. Does he think benefits can simply continue without additional funding or reform of some kind? Does he prefer a greater inflation tax, rather than reform? Does he secretly favor “just print the money” like the modern monetary theorists of the Left? There are much better alternatives, but where is his leadership on this issue?

His unwillingness to discuss entitlements, and indeed, his denigration of anyone who so much as mentions the need for serious reforms, is a disgrace. He knows the train wreck is coming, but his focus is squarely on short-term politics. Why are so many on the Right willing to fall for this? Maybe they too understand it’s an elephant in the room, but an elephant that must not be named. After all, it’s not as if the Democrats have done a thing to address the issue.

False Fealty to Workers

Trump is a protectionist, given to the mercantilist fallacy that only exports are good and imports are bad. We import heavily because we are a high-income nation. The other side of that coin is that the world craves our assets, including the U.S. dollar (which is in absolutely no danger of losing its dominance as the primary currency of international transactions).

Here’s a little truth from “Trade Flows 101”: U.S. imports of goods and services correspond to purchases of U.S. assets by the rest of the world. In other words, U.S. trade deficits present opportunities for foreign investors to supply us with capital. That helps foster greater U.S. productive capacity, greater worker productivity, and higher wages.

On the other hand, government intervention to discourage imports via quotas or tariffs increases domestic prices and erodes real wages in the U.S. Furthermore, to favor certain industries (exporters) over others (importers) is a grotesque application of corporatist industrial policy. Why does the Right tolerate Trump’s advocacy for this sort of government central planning? Part of the answer is national security, which I accept to a limited extent, but not when “critical industries” are extended favors by government that are redundant to already powerful market forces.

Protectionism owes some of its popularity to the appeal of nationalism, as distinct from patriotism. However, it promotes sclerosis among domestic producers by shielding them from competition, causing direct harm to U.S. consumers. There is nothing patriotic about protectionism.

Real Stuff

A fallacy closely related to protectionism, and one to which Trump subscribes, is that the U.S. must produce more “things” — more commodities and manufactured goods. That’s not the market’s judgement, but one that appeals to the instincts of interventionists. In any case, services are often more highly valued than physical goods. If your comparative advantage is in producing a highly-valued service, don’t beat yourself up over neglecting to produce hard goods at which you’re comparatively lousy. Specialization and trade are under-appreciated as true social and economic miracles.

That said, we certainly have an advantage in the production of fossil fuels and should continue to produce them without interference. I’m with Trump on that. One day, reliable sources of “clean” energy will be economic, but we’re not there yet.

Corporate State

Well before his presidential run, Trump had a history of leveraging government to achieve his private ends. Eminent domain actions were useful to his development projects and expanding his own property rights at the expense of others. Naturally, he claimed his projects were in the public interest. Ah, the mindset of a rent seeker: government exists to actively facilitate the acquisitive interests of private business, or at least the “winners”. That thinking is thoroughly contrary to the libertarian view of the state’s role in establishing a neutral social environment under the rule-of-law.

In other ways, as President, Trump sought to bring major corporations under his political sway. Trump’s protectionist leanings as president were a prime example of corporatism in action. And read this account of a public meeting (and watch it at the link) at which one CEO after another, under Trump’s furrowed gaze, took turns describing something great they were doing for the country and committing to do more. It was one big, weird suck-up session intended to make the puffed-up Trump look like a great leader. As the author at the link says:

“These are corporate executives doing the President’s bidding for fear or favour.”

I supported Trump’s tax cuts, though they were certainly designed to reduce taxes on corporate income. Was this corporatist largess? That might have been part of his motivation. However, as I’ve argued before, corporate income is largely double-taxed. Moreover, shareholders do not bear the full burden of corporate taxes. Workers bear a significant portion of the burden, so Trump’s corporate tax cuts encouraged growth in real wages, whether he understood it or not.

It’s Still So Big

Tax cuts paired with reduced spending would have been a welcome approach. Unfortunately, Trump was a fairly big spender during his term in office, even if you exclude Covid emergency spending. Growth in the government’s dominance over resources did not slow on his watch. Fiscally disciplined he’s not!

It’s true that his administration made efforts to curtail regulation, but in retrospect, those steps at best arrested the growth of regulation, rather than achieving reductions. The hope of seeing any real deconstruction of the administrative state under Trump was fleeting.

Migration

Immigration is a complicated issue when it comes to assessing Trump’s candidacy. I’m strongly in favor of greater legal immigration because it would improve our demographics and labor supply while shrinking our entitlements deficits. Legal migrants are often technically proficient and many come with sponsorships. On the whole, legal migrants tend to be ready and willing to work,

This position is often condemned by Trump’s most ardent cheerleaders, however. I’ve generally supported Trump’s position on illegal immigration as a matter of national security, to eliminate human trafficking, and to reduce burdens on public aid and support systems. Unfortunately, during Trump’s presidency, he did more to reduce legal immigration than illegal immigration. I have no qualms about “the Wall” except for its expense and the likelihood that cheaper and superior technologies could be deployed for border security. Trump might prefer the Wall’s symbolic value.

Rightly or wrongly, Trump’s messaging on immigration strikes many as nativist, providing an easy excuse for the Left to accuse him of racism. That certainly won’t help his election prospects.

Conclusion

Trump will almost surely be the GOP nominee, unless Democrats succeed in putting him behind bars by then. If the choice is Trump vs. almost any Democrat I can imagine, I’ll have to vote for him. For all his faults and wild card qualities, I still consider him a safer alternative than the devils we know on the Left. But I’d feel much better about him if he’d take a responsible position on Social Security and Medicare reform, abandon protectionism except in cases of critical national security needs (and without overkill), commit to spending reductions, and adopt a more productive approach to legal immigration.

Containing An Online Viper Pit of Antisemites

05 Thursday Jan 2023

Posted by Nuetzel in Free Speech, Social Media

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Tags

Andrew Torba, Antisemitism, Christian Nationalism, Corporatism, Dan Frankel, fascism, Fighting Words, Free Speech, Gab, GabPro, Israel, Judeo-Bolshevism, Kanye West, Kristallnach, Pittsburgh Jewish Chronicle, racism, Religious Liberty, Rothschild Family, Theocracy, Zionism

This post is about a particular social media platform and a terrible oversight on my part. I signed up for Gab at least two years ago as I tried to find social media platforms that respected free speech rights and on which I could promote my blog. I haven’t paid for a subscription to “GabPro”, but I’m embarrassed to have completely missed some of the stink emanating from within the platform until recently. It’s not as if it hadn’t been reported, but somehow, I was oblivious.

I knew pretty quickly that Gab was an odd fit for me because so many posters there are on the very religious right. That’s fine, as I’m a strong believer in religious liberty and free speech. My views sometimes conflict with the religious right, but we’re in alignment on some key issues.

I never really scrolled Gab for more than a few moments at any time, having maintained my account there primarily for cross-posting my blog. I joined a particular Gab “fan” group of a band I love, and I have an old friend who happens to be on Gab. I also joined the “Libertarians of Gab” group. Occasionally, something raised my antennae right at the top of my feed, prompting me to look more closely, but I knew this much: like many other social media platforms, Gab is a meme-fest with lots of repetition, so I seldom wasted time scrolling there.

A year or so ago, a Jewish acquaintance on Gab mentioned a few antisemitic posts he’d seen there, but he’s a staunch free-speech advocate and had other reasons to stick with it. At the time, I might have begun to notice a few posters on Gab who were clearly anti-Zionist, but there’s a real distinction between anti-Zionism and antisemitism. Antisemites are bound to be anti-Zionist; the reverse doesn’t always follow. But again, I hadn’t yet found any real fault with Gab itself at that time.

(Note: I’m not hyphenating “antisemitism”, nor am I capitalizing “semitism”, because there is no such thing as a “semite” or “semitism”. The word was concocted by political factions in 19th century Germany in an attempt to “other” German Jews as “Orientals”.)

Over the next several months, however, at the top of my feed, I began to see a few antisemitic posts. Sometimes these amounted to silly assertions, such as the Rothschild family’s supposed world domination, a claim that would be harmless enough if not for indignation that the Rothschilds happen to be Jewish. A few posts were much worse. My knee-jerk reaction to offensive content is to block the poster, as I did a few times.

More recently, in the wake of Kanye West’s crazy tweets about Jews, I was a recipient of a group email from Andrew Torba, the founder and CEO of Gab. Torba, as it happens, is a self-styled “Christian Nationalist”. His email essentially portrayed West as a messenger from God. Here are some excerpts:

“God is using Ye, formerly known as Kanye West, for a big purpose…. He talks about the need for our leaders to uphold Christian values, not Zionist ones. … Ye is using the influence and talents that God has given him to speak the Truth and glorify Jesus Christ.”

It’s interesting that Torba referred to “Zionist” values. Though he is almost certainly anti-Zionist, that’s not really what he meant here. This bit of nut-jobbery, as I learned, had been preceded by many other wild statements from Torba over the years. For instance, over a year ago he tweeted the following and then disabled his Twitter account, a stunt he’s repeated several times:

“We’re building a parallel Christian society because we are fed up and done with the Judeo-Bolshevik one.”

The author at the link above, who reviewed some of Torba’s antics, noted that Judeo-Bolshevism was a term thrown around by the Nazis in the 1930s. But even putting that aside, Torba has an unfortunate tendency to paint with an extremely broad brush in promoting his very own brand of identity politics. That point is established clearly in this “Open Letter” to Torba from a “Hebraic-oriented evangelical Christian attorney”. If anything, the letter is far too gentle with Torba. The writer concludes:

“… I do hope you will reconsider your gratuitous exclusionary rhetoric regarding our spiritual cousins in the House of Judah, treating at least the many who share our cultural values and all-important Creationist paradigm with the same basic respect and camaraderie you show to atheists in the MAGA and conservative movements.”

Torba’s perspective seems to be that all Jews are unworthy, or worse. Here’s one of his posts:

From my perspective, Torba’s recent email regarding “Ye” served as a permission slip to antisemites on Gab to engage in blatant hatred of Jews. Since then, I’ve seen truly antisemitic content appear in my feed with increasing frequency, as if it’s being promoted by the platform. I’m not sure it always sinks to the level of brown-shirts on Kristallnach, but it has that nauseating flavor. Much to my dismay, a few of these posts were from users with whom I’d established earlier connections, or it was content they reposted. Others might have appeared on my feed courtesy of an effort to “introduce” users to one another and to promote certain content.

I didn’t save screenshots of the offensive posts I’ve seen on Gab. I probably should have, but here’s a sampling of a few of the wholesome users I’ve blocked:

One recent post expressed anger with so-called “elites”, an understandable sentiment shared by many in an age of corporatist fascism with the imposition of “woke” ideology in many institutions. However, the poster’s real point was to admonish others for not identifying the target of their anger as “the Jews”.

I became aware of another piece of disturbing information about the perpetrator of a mass killing in Pittsburgh a few years ago, and I can’t believe I missed it:

“The man accused of killing 11 Jews in the Tree of Life building posted antisemitic messages on Gab before the Oct. 27, 2018, massacre. In his Gab bio, he described Jews as the ‘children of satan.’”

Related to these murders, Torba reposted this article on Gab not long ago, from the Pittsburgh Jewish Chronicle. It stated that Pennsylvania Representative Dan Frankel was the target of hateful and threatening posts on the platform. Some of the posts quoted at the link are awful.

But why did Torba repost that article? Well, it motivated a large number of Torba’s followers on Gab to subject the Chronicle to a series of antisemitic replies. This would appear to have been Torba’s intent, but he subsequently removed the repost of the article (along with the hateful replies). That’s a familiar pattern.

Torba’s original comments on the Chronicle article included the following:

“People are done caring about your eternal victimhood complex … Free speech means the right to offend…Stop conflating offensive memes with ‘threats’…Gab is what free speech looks like, the good, the bad, and the ugly are all included.”

Well, you’re right about free speech, Mr. Torba, but subject to an important qualification: “fighting words” are not protected speech under the Constitution. Maybe that’s why you took down your repost, and most importantly the replies. Did you come to your senses relative to the limits of free speech?

It’s not surprising, but the hatred on Gab is not reserved solely for Jews. Since I’ve been on the lookout, I’ve witnessed overt racism of several other varieties on Gab, and I’ve duly blocked those posters. There is also a complement of hatred for individuals falling under the LGBTQ+ banner.

Gab is not the only province of this sort of behavior on social media, but it might be a hotbed. Is it that easy to learn to hate others? Is the distinction between arguing policy versus revilement and ad hominem too subtle for them?

I have Jewish friends across the political spectrum and Jews in my extended family. Few of them are deeply religious. Likewise, many of my friends raised as Christians are not deeply religious. These individuals are entitled to the liberty to practice any or no religion at all. Their choices are no cause for hostility unless they make some effort to impose their views or will upon others. But that kind of theocratic, coercive power seems to be precisely what Andrew Torba and his Christian Nationalist followers on Gab wish to have for themselves.

I’m happy to report that I’ve seen far fewer offensive posts since blocking a number of antisemitic and racist posters. Maybe the platform is “learning” about me. However, there are many well-intentioned people on Gab, and even a few who actively call-out the bigots. I might have to join in that effort. I support Torba’s right to express his views, short of threats or incitement of violence. I have no desire to be affiliated with Torba, however, and I’ll never pay him for GabPro. I’ll remain on Gab for the time being, and we’ll see how the content evolves.

Great Moments In Projection: Il Doofe Says His Opponents Are Anti-Democratic, Fascist

06 Tuesday Sep 2022

Posted by Nuetzel in Democracy, fascism, Uncategorized

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Administrative State, Angelo M. Codaville, Babylon Bee, Benito Mussolini, Classical Liberal, Constitutional Republic, Corporatism, crony capitalism, Dan Klein, Democracy, fascism, FDR, Federalism, Friedrich Hayek, G.W.F. Hegel, Hitler, Il Duce, Joe Biden, Joseph Stalin, Majoritarianism, Nationalism, New Deal, Semi-Fascism, Sheldon Richman, Socialism

When partisans want to make sure they get their way, perhaps we shouldn’t be surprised to hear them claim their opponents are “anti-democratic”. Well, one-party rule is not democratic, just in case that’s unclear to leftists prattling about “hunting down” the opposition. We now have those forces hurling cries of “fascism” and “semi-fascism” at political adversaries for opposing their use of the state’s coercive power to get their way and to punish political enemies.

Restrained Democracy

The U.S. is not a democracy; it is a constitutional republic. The reason it’s not a democracy is that the nation’s founders were wary of the dangers of majoritarianism. There are many checks on unbridled majoritarianism built into our system of government, including the many protections and guarantees of individual rights in the Constitution, as well as federalism and three branches of government intended as coequals.

In a short essay on democracy, Dan Klein refers to a mythology that has developed around the presumed democratic ideal, quoting Friedrich Hayek on the “fantasy of consensus” that tends to afflict democratic absolutists. Broad consensus is possible on many issues, but it might have been an imperative within small bands of primitive humans, when survival of the band was of paramount concern. That’s not the case in modern societies, however. Classical liberals are often derided as “anti-democratic”, but like the founders, their distaste for pure democracy stems from a recognition of the potential for tyrannies of the majority. Klein notes that the liberal emphasis on individual rights is naturally at tension with democracy. Obviously, a majority might selfishly prefer actions that would be very much to the detriment of individuals in the minority, so certain safeguards are necessary.

However, the trepidation of classical liberals for democracy also has to do with the propensity for majorities to “governmentalize” affairs so as to codify their preferences. As Klein says, this often means regulation of many details of life and social interactions. These are encroachments to which classical liberals have a strong aversion. One might fairly say “small government” types like me are “anti-pure democracy”, and as the founders believed, democratic processes are desirable if governing power is distributed and restrained by constitutional principles and guarantees of individual rights.

Democracy has vulnerabilities beyond the danger posed by majoritarian dominance, however. Elections mean nothing if they can be manipulated, and they are easily corrupted at local levels by compromises to the administration of the election process. Indeed, today powerful national interests are seeking to influence voting for local election officials across the country, contributing substantial sums to progressive candidates. It’s therefore ironic to hear charges of racism and anti-democracy leveled at those who advocate measures to protect election integrity or institutions such as federalism.

And here we have the White House Press Secretary insisting that those in the “minority” on certain issues (dependent, of course, on how pollsters phrase the question) are “extremists”! To charge that someone or some policy is “anti-democratic” usually means you didn’t get your way or you’re otherwise motivated by political animus.

Fascism

Biden and others are throwing around the term fascism as well, though few of these partisans can define the term with any precision. Most who pretend to know its meaning imagine that fascism evokes some sort of conservative authoritarianism. Promoting that impression has been the purpose of many years of leftist efforts to redefine fascism to suit their political ends. Stalin actually promoted the view that anything to the right of the Communist Party was inherently fascist. But today, fascism is an accurate description of much of Western governance, dominated as it is by the administrative state.

I quote here from my post “The Fascist Roader” from 2016:

“A large government bureaucracy can coexist with heavily regulated, privately-owned businesses, who are rewarded by their administrative overlords for expending resources on compliance and participating in favored activities. The rewards can take the form of rich subsidies, status-enhancing revolving doors between industry and powerful government appointments, and steady profits afforded by monopoly power, as less monied and politically-adept competitors drop out of the competition for customers. We often call this “corporatism”, or “crony capitalism”, but it is classic fascism, as pioneered by Benito Mussolini’s government in Italy in the 1920s. Here is Sheldon Richman on the term’s derivation:

‘As an economic system, fascism is socialism with a capitalist veneer. The word derives from fasces, the Roman symbol of collectivism and power: a tied bundle of rods with a protruding ax.’”

Meanwhile, Hitler’s style of governing shared some of the characteristics of Mussolini’s fascism, but there were important differences: Hitler persecuted Jews, blaming them for all manner of social problems, and he ultimately had them slaughtered across much of Europe. Mussolini was often brutal with his political enemies. At the same time, he sought to unite an Italian people who were otherwise a fairly diverse lot, but once Mussolini was under Hitler’s thumb, Italian Jews were persecuted as well.

Angelo M. Codevilla provides an excellent account of Mussolini’s political career and the turns in his social philosophy over the years. He always considered himself a dedicated socialist, but the views he professed evolved as dictated by political expediency. So did his definition of fascism. As he took power in Italy with the aid of “street fighters”, fascism came to mean nationalism combined with rule by the administrative state and a corresponding preemption of legislative authority. And there were concerted efforts by Mussolini to control the media and censor critics. Sound familiar? Here’s a quote from Il Duce himself on this matter:

“Because the nature of peoples is variable, and it is easy to persuade them of things, but difficult to keep them thus persuaded. Hence one must make sure that, when they no longer believe, one may be able then to force them to believe.”

Here is Codevilla quoting Mussolini from 1919 on his philosophy of fascism:

“The fascist movement, he said, is ‘a group of people who join together for a time to accomplish certain ends.’ ‘It is about helping any proletarian groups who want to harmonize defense of their class with the national interest.’ ‘We are not, a priori, for class struggle or for class-cooperation. Either may be necessary for the nation according to circumstances.’”

This framing underlies another basic definition of fascism: a system whereby government coercion is used to extract private benefits, whether by class or individual. Codevilla states that Mussolini was focused on formal “representation of labor” in policy-making circles. Today, western labor unions seem to have an important, though indirect, influence on policy, and labor is of course the presumed beneficiary of many modern workplace regulations.

Modern corporatism is directly descended from Mussolini’s fascist state. The symbiosis that exists between large corporations and government has several dimensions, including regulatory capture, subsidies and taxes to direct flows of resources, high rates of government consumption, rich government contracts, and of course cronyism. This carries high social costs, as government dominance of economic affairs gives rise to a culture of rent seeking and diminished real productivity. Here is Codevilla’s brief description of the transition:

“Hegel, as well as the positivist and Progressive movements, had argued for the sovereignty of expert administrators. Fascist Italy was the first country in which the elected legislature gave up its essential powers to the executive, thus abandoning the principle, first enshrined in the Declaration of Independence and the U.S. Constitution, by which people are rightly governed only through laws made by elected representatives. By the outbreak of World War II, most Western countries’ legislatures—the U.S. Congress included—had granted the executive something like ‘full powers,’ each by its own path, thus establishing the modern administrative state.”

Mussolini saw Italian fascism as the forerunner to FDR’s New Deal and took great pride in that. On this point, he said:

“… the state is responsible for the people’s economic well-being, it no longer allows economic forces to run according to their own nature.”

The Babylon Bee’s take on Biden and fascism would have been more accurate had it alluded to Mussolini, but not nearly as funny! The following link (and photoshopped image) is obviously satire, but it has a whiff of eerie truth.

Biden Condemns Fascism in Speech While Also Debuting Attractive New Mustache

Conclusion

Biden’s slur that Republicans are “anti-democratic” is an obvious distortion, and it’s rather ironic at that. The nation’s support for democratic institutions has always been qualified for good reasons: strict majoritarianism tends to disenfranchise voters in the minority, and in fact it can pose real dangers to their lives and liberties. Our constitutional republic offers “relief valves”, such as “voting with your feet”, constitutional protections, and seeking recourse in court. Biden’s party, however, has a suspicious advantage via control of election supervision in many key urban areas of the country. This can be exploited in national elections to win more races as long as the rules on election administration are sufficiently lax. This is a true corruption of democracy, unlike the earnest efforts to improve election integrity now condemned by democrats.

Joe Biden hasn’t the faintest understanding of what fascism means. He uses the term mostly to suggest that Trump, and perhaps most Republicans, have authoritarian and racist sympathies. Meanwhile, he works to entrench the machinery and the breadth of our own fascist state, usurping legislative authority. He is buttressed by a treacherous security apparatus, “street fighters” under the guise of Antifa and BLM, and the private media acting as a propaganda arm of the administration. Joe Biden, you’re our fascist now.

The SEC’s Absurd Climate Overreach

04 Monday Apr 2022

Posted by Nuetzel in Central Planning, Global Warming

≈ 2 Comments

Tags

capital costs, Carbon Emissions, Carbon Forcing Models, carbon Sensitivity, central planning, Corporatism, Disclosure Requirements, ESG Risk, ESG Scores, Green Energy, Greenhouse Gas, Hester Peirce, John Cochrane, Litigation Risk, Paris Agreement, Regulatory Risk, Renewable energy, Scope 1, Scope 2, Scope 3, SEC Climate Mandate, Securities and Exchange Commission

The Securities and Exchange Commission recently issued a proposed rule for reporting on climate change risk, and it is fairly outrageous. It asks that corporations report on their own direct greenhouse gas emissions (GHG – Scope 1), the emissions caused by their purchases of energy inputs (Scope 2), and the emissions caused by their “downstream” customers and “upstream” suppliers (Scope 3). This is another front in the Biden Administration’s efforts to bankrupt producers of fossil fuels and to force the private sector to radically alter its mix of energy inputs. The SEC’s proposed “disclosures” are sheer lunacy on several levels.

The SEC Mandate

If implemented, the rule would allow the SEC to stray well outside the bounds of its regulatory authority. The SEC’s role is not to regulate emissions or the environment. Rather, as its web site makes clear, the agency is charged with:

“… protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation.”

Given this mission, the SEC requires management to disclose material financial risks. Are a firm’s GHG emissions really material risks? The first problem here is quite practical: John Cochrane notes the outrageous costs that would be associated with compliance:

“‘Disclosure’ usually means revealing something you know. A perfectly honest answer to ‘disclose what you know about your carbon emissions’ is, ‘we have no idea what our carbon emissions are.’ Back that up with every document the company has ever produced, and you have perfectly ‘disclosed.’ There is no asymmetric information, fraud, etc.

The SEC has already required the production of new information, and as Hester Peirce makes perfectly clear, the climate rules again make a huge dinner out of that appetizer: essentially telling companies to hire a huge number of climate consultants to generate new information, and also how to run businesses.”

In a separate post, Cochrane quotes SEC Commissioner Hester Peirce’s response to the proposed rule. She emphasizes that companies are already required to disclose all material risks. Perhaps they have properly declined to disclose climate risks because those risks are not material.

“Current SEC disclosure mandates are intended to provide investors with an accurate picture of the company’s present and prospective performance through managers’ own eyes. How are they thinking about the company? What opportunities and risks do the board and managers see? What are the material determinants of the company’s financial value?”

Identifying the Risk Causers

Regardless of the actual risks to a firm caused by climate change, the SEC’s proposed GHG disclosures put a more subtle issue into play. Peirce describes what amounts to a fundamental shift in the SEC’s philosophy regarding the motivation and purpose of disclosure:

The proposal, by contrast, tells corporate managers how regulators, doing the bidding of an array of non-investor stakeholders, expect them to run their companies. It identifies a set of risks and opportunities—some perhaps real, others clearly theoretical—that managers should be considering and even suggests specific ways to mitigate those risks. It forces investors to view companies through the eyes of a vocal set of stakeholders, for whom a company’s climate reputation is of equal or greater importance than a company’s financial performance.”

In other words, a major risk faced by these firms has nothing to do with climate change itself, but with perceptions of “climate-related” risks by other parties. That transforms the question of climate risk into something that is, in fact, regulatory and political. Is this the true nature of the SEC’s concern, all dressed up in the scientism typically relied upon by climate change activists?

The reaction of government bureaucrats to the risks they perceive is a palpable threat to investor well-being. For example, GHG emissions might lead to future regulatory sanctions from various government agencies, including fines, taxes, various sanctions, and mitigation mandates. In addition, with the growth of investment management based on what are essentially shambolic and ad hoc ESG scores, GHG or carbon emissions might lead to constraints on a firm’s access to capital. Just ask the oil and gas industry! That penalty is imposed by activist investors and fund managers who wish to force an unwise and premature end to the use of fossil fuels. There is also a threat that GHG disclosures themselves, based (as they will be) on flimsy estimates, could create litigation risk for many companies.

Much Ado About Nothing

While there are major regulatory and political risks to investors, let’s ask, for the sake of argument: how would one degree celcius of warming by the end of this century affect corporate results? Generally not at all. (The bounds described in the Paris Agreement are 1.5 to 2 degrees, but these are based on unrealistic scenarios — see links below.) It would happen gradually in any case, with ample opportunity to adapt to the operating environment. To think otherwise requires great leaps of imagination. For example, climate alarmists probably fancy that violent weather or wildfires will wipe out facilities, yet there is no reliable evidence that the mild warming experienced to-date has been associated with more violent weather or an increased incidence of wildfires (and see here). There are a great many “sacred cows” worshiped by climate-change neurotics, and the SEC undoubtedly harbors many of those shibboleths.

What probabilities can be attached to each incremental degree of warming that might occur over several decades. The evidence we’ve seen comes from so-called carbon-forcing models parameterized for unrealistically high carbon sensitivities and subjected to unrealistic carbon-concentration scenarios. Estimates of these probabilities are not reliable.

Furthermore, climate change risks, even if they could be measured reliably in the aggregate, cannot reasonably be allocated to individual firms. The magnitude of the firm’s own contribution to that risk is equivalent to the marginal reduction in risk if the firm implemented a realistic zero-carbon operating rule. For virtually any firm, we’re talking about something infinitesimal. It involves tremendous guesswork given that various parties around the globe take a flexible approach to emissions, and will continue to do so. The very suggestion of such an exercise is an act of hubris.

Back To The SEC’s Mandated Role

Let’s return to the practical problems associated with these kinds of disclosure requirements. Cochrane also points out that the onerous nature of the SEC proposal, and the regulatory and political threats it embodies, will hasten the transition away from public ownership in many industries.

“The fixed costs alone are huge. The trend to going private and abandoning public markets, at least in the U.S. will continue. The trend to large oligopolized politically compliant static businesses in the U.S. will continue.

I would bet these rules wind up in court, and that these are important issues. They should be.”

Unfortunately, private companies will still have to to deal with certain investors who would shackle their use of energy inputs and demand forms of diligence (… not to say “due”) of their own.

The SEC’s proposed climate risk disclosures are stunningly authoritarian, and they are designed to coalesce with other demands by the regulatory state to kill carbon-based energy and promote renewables. These alternative energy sources are, as yet, unable to offer an economical and stable supply of power. The fraudulent nature of the alleged risks make this all the more appalling. The SEC has effectively undertaken an effort to engage in corporatist industrial policy benefitting a certain class of “green” energy investors, exposing the proposal as yet another step on the road to fascism. Let’s hope Cochrane is right: already, 16 state attorneys general are preparing a legal challenge. May the courts ultimately see through the SEC’s sham!

ESG Scoring: Political Tool Disguised as Investment Guide

30 Wednesday Mar 2022

Posted by Nuetzel in Capital Markets, Corporatism, Environmental Fascism, Social Justice

≈ 3 Comments

Tags

Access to Capital, Antitrust, Blackrock, Climate Action 100+, Corporatism, Diversity, Equity, ESG Fees, ESG Scores, Great Reset, Green Energy, Inclusion, John Cochrane, Mark Brnovich, Principal-Agent Problem, Renewable energy, Renewables, rent seeking, Shareholder Value, Social Justice, Stakeholder Capitalism, Sustainability, Too big to fail, Ukraine Invasion, Vladimir Putin, Woke Investors, Zero-Carbon

ESG scores are used to rate companies on “Environmental, Social, and Governance” criteria. The truth, however, is that ESGs are wholly subjective measures of company performance. There are many different ESG scores available, with no uniform standards for methodology, specific inputs, or weighting schemes. If you think quarterly earnings reports are manipulated, ESGs are an even more pliable tool for misleading investors. It is a market fad, and fund managers are using it as an excuse to charge higher fees to investors. But like any trending phenomenon, for a time, the focus on ESGs might feed-back positively to returns on favored companies. That won’t be sustainable, however, without legislative and regulatory cover, plus a little manipulative help from the ESG engineers and “Great Reset” propagandists.

It’s 100% Political, 0% Economic

ESGs are founded on prioritizing objectives that have little to do with shareholder value or any well-understood yardsticks of financial or operating performance. The demands on company resources for scoring highly on ESG are often nakedly political. This includes adoption of environmental goals such as fraudulent “zero carbon” impacts, the nebulous “sustainability” objective promoted by “green” activists, diversity, inclusion and equity initiatives, and support for activist groups such as Black Lives Matter and Antifa.

Concepts like “stakeholder value” are critical to the rationale for ESGs. “Stakeholders” can include employees, suppliers, and customers, as well as potential employees. suppliers, and customers. In other words, they can be just about anyone in the broader community, or more likely activists for “social change” whose interests have but the thinnest connection to the business’s productive activities. In essence, so-called stakeholder capitalism amounts to a ceding of control over corporate resources, and ultimately confiscation of wealth from equity owners.

Corporations have long engaged in various kinds of defensive actions, amounting to a modern-day trade in indulgences. No one will be upset about your gas-powered fleet if you buy enough carbon offsets, which just might neutralize the impact of the fleet on your ESG! On a more sinister level, ESG’s provide opportunities for cover against information that might be damaging to firms, such as the use of slave labor overseas. Flatter the right people, give to their causes, “partner” with them on pet initiatives, and your sins will be ignored and your ESG will climb! And ESGs are used in attempts to pacify leftist investors who see the corporation as a vessel for their own social objectives, quite apart from any mission it might have had as a productive enterprise.

Your ESG will shine if you do business that’s politically-favored, like renewable energy, despite its inefficiencies and significant environmental blemishes. But ESGs are not merely used to reward those anointed as virtuous by the Left. They are more forcefully used to punish firms in industries that are out of favor, or firms refusing to participate in buying off authoritarian crusaders. For example, you might be so berserk as to think fossil fuels and climate change represent imminent threats of catastrophe. Naturally, you’ll want to punish oil and gas producers. In fact, if you are in charge of ESG modeling, you might want to penalize almost any extraction industry, with certain exceptions: the massive extraction and disposal costs of renewables will pass without notice.

All these machinations occur despite the huge uncertainty surrounding flimsy, model-based predictions of warming and global catastrophe. Never mind that fossil fuels are still relied upon to provide for most of our energy needs and will be for some time to come, including base-load power generation when intermittency prevents renewables from meeting demand. The stability of the power grid depends upon the availability of carbon-based energy, which in fact is marvelously efficient. Yet the ESG crowd (not to mention the Biden Administration) seeks to drive up its cost, including the cost of capital, and these added costs fall most heavily on the poor.

ESG-guided efforts by activists to deny capital to certain segments of the energy sector may constitute antitrust violations. Some big players in the financial industry, who together manage trillions of dollars in investment funds, belong to an advocacy organization called Climate Action 100+. They coordinate on a mission to completely transform the energy industry via “green” investments and divestments of presumptively “dirty” concerns. These players and their clients have huge investments in green energy, and it is in their interest to provide cheap capital to those firms while denying capital to fossil fuel industries. As Arizona Attorney General Mark Brnovich writes at the link above, this is restraint of trade “hiding in plain sight”.

Manipulation

ESGs could be the mother of all principal-agent problems. Corporate CEOs, hired by ownership as stewards and managers of productive assets, are promoting these metrics and activities, which may not align with the interests of ownership. ESG’s are not standardized, and most users will have little insight into exactly how these “stakeholder” sausages are stuffed. In fact, much of the information used for ESGs is extremely ad hoc, not universally disclosed, and is often qualitative. The applicability of these scores to the universe of stocks, and their reliability in guiding investment decisions, is extremely questionable no matter what the investor’s objectives. And of course the models can be manipulated to produce scores that suit the preferences of money managers who have a stake in certain firms or industry segments, and who inflate their fees in exchange for ESG investment advice. And firms can certainly engage in deceptions that boost ESGs, as already discussed.

Like many cultural or consumer trends, investment trends can feed off themselves for a time. If there are enough “woke” investors, ESGs might well feed an unvirtuous cycle of stock purchases in which returns become positively correlated with wokeness. Such a divorce from business fundamentals will eventually take its toll on returns, especially when economic or other conditions present challenges, but that’s not the answer you’ll get from many stock pickers and investment pundits.

At the same time, there are ways in which the preoccupation with ESGs dovetails with the rents often sought in the political arena. Subsidies, for example, will be awarded to firms producing renewables. Politically favored firms are also likely to receive better regulatory treatment.

There are other ways in which firms engaging in wasteful activities can survive profitably, at least for a time. Monopoly power is one, and companies often develop a symbiosis with regulators that hampers smaller competitors. This is traditional rent-seeking corporatism in action, along with the “too-big-to-fail” regime. Sometimes sheer growth in demand for new technologies or networking potential helps to conceal waste. Hot opportunities can leave growing companies awash in cash, some of which will be burned in wasteful endeavors. ESG scoring offers them additional cover.

Cracks In the Edifice

John Cochrane notes a fundamental, long-term contradiction for those who invest based on ESGs: an influx of capital will tend to drive down returns in those firms and industries, while the returns on firms having low ESGs will be driven upward. Yet advocates claim you can invest for virtue and superior returns. That can’t outlast real market forces, especially as ESG efforts dilute any mission a firm might have as a productive enterprise.

Vladimir Putin’s brutal invasion of Ukraine has revealed other cracks in the ESG edifice. We now have parties arguing that defense stocks should be awarded ESG points! Also, that oil production by specific nations should be scored highly. There is also an awakening to the viability of nuclear power as an energy source. Then we have the problem of delivering on Biden’s promise to Europe of more liquified natural gas exports. That will be difficult given the way Biden has bludgeoned the industry, as well as the ESG conspiracy to deny it access to capital. Just watch the ESG hacks backpedal. Now, even the evangelists at Blackrock are wavering. To see the thread of supposed ESG consistency unravel would be enough to make you laugh if the entire conspiracy weren’t so grotesque.

Closing

The pretensions underlying “green” initiatives undertaken by large corporations are good mainly for virtue signaling, to collect public subsidies, and to earn better ESG scores. They are usually wasteful in a pure economic sense. The same is true of social justice and diversity initiatives, which can be perversely racist in their effects and undermine the rule of law.

Ultimately, we must recognize that the best contribution any producer can make to society is to create value for shareholders and customers by doing what it does well. The business world, however, has gone far astray in the direction of rank corporatism, and keep this in mind: any company supporting a sprawling HR department, pervasive diversity efforts, “sustainability” initiatives, and preoccupations with “stakeholder” outreach is distracted from its raison d’etre, its purpose as a business enterprise to produce something of value. It is probably captive to outside interests who have essentially commandeered management’s attention and shareholders’ resources.

When it comes to investing, I prefer absolute neutrality with respect to out-of-mission social goals. Sure, do no harm, but the focus should remain squarely on goals inherent in the creation of value for customers and shareholders.

Activists Prey On Corporate Pushovers

05 Sunday Jul 2020

Posted by Nuetzel in Corporatism, Identity Politics, Political Correctness

≈ 1 Comment

Tags

Aaron Clarey, Asshole Consulting, Black Lives Matter, Capitalism, Captain Capitalism, Corporate Donations, Corporatism, Danegeld, First Amendment, Rudyard Kipling, Virtue Signaling, Welfare State

I don’t think I’ve ever linked to anything on Captain Capitalism’s site. I know I’ve been tempted. The Captain is Aaron Clarey, a lively writer who is so politically incorrect he’s almost guaranteed to offend the faint of heart. His consulting company is known as Asshole Consulting because his gig, he says, is to be a truth-telling asshole so he can save you from yourself. I check his blog from time-to-time because he’s unabashedly pro-capitalist (not to be confused with corporatist!), he has interesting points of view, and well, he can be very entertaining.

Clarey wrote a piece a few days ago entitled “Corporate Donations to BLM vs. Government Spending on the Black Community“. Here are a few of his points:

- Corporate gifts to Black Lives Matter and similar organizations dedicated to black causes are a mere pittance relative to the trillions of disproportionate benefits that have been paid by the government to aid blacks over the years. By “disproportionate” Clarey means the excess of those benefits above the black share of the population.

- The disproportionate government benefits have been gloriously unproductive as a permanent solution to end black poverty. Clarey says, “… the multiple trillions of dollars [spent by government] has not closed the:

wage
health
income
savings
life expectancy

gaps between black and white“

- The comparatively tiny corporate donations “may enrich some black activists who sit on the boards of these non-profits, but it will not do one damn thing to tangibly improve the lives of black people in the US.”

- Clarey then challenges “anybody of any political or racial stripe to be intellectually honest with themselves and acknowledge what this laughable joke of “corporate donations” are – Marketing. Placating. Danegeld. Virtue-signaling. These corporations do not care about black people, they care about themselves and are capitalizing off of a tragedy to profit.“

I’ve worked for some large corporations over the years and they all play these games: not only are shareholder resources dolled out to every special interest under the sun, who are now deemed “stakeholders”, but employees are constantly harangued because they just might have less than appropriate consciousness of these interests. Staff time is dedicated to training employees in “right-think”, and they are asked to bend and twist their objectives and job descriptions in order that they appear to revolve around those interests. It’s patently ridiculous. And now, some of these corporations have been cowed into withdrawing advertising dollars to sites that might offend those whom the corporations don’t wish to offend, or sites that might support the First Amendment rights of those whom their intimidators wish to silence.

Clarey’s use of the term “Danegeld” is particularly interesting. He means that the primary interest of these corporations is in buying off potentially hostile forces. That‘s exactly what’s going on here! The cowardly upper management of these companies would be better off taking Rudyard Kipling’s advice on the matter (with apologies to my Danish friends):

“It is always a temptation to an armed and agile nation
To call upon a neighbour and to say: —
‘We invaded you last night–we are quite prepared to fight,
Unless you pay us cash to go away.‘

And that is called asking for Dane-geld,
And the people who ask it explain
That you’ve only to pay ’em the Dane-geld
And then you’ll get rid of the Dane!

It is always a temptation for a rich and lazy nation,
To puff and look important and to say: —
‘Though we know we should defeat you, we have not the time to meet you.
We will therefore pay you cash to go away.’

And that is called paying the Dane-geld;
But we’ve proved it again and again,
That if once you have paid him the Dane-geld
You never get rid of the Dane.

It is wrong to put temptation in the path of any nation,
For fear they should succumb and go astray;
So when you are requested to pay up or be molested,
You will find it better policy to say: —

‘We never pay any-one Dane-geld,
No matter how trifling the cost;
For the end of that game is oppression and shame,
And the nation that pays it is lost!'”

Evil HR: Organizational Fetters, Social Fabians

27 Wednesday Feb 2019

Posted by Nuetzel in Identity Politics, Progressivism, Social Justice

≈ Leave a comment

Tags

Best Practices, Centers of Excellence, Core Competencies, Corporate Social Responsibility, Corporatism, Disparate impact, Diversity Training, Fast Company, Glenn Reynolds, Human Resources, Jordan Peterson, Kyle Smith, Social Justice, Stakeholders

It is with deepest apologies to my friends in Human Resources (HR) that I admit to a long-standing bias: HR can exert a corrosive influence on a company’s ability to serve customers well and profit at it. I’m sure there are exceptions, but HR often pursues missions that are incompatible with the firm’s primary objectives. I’ve had my own difficulties with HR at employers for whom I’ve worked, and those have been of a mere bureaucratic variety. Today, the dysfunction goes much deeper. Many HR departments are engaged in a sort of Fabian gradualism, subverting free enterprise from within and promoting the doctrine of social justice.

Here are a few reasons for casting a skeptical eye on the contributions of HR:

It adds little value in screening applicants for certain kinds of jobs, helping to explain why so many job matches occur via professional networks and external recruiters.
I have witnessed HR scuttle simple plans to add interns, paid or unpaid, asserting that our department had no authority to institute such a program.
HR dreams up ridiculously ambiguous and complex performance assessment methods, which in the end make very little difference in the structure of rewards.
HR insists that “promoting diversity” is a key component of every job assessment, forcing staff to engage in written exercises of creative fluffery.
It creates incentives that distort hiring and firing decisions based on demographic characteristics rather than actual job qualifications and performance.
HR requires staff time for “diversity training”, an effort that is often resented as an insulting and patronizing intrusion on the time employees have to do their jobs.
HR emphasizes rewards to “stakeholders”, with little deference to the primacy of shareholders. It’s one thing for a company to maximize its value proposition to customers and prospects and to provide employees with handsome incentives. Those are fully consistent with maximizing the value of the firm. But “stakeholders” includes … just about everyone. Come and get it!
And HR relentlessly promotes the creed of “corporate social responsibility“, which ultimately involves a high order of virtue signaling on environmental and other social issues having little to do with the firm’s business.

It is true that HR is tasked with responsibilities that include minimizing a company’s exposure to various legal and regulatory risks. For example, one objective is to avoid any appearance of “disparate impact”. Even policies having a legitimate business purpose might be challenged if results have a statistical association with demographic characteristics. It’s an unfortunate fact that through efforts to manage that risk, HR serves as a spearhead of government intrusion into the affairs of private companies.

HR has thus become a tool through which collectivist ideals infiltrate business practices, to the detriment of the firm’s performance. These are exactly the kinds of things meant by Fast Company when they say HR isn’t working for you.

Kyle Smith makes no bones about it: companies should simply fire their HR departments. And many can do just that by outsourcing HR functions. Smith’s arguments are couched in the most practical of terms:

“They speak gibberish.” Yes they do. Nowhere is corporate-speak more pervasive than in HR, where they’ll tell you that the organization’s “core competences” must be “leveraged” via “best practices” by “empowered contributors” within “centers of excellence”.

“They revel in red tape.” To paraphrase Smith, HR could rightfully be renamed “Compliance Resources”. These “paper pushing” functions are drivers of bloat and cost escalation, a manifestation of the familiar cost disease endemic to all bureaucracies.

“They live in a bubble.” HR managers have an inflated view of their role in the organization. Smith quotes an HR executive: ”The organization reports to us. It must meet our demands for information, documents, numbers.” Sounds like a classic central planner. Unfortunately, many companies acquiesce to the tyranny of HR bureaucrats, much to their detriment. But Smith’s point here is that HR executives are often out of touch with the way employees truly feel about the company for whom they work, with an exaggerated view of employee enthusiasm. Yet those executives are given responsibilities for which they should know better.

“They aren’t really in your business.” The skill emphasized as most important for success in HR is communications skills, according to Smith (“… what you and I call talking.“) Knowledge of finance, engineering or technology is noncritical. Fair enough, you might say: their role is different, but this goes a long way toward explaining why HR generally fails so miserably in evaluating job candidates. Can you really expect them to craft policies designed to optimize a business’ use of professional talent?

Jordan Peterson takes an extremely dim view of HR. I share his concern that HR, and HR policies, have a tendency to become heavily politicized. Ultimately, this cannot be of value to a competitive firm. As Glenn Reynolds likes to say, “Get woke, go broke“. Peterson’s perspective is societal, however, and he goes so far as to say HR departments are “dangerous”:

“I see that the social justice etiology that’s destroyed a huge swath of academia is on the march in a major way through corporate America. …

… they’ve become ethics departments. And people who take to themselves the right to determine the propriety of ethical conduct end up with a lot more power — especially if you cede it to them — than you think. And that’s happening at a very rapid rate.

The doctrines that are driving hiring decisions, for example — any emphasis, for example, on equity, or equality of outcome — it’s unbelievably dangerous. You don’t just pull that in and signal to society that you’re now acting virtuously without bringing in the whole pathological ideology.”

The value extracted from firms in the service of achieving “social justice” is essentially stolen from its rightful owners. The penalties don’t end with shareholders; employees and suppliers lose a measure of security from a weakened firm, and customers may suffer a loss in the quality of the product. It is as if reparations must be made to parties who are completely external to, and completely unharmed by, the success of the business.

It’s little wonder that companies are outsourcing their HR functions. A classic case is the use of recruiting firms that specialize in identifying talent in particular professions. Another is the outsourcing of benefits management, and there are other functions that can be farmed out. Eliminating bureaucratic bloat is often a focus of firms seeking to rationalize HR. Ultimately, a leaner HR department improves cost control, and keeping it lean reduces its latitude to divert company resources toward endeavors that promote the philosophy of collectivism.

Sacred Cow Chips

Tag Archives: Corporatism

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Activists Prey On Corporate Pushovers