On the Equality of Taxation

Posted on July 6, 2013 by admin

The Age of Enlightenment of the 18th century saw the intellectual maturation of the humanist belief in reason as the supreme guiding principle in the affairs of mankind. The Enlightenment introduced critical thinking to replace the dead weight of tradition and challenge the blind faith in institutions. Voltaire, a French Enlightenment thinker, known for his defense of civil liberties challenged the myths of superiority that underlie the aristocracy and monarchial governments of the eighteenth century. He opposed the corruption of the Church and believed there was an unfair balance of power and taxes between the aristocracy, and the commoners and middle class who were burdened with most of the taxes. He supported rights to freedom, equality of taxation, and respect for the individual.

Voltaire did not support revolution, but his ideas had a significant influence on the French Revolution. The French reformers introduced the revolutionary new ideas of Equality, Liberty and Fraternity to signify a transition from the old regime to the new liberal one. Equality was reflected in the elimination of hereditary privilege, the aristocracy was subject to the same laws as other French citizens. In addition admission to public office would now be based on capacity, virtue, and talent rather than heredity or status. There was the elimination of privileges based on birth; everyone will have to pay taxes.

Then came the counter-revolution in the early 19th century. Joseph de Maistre thought that the revolution and the republic it created in the name of reason and individual rights had failed. He thought social order had been shattered and there had been too much liberty and not enough religion. He attacked the idea’s of Voltaire specifically. He claimed there was a need for strong institutions, social, religious and political, to reign in human perversity which was ever lurking below the thin veneer of civilization. De Maistre described an authoritarian conservatism in which proper government required the upholding the functions of the state in enforcing moral and religious creeds, and attacked liberty as an abstract principle.

In the latter half of the 19th century a new revolutionary way of thinking appeared with Charles Darwin’s Theory of Natural Selection. The Theory of Natural Selection, arrived at upon an empirical basis explaining the role in evolution played by chance, was a complete rejection of Newtonian determinism, the system that supported the invisible hand in Adam Smith’s economic theory. In addition, the theory made man equal to the apes (human were part of the natural world closely related to the smaller apes) – a process that undermined significant teachings of the Bible. Now it was necessary to factor in the meaning of freedom based on new ideas.

During the second decade of the 20th century the principles behind Christian fundamentalism developed in response to the challenges to the church that had appeared in the late 19th century (including Darwin’s theory). In the 1970s the fusion of the conservatives and fundamentalists appeared that countered the ongoing threats from communism and the new freedom of expression associated with the sexual revolution. In 1979 Jerry Falwell (1958-2007) established the Moral Majority that crusaded against what it viewed as negative cultural trends, especially legalized abortion, the women’s movement, and the gay rights movement. The Moral Majority became a very prominent movement and is credited with delivering huge numbers of votes to Ronald Reagan in 1980. President Reagan won the election on the principled platform of limited government laying the foundation for deregulation and the growth of globalization.

The Christian Coalition was founded by Pat Robertson (1930- ) in 1989 to give Christians a voice in government. In 1994 Roberson helped develop the document, the Contract with America which was devoted to rolling back government, included many ideas that originated at the Heritage Foundation (a conservative think tank) espoused shrinking the size of government and lower taxes. It used abortion and same sex marriage as wedge issues (to distract the middle class) and was responsible for the election of conservatives to the 1994 congress.

The ideology of reducing government regulation and taxes led to the growth of global corporations during the past four decades and the effective dismantling of unions in North America with the outsourcing of many high paying middle class jobs. Globalization leads to competition amongst countries for business.  This, in turn, drives down taxes, and weakens health and environmental protection, creating a situation in which states are no longer in a position to impose reasonable taxes. The more tax rates are cut, the greater the share of national income that is mopped up by the wealthiest citizens.

A new world aristocracy that forms a global community connected by interest and ideology has appeared. The new aristocracy opposes increases in their taxes and the tightening of the regulations of their economic activities. They believe this (low taxes) is driving the whole system. The new global aristocracy is a system in which privileged groups in both developed and developing countries act (often in concert) to protect their own position at the expense of others. Under globalization the dominant business class no longer needs to accommodate citizen pressures within national boundaries.

In the 21st century, the epigenetics revolution is rewriting our understanding of genetic disease and inheritance. Individuals are much more sensitive to exposures from their environment, diet and lifestyles than previously thought. Epigenetic control of our genes represents a fundamental shift in the way we understand our world. Today the equality of individuals must be based on epigenetic harms. Wellness (good health) is the opportunity a person has to reach their full potential. The greatest influence on one’s health is not the absolute amount of money one makes, rather how income wealth is distributed. Rising income inequality is contributing to the deterioration of the health of all people, regardless of their income level.1 It is time for governments to raise additional revenues from those most able to afford it in order to support social programs that help reduce social and health inequities.

1Horsman, Greg. Evolutionary Economics and Equality: An Age of Enlightenment. Pp 225-227.

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Aristotle and Freedom

Posted on June 8, 2013 by admin

Plato developed his concept of freedom in a perfect society – describing an ideal way to structure our society. Aristotle approaches the problem from an individualistic point of view – freedom depends on people’s ability to communicate freely and effectively. He conceives freedom as the capacity to direct oneself to those ends which one’s reason recognizes as choice worthy.  A morally virtuous action requires an individual to be able to choose how to respond to his or her own thoughts and feelings. Thus the concept of moral responsibility implies that an individual has some freedom to choose his or her own actions.

For Aristotle the goal of human life was happiness, Richard Tarnas observed, the necessary precondition for this was virtue. But virtue itself had to be defined in terms of rational choice in a concrete situation where virtue lay in the mean of two extremes. “Good is always a balance between two opposite evils, the midpoint between excesses and deficits…” The virtue of courage, for example, lies between the vices of rashness and cowardice. The coward has too much fear, or fear when he should have none. The rash person has too little fear and excessive confidence. The courageous person has the right amount.1

For Aristotle self-love was a virtue, and the most important aspect was to find the correct balance between the extremes of excess and deficiency. A person with the right balance of self-love will seek what is best for himself or herself, which will be consistent with what is best for all. It also helps us to truly know and recognize ourselves – both the good parts and the bad parts. Finally it allows us to act rationally in our own best interest, or better, allows us to reach our potential. That means making intelligent decisions rather that being driven by emotions, and having regard for long-term interests rather than acting on impulse. Such a person seeks to become the best that he can be – to reach their full potential.

At one extreme too little self-love results in self-loathing in which one does not pursue actions to support one’s well being (with respect to relationships, habits, vices). At the other extreme, too much self-love results in selfishness, self-centeredness, and a personal sense of entitlement and narcissism. Virtue gives us the strength of character needed for us (and those around us) to flourish. It also includes the practical wisdom to when and how to best apply moral knowledge. In addition it moves away from a world in which individual rights are constantly pitted against each other and acknowledges a place for feeling and emotion.

Ayn Rand described her philosophy of objectivism as the blending of free markets, reason and individualism. Rand adopted Aristotle’s self-love in which we love ourselves in the proper sense when we pursue our own true good. This means using reason to make intelligent decisions and not being buffeted by desires – having regard for long-term interests rather than acting on impulse. Rand spoke of the importance of self-esteem, meaning justifiable pride in one’s accomplishments. Self-esteem was deemed a necessary defense against altruists who wanted people to give up their liberty or property for the sake of an alleged greater good.

Established in 1985, over 15 years Enron grew into the seventh largest company in the US with over 21,000 employees worldwide. The company developed a unique hiring format. They brought in a stream of the best college MBA graduates they could find, who became (star) performers, who did what ever they wanted. This created a milieu for extreme individualism and narcissism. Enron became a narcissistic company in which workers did not need to acknowledge their faults and deception, and a declining sense of responsibility became part of their culture. Enron created cash flow through various methods that included creating a phony California electricity crisis, as well as novel methods of keeping liabilities off the books. The company collapsed and was delisted from the stock market in 2002.2

Five years after the collapse of Enron the International Monetary Fund declared the bursting of the housing bubble in the US and its worldwide consequences, the largest financial shock since the great depression. The sense of entitlement allowed Wall Street to create the milieu for the greed and corruption, which led from one crisis to the next, where on each occasion the actions were consistent with the excess self-love of Aristotle that one associates with narcissism.

Aristotle attacks the bad effects of self-love, arguing that a virtuous person should love justice rather than himself. Aristotle notes that the cause of all errors arises in each occasion for each person because of extreme love of oneself. This love makes us slow to correct our ignorance, and prone to claim knowledge when we know nothing. In the end the truly great man should love just things [where justice is fairness], whether done by himself or someone else.  The highest good is happiness, not material goods or intellectual knowledge, which involves proper function of a life balanced between reason and desires.3

Income inequality damages health outcomes in two ways. Health follows a social gradient, the lower down the gradient the poorer the health outcomes. Also income inequality is detrimental to the more affluent members of society since members of these citizens experience psychosocial stress from the inequality and loss of social adhesion.  Countries that minimize economic inequalities are societies where children are most likely to be able to develop their full potential. These factors secure the fairness [ensuring that social policies, social systems, institutions and environments are beneficial to all individuals] that gives everyone the equal opportunity and freedom to make the choices to reach their full potential, and achieve happiness.

1Horsman, Greg.  Objectivism Lost and the Age of Disillusionment p. 45

2Horsman, Greg.  Evolutionary Economics and Equality: An Age of Enlightenment p. 179.

3Heinaman, Robert.  Plato and Aristotle’s Ethics, p. 96

Posted in economic inequality, Objectivism Lost and an Age of Disillusionment, The Narcissist's Vocation and the Economic Debacle | Tagged , , , | 1 Comment

The High Cost of Sugar

Posted on May 23, 2013 by admin

During the 17th and 18th centuries sugar accounted for one third of Europe’s entire economy. After the Seven Years’ War France chose to retain the sugar producing island areas of Haiti and Guadeloupe, and cede Canada to Britain. By the time of the French revolution Haiti was producing more than half of all the coffee in the world, was producing 40% of the sugar for France and Britain, and accounted for 40% of France’s foreign trade (at a time when France was a dominant economy on the continent). In the 18th century the British West Indies were Great Britain’s most important trading partners.

The Caribbean sugar interests were a lobby that developed as the production of sugar resulted in money pouring into Britain. The lobby supported government policies that ensured the sugar business continued to provide large profits. Eventually a number of the lobbyists became MPs. They had the power and wealth to buy votes and exert pressure on others. They wrote a pamphlet arguing the slave trade (that supported the sugar plantations) was necessary to support the British economy. The slavery lobby presented themselves as reformers – revising slave codes and offering improved conditions.

In the late 18th century cotton, not sugar became the main produce of the British economy. By this time sugar has become much cheaper and played a role in the new industrial workers diet, which shifted to more fat, sugar and refined flour. These cheap, energy-providing foods were considered ‘fuel’ for the industrial revolution. These foods needed no digestion time; they became the energy food for the industrial worker. With more and more women working in the factories, it was advantageous to have foods with longer shelf life and less spoilage.  With this sudden change in diet health of the workers declined during the 19th century. The malnutrition among the poor classes at the end of the 19th century was awful.

Today sugar is one of the most traded commodities on the planet ranking only behind petroleum, precious metals, and coffee. North America is a $10 billion annual market. In the 1970s the US government decided to protect the domestic market for sugar with import restrictions that limited cane sugar that was imported into the country to ensure the price remained 50% above world-market prices. At the same time high fructose corn syrup that was made by enzymatic digestion of cornstarch came on the market. Agribusiness promoted HFCS through political contributions to both Republicans and Democrats. Corn syrup use increased dramatically as it was cheaper, easier to transport and sweeter than cane sugar.

HFCS became the sugar of use in soft drinks, yogurt, cottage cheese, sour cream, baked goods (to keep moist) and frozen fruits. The fructose in HFCS is metabolized differently in the body than cane sugar is. For example, it does operate as efficiently in appetite regulation to shut down the urge to eat – thus a person eats more than they need. In addition fructose is more rapidly metabolized in the liver leading to more triglyceride synthesis and fat storage in the liver – leading to a rise in serum triglycerides and promoting an atherosclerotic profile and higher risk for cardiovascular disease. Some kids get 40% f their calories from junk food.

The industrial food system has made food very cheap. Industry argues that regulating the amount of sugar will be very costly to the economy because it will be necessary to redo the formula of salt, sugar, fat ratios to create a desirable product. In 2012 the industry is presenting themselves as the answer to the fear how to feed nine  billion people (in 2050), and argue for a continued reliance on processed foods. This is about spinning a story that sugar is not bad, rather a safe, reliable, cheap way to deliver necessary calories.1

The current food systems are deeply dysfunctional, with the world paying an exorbitant price for the failure to consider the health impacts in designing food systems. Deaths from non-communicable disease are rising in poor countries.  A change of course is needed as a matter of urgency – the cost of sugar is too high.

1Moss, Michael. Salt Sugar Fat: How the Food Giants Hooked Us  p. 340.

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On Transforming Rationalization

Posted on May 2, 2013 by admin

John Locke (1632-1704) believed that one should use reason to search after truth rather than simply accept the opinion of authorities or be subject to superstition. Used properly, reason could determine the legitimate functions of institutions and optimize the functioning of a society with respect to both spiritual and material welfare. Locke rationalized inequality through a complex analysis of people’s rights in a social contract, and especially the right to withdraw their consent if power of an institution or government is abused. During the Enlightenment the scientific rationalization of nature evolved into the optimistic faith in the ability of man to develop progressively through education and the use of reason. Science and reason were promoted not to just understand the world, but to change it as well.

Romanticism was a revolt against Enlightenment rationalism. It became a significant force in the early 19th century and radically changed the way people perceived themselves and the state of nature around them. The person listens more intently to the individual conscience than to the demands of society, and prefers rebellion to acceptance. Romanticism allowed people to get away from the constricted, rational views of life and concentrate on an emotional and sentimental side of life. Romantics recognized the limits of human reason to comprehend reality and be objective. The Romantics attacked the Enlightenment because it blocked free play of emotions and creativity.

In the 19th century two philosophers, Søren Kierkegaard and Friedrich Nietzsche, stood out with their reaction against the ‘impersonal’ rationalism of the Enlightenment, and stressed the importance of the individual. Kierkegaard (1813-1855), the ‘father of existentialism,’ believed that one must choose one’s own way without the aide of universal objective standards.  Against the traditional view that moral choice involves an objective judgment of right and wrong, existentialists have argued that no objective, rational basis can be found for moral decisions. To make moral assessments, one must first know what an action is intended to accomplish and what its possible consequences will be on others. Thus for the existentialist, it is necessary to create one’s own values in a world in which traditional values no longer govern.

Nietzsche (1844-1900) rejected the power of reason, and the belief that science would automatically lead to progress. He claimed there was no objective fact about what has value in itself – culture consisted of beliefs developed to perpetuate a particular power structure. The system, if followed by the majority of the people, supports the interests of the dominant class. In the past the aristocracy developed the opposing values of good and bad. Good is power enhancing; bad is power diminishing, and the strong continue to define what is good. In such a system people do not seek knowledge for knowledge sake, rather for what is useful to maintain power (the dominate state). Nietzsche said, “God is dead” in the sense that the lives of modern people are not God-centered, and our sciences make no reference to God.

For Nietzsche the values (culture and traditions) of the dominant society (with an ideology consistent with its interests) were oppressing the emergence of a new generation of stronger individual and a more vigorous society and culture. Darwin has effectively shown that searching for a true definition of species is not only futile but unnecessary since the definition of a species is something temporary, something which will change over time, without any permanent lasting and stable reality. Nietzsche strived through his philosophical work to do the same for cultural values. He substituted Darwin’s adaptive fitness with creative power – for Nietzsche everything is in flux. Ideas should change as soon as information and inputs change. The goal of the good life was self-fulfillment achieved by overcoming the conflicts in both natural and cultural environments through free personal choices.

Thorstein Veblen (1857-1929), a contemporary of the robber barons, combined the new ideas on Darwinian evolutionary perspectives with his institutional approach to economic analysis. Veblen described man’s conflict: “The life of man in society, just as the life of other species, is a struggle for existence, and therefore is a process of selective adaptation. The evolution of social structures has been a process of natural selection of institutions.” Veblen used the term, conspicuous consumption, to depict the behavioral characteristic of the nouveau riche, a new class that emerged in the nineteenth century capitalistic society as a result of the accumulation of wealth. He saw the modern industrial community as being polarized between those making money and those making goods. Veblen wanted people to understand the social and cultural causes and effects of economic changes.1

Since the turn of the 20th century there has been a belief that technology and reason could make us masters of our own environment. Max Weber (1864-1920) noted by loosening the hold of custom and tradition, rationalization led to new practices that were chosen because they were efficient and predictable, rather than customary. A rational society is one built around logic and efficiency rather than morality or tradition. Rationalization of the economy created the mindset that the economy requires less and less engineering (regulations), and would be capable of fixing itself. This, in turn, created the notion that there exists an inherent natural law unaffected by human endeavor and weakness that drives the economy. However, the corporation’s imperative for short-term profits means that during this recession the demands for less taxation and the need for budgets of governments to be opportunistically cut, comes from a voice that becomes ever more shrill. Today we recognize the limits of economic rationalization that underpins an ideology based on selfishness, and the need for changes to allow the free personal choices required for individuals to reach their full potential.

The consequences of the 2008 debacle – ongoing high unemployment and the growing income gap between the wealthy and the rest of society underscores the basis of rational self-interest (selfishness). When challenging ideology (in 2013 the status quo) it is necessary to choose criterion for distinguishing ideas that support the relations of domination. The economic system of the past 50 years is a codification of political ideology defended by proxies. When one declares that the increasing economic inequality is the consequence of the new social contract of the last five decades, the news media on the right stridently accuses one of inciting class warfare. This reaction is consistent with the observations of Thorstein Veblen, that is, the power of the wealthy to respond to minor challenges from new ideas as a constituency, and when they do, to claim the whole system is threatened.2  Rather than seek to destroy the Western system of rationalization like Nietzsche, we need to transform it.

1  Horsman, Greg. Evolutionary Economics and Equality: An Age of Enlightenment p 89-101.

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Plato and the Healthy Community

Posted on April 16, 2013 by admin

Athens and Sparta, two of the most powerful Greek city-states, had fought as allies in the Greco-Persian Wars between 499 and 449 BCE. The half-century following the Persian Wars Athens grew as a maritime power and prospered. As Athens grew more powerful, tensions grew with Sparta, escalating into almost three decades of hostilities called the Peloponnesian War. Plato was born during the second year of the Peloponnesian War. In the end, Sparta won, leaving Athens bankrupt and demoralized. Sparta installed the thirty tyrants that lead to further chaos and accelerated the decline of the Athenian Empire. Living in Athens during these uncertain times had an effect on Plato’s thinking and influenced his writings.

Plato claimed the health of the community is the overriding principle in all spheres of life. He identified selfishness and egotism that characterizes individualism as the enemy of the system. Reason was to rule over the passions – over the empirical world of desire, appetite and ambition. Only under the rational freedom that Plato sought can human beings fully realize their human purposes (when reason reigns over opinion). This can only be achieved in unison – individuals working together with each other rather than apart and against each other. It was about achieving a just state; each individual has a specific set of duties, a set of obligations to the community, which, if everyone fulfills them, will result in a harmonious whole.

Plato observed, the maximum of individual freedom is the maximum of unchecked pursuit of individual self-interest. The consequences of this unchecked activity are the ruination of public life to the detriment of all individuals. This individual freedom reduces the freedom of the community (group) leading to the ruination of public life. This makes justice the founding principle of the political community. Individual justice is the source of happiness. This allows individuals to reach their full potential and achieve happiness.

Plato argues that it is natural for individuals to pursue self-interest without regard to others. Justice is simply a question of convenience (not a loss of freedom). Under this system, to do wrong is a desirable thing; yet to suffer wrong is undesirable. In the dialogues, Glaucon (from the Republic, Plato’s older brother) offers the explanation: “Consequently, when men have had a taste of both, those who have not the power to seize the advantage and escape the harm, decide they would be better off if they made a compact neither to do wrong nor to suffer it…justice is accepted as a compromise and valued, not as a good in itself, but for lack of power to do wrong.”

Men only practice justice against their natural inclination. Two men, one just, the other unjust, are given full license to do as they please. The just man, Glaucan says, will pursue his own self-interest the same as the unjust man “until forcibly turned aside by law and custom to respect the principles of equality.”

After the Second World War the gradually expanding economy created prosperity throughout Canada and the United States. The 1950s saw the shift of population from suburban to suburbs. Housing increased dramatically, the automobile industry took off and electronics grew by leaps and bounds. At the same time, the middle class expanded dramatically. Social mobility drove the American dream. In the 1970s and 1980s, labor unions won long-term employment contracts and other benefits for their members. In the 1980s the economic model of small government and deregulation went mainstream under the administrations of Margaret Thatcher in Britain and Ronald Reagan in the US. They embraced the ideas of (individual) freedom espoused by Friedrich Hayek and Milton Friedman.

Friedrich Hayek claimed that human cooperation, social order, and economic prosperity are only possible where human freedom is maximized, subject to the restraints of a legal and moral code. These ideas are incorporated into the ideology of minimal governments and deregulation of the past five decades. This worldview shares the concepts of order and tradition envisioned by Plato’s ideal community, but deviates greatly thereafter. Milton Friedman claimed, “A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both.”  The consequence of five decades of regressive taxation and deregulation is a weakened economy that no longer reliably and consistently transmits productivity gains to workers. Extreme individualism triumphed – selfishness won. The last decade has been the lost decade of the middle class in Canada and the US.

Plato voiced his concern, “the more closely I studied the politicians and the laws and customs of the day…the more difficult it seemed to me to govern rightly…in an age which had abandoned its traditional moral code but found it impossibly difficult to create a new one.” John Kenneth Galbraith, an economist who warned of the dangers of deregulated markets and corporate greed observed, “the modern conservative is engaged in one of man’s oldest exercises in moral philosophy, that is, the search for a superior moral justification for selfishness.”1 Today the same issue that consumed Plato,  the consequences of the lack of restraint on the selfishness in the system that results in increasing inequality are apparent. The last fifty years are about the hollowing out of the middle class and the loss of social mobility. The increased poverty associated with the sense of social exclusion, and a loss of control over events leads to an individual’s loss of freedom to reach their potential. Failure to ensure a healthy community in the first decade of the 21st century is linked to the lack of economic opportunities for individuals to reach their potential. Unchecked selfishness is undermining the health of our communities.

1 Horsman, Greg. Objectivism Lost and an Age of Disillusionment, pp 147.

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Reality in 2013

Posted on April 2, 2013 by admin

The Enlightenment saw the intellectual maturation of the humanist belief in reason as the supreme guiding principle in the affairs of mankind. The ‘truth’ discovered through reason would displace the dogged adherence to established opinions and customs and enlighten a population that the system has kept in the dark. The Enlightenment thinkers introduced questioning and critical thinking to replace the dead weight of tradition and challenge the blind faith in institutions and sought to advance the public good. This cultural movement ushered in the scientific method – a new way of studying the natural world.

Plato had assured us that reason (ego) could control our worse impulses; then Freud brought forward the evidence of the existence of unconscious forces determining man’s behavior and conscious awareness. The revelation that below or beyond the rational mind existed an overwhelming repository of non-rational forces undermined the idea that reason could be used to establish an authoritative system of government and ethics, etc. Freud postulated the pleasure principle as the force that controls an individual’s urges – the ego, is the rational part of the mind under the influence of societal mores mediates the part of the mind, called the id, that contains the unconscious impulses which seek immediate experience and gratification. Freud noted that while these impulses might temporarily be held in check, they can never be permanently eliminated.

Freud later described the reality principle, the ability to evaluate the external world and differentiate between it and the internal world. The reality principle did not replace the pleasure principle, but represses it, such that, a momentary pleasure; uncertain of its results, is given up, but only in order to gain in a new way, an assured pleasure coming later. The reality principle strives to satisfy the id’s desires in realistic and socially appropriate ways. Some believe that reality and consciousness are one and the same, and over time one becomes aware of the real environment and the need to accommodate it.

Consumer capitalism encourages us to think of ourselves in terms of what we want to have, to own, to possess – reinforced through repetition. Corporate capitalism’s ability to manipulate the unconscious mind has lead to the growth of a sophisticated propaganda racket that shapes public opinion and governs people’s behaviour. We no longer buy a product rather a lifestyle. Having a new car, house, or electronic gadget determines the status and worth of a person in the community. Ownership guarantees fears, anxieties and internal conflicts can be resolved and pleasure attained through the simple act of buying.

In 2013 newspapers describe reality is now about a slower long-term economic growth and an aging society associated with an epidemic in chronic disease. The consequences of these phenomena are high unemployment, less workers to support retirees as government revenues grow slower than before. Without so-called efficiency gains in the economy the choices swing between higher taxes or fewer services. The economic debacle of 2008 has highlighted the increased economic gap between the wealthy and the rest of society and accelerated the disappearance of pensions and jobs.

While the politicians remain silent on a solution, the corporations work overtime through proxies to defend trickle down economics, claiming that without minimal government and less regulations, people should fear the ability of the system to create jobs and expand the economy. Right wing think tanks even challenge the growth of inequality between the wealthy and the rest of society. The basic situation in  trickle down economics is that reality does not match the rhetoric.

Since the turn of the 20th century, there has been a belief that technology and reason would make us masters of our environment, but now we realize we bought into an illusion. The stress that comes from the inequality of our society, in particular, from economic inequality, may have more effect on our health than any other single factor. To control the epidemic of chronic disease it is necessary to address the economic gap. Real solutions to job creation cannot occur without addressing the growing income inequality between the wealthy and the rest of society. The reality of 2013 is that inequality matters.

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The Rationalization of Inequality

Posted on March 17, 2013 by admin

The Medieval church became the most dominant institution in western Europe. It was one of the largest landowners of the time and collected rents and many fees for offices and services. The church did not pay taxes. The top down structure facilitated control of information and the creation of wealth, ultimately ensuring the abuse of power. In Passion of the Western Mind, Richard Tarnas identifies the change from medieval era to the modern character, the modern mind required a systematically critical independence of judgment. Tarnas described the process as, “The modern emergence of autonomous personal judgment, prototypically incarnated in Luther, Galileo, and Descartes, made increasingly impossible the continuation of the medieval era’s virtually universal intellectual deference to external authorities, such as the Church and Aristotle, that had been culturally empowered by tradition.”1

Only with credit, which he had to repay with income from the sale of indulgences by the preacher Tetzel, had Albert of Mainz, one of the Imperial Electors, been able to buy himself worldly and church offices. These activities triggered Luther’s 95 theses and call for reform in 1517. Opposition to Luther’s ideas initially was due to the impact on Fuggers’ investments and Albert’s cash flow. The Medieval church’s efforts to suppress heretics had less to do with spirituality and everything to do with social and political control. In less than 50 years after Luther posted his 95 theses  against indulgences on the church door in Wittenberg, Protestant reformers had established original systems of Christian doctrine and new churches in opposition to the Church of Rome.

With his newly developed telescope, Galileo (1564-1642) made observations that supported the Copernican theory (movement of earth around the sun) which raised questions about the Aristotelian and Ptolemaic view (sun rotates around the earth) of the universe. These ideas were opposed because they undermined the power and authority of the Catholic Church. Isaac Newton’s studies of gravitation established the Copernican theory of the Earth revolving around the sun, introduced to the West the concept of mankind as the center of the universe, establishing individualism as a core value of society.

Aristotle’s followers accepted every word of his writings, or at least every word that did not contradict the Bible as eternal truth. Fused and reconciled with the Christian doctrine into a philosophical system known as scholasticism, Aristotle’s ideas were used to support the interpretations of the Scriptures. Descartes, a mathematician and philosopher, most famous for his writing, Meditations on First Philosophy in 1641, presented ideas that laid the groundwork for science through developing skeptical questions concerning the possibility of knowledge. The substance of his principles destroyed the principles of Aristotle.

The deregulation and minimal role for government has been ‘culturally empowered’ since the 1970s through the universal intellectual deference to external authorities such as Friedrich Hayek, Milton Friedman and Ayn Rand. Their followers accept unquestioningly every word of their writings that support laissez faire economics. Friedrich Hayek claimed laws are to protect the liberty of the individual, even though it created a system with built-in inequality. Milton Friedman, the champion of the trickle down economics – the laissez-faire economic system helps poor people by the trickle down effect in which economic growth flows down from the top to the bottom indirectly benefiting those who do not directly benefit from the policy changes. This economic theory advocates letting businesses flourish, since their profits will ultimately trickle down to lower-income individuals and the rest of the economy. Ayn Rand developed objectivism as the blending of free markets, reason, and individualism. What the theories of Hayek, Friedman and Rand shared in common is a belief in rational self-interest.

Rationalists are free to theorize anything they want without such irritating constricts as facts, statistics, data, history or experimental confirmation. Claims of objectivity can be considered a means of presenting one’s own ideology as a screen for established facts. The problem with rationalism is that it tends to leave out the facts. Reality is complex and has many facets that one must connect to form knowledge.  Beliefs and new ideas must be met with questioning and skepticism to prevent them from becoming dogma.2

In the 21st century, the top down economic system of control is about cheap money and power staying concentrated with a small group at the top of the economic pyramid. Trickle down economics links the welfare of the working class directly to the prosperity of the rich, protecting the interests of the few at the top of the economic pyramid. Occupy Wall Street protesters challenge the ideas of trickle down economics that have been  culturally empowered  by universal deference to Hayek, Friedman and Rand, and point out trickle down economics is about the flow of money – about more and more money flowing up the pyramid to the few at the top; the data establishes that neither social mobility nor growth of the middle class are supported by this economic theory, and that scientific facts destroy an economic theory with a core component based on the rationalization of inequality. (The system is associated with increased economic inequality – the lower the top marginal rates go, the bigger the share of national income that goes to the top 0.1% of wage earners.)

1Tarnas, Richard. The Passion of the Western Mind (p 320)

2 Horsman, Greg Objectivism Lost and an Age of Disillusionment (p 132)

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About Madness and the Deluded

Posted on March 2, 2013 by admin

Bubbles occur when prices of a particular item rise far above the item’s real value. A stock market bubble is a self-propagating rise or increase in share price of a stock – investors buy more stock at an inflated price believing the price will continue to rise. In the regular market, housing prices typically rise along with the rate of inflation or increase in average income. In the US the inflation adjusted house prices nationwide were on average essentially unchanged from 1953 to 1995.1 In 2008 housing prices were falling at more than a 30% annual rate in the most rapidly deflating markets.

One of the largest bubbles in the 18th century was the South Sea Bubble. Following the War of Spanish Succession the British government became concerned over the size of the government debt. Harley, Earl of Oxford was the lead on setting up a scheme to buy up government debt, and trade in the South Seas. Insiders spread rumors that Spain would grant Britain free trade access to four ports in Spanish America (the South Seas) – promising huge profits. The British Empire spread around the world; there was great confidence such a project would succeed.

There were no regulations against this activity at the time. To ensure that the company would be awarded the government debt option, key members of Parliament were bribed – receiving shares in the South Sea Company without cost. It triggered massive lending against shares. Easy credit was available – investors went for lottery-like payoffs (as a result of shares being sold with only a small down payment). It became an exercise in Ponzi finance – individuals paid inflated prices for shares on the belief huge profits would be made from trade with Spanish America. Wampole, the Prime Minister, at the time, opposed the project, but could not drive the debate in Parliament. The stocks peaked and then crashed in 1720. Two generations of wealth were lost when the bubble burst. Hurley and other directors of the company had friends in high places, so none went to jail. The Bubble Act was passed before the bubble burst, but it was too little too late.

The majority of politicians supported the ongoing expansion of housing as it became the main driver of the economy following the bursting of the Internet Bubble. There was confidence that the global economy didn’t require regulation, and could self-correct from any excess. The Wall Street-Washington corridor ensured politicians who needed funds for re-election were supportive of activities such as allowing banks to assign their own risk level. Brooksley Born, the head of the Commodity Futures Trading Commission (CFTC) – warned of the potential for economic meltdown in the late 1990s, but was unable to get key economic powerbrokers to take actions that could have helped avert the crisis.

The market was leveraged by bundling regular mortgages with high risk mortgages – creating new and alluring securities that could be bundled together and sold (to pension funds as low risk products) as alternatives to traditional bonds and traditional government bonds. To lure in more borrowers, the sub-prime mortgage with initially low interest rates was promoted – which worked perfectly as long as interest rates stayed low.  It became a Ponzi finance system based on the idea that housing prices would appreciate into the foreseeable future. Homes were used as piggy banks at the height of the real estate boom. People refinanced high-interest credit cards with a low interest second mortgage on their home – many subsequently lost their home.

The middle class saw their wealth decrease by over 30% as their major investments (homes and pension funds) shrunk. The economic debacle of 2008 created a lost generation with ongoing high unemployment and loss of opportunity for a younger generation. No one went to jail for manipulating and almost tanking the economy. The Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) was passed in July 2010 and is being slowly implemented.

The South Sea Bubble and the Housing Bubble both shared the problem of insiders exploiting asymmetries (such as risk information) fraudulently. In 1720, Isaac Newton, who lost money in the South Sea Bubble, claimed “I can calculate the motion of the heavenly bodies, but not the madness of people.” During either bubble there was no effective regulation. In 2009 Joseph Stiglitz, Nobel Prize winner in Economics, observed “Today only the deluded would argue that markets are self-correcting, or that they can rely on the self-interested behaviour of market participants to guarantee that everything works and honestly.”2 

1Baker, D. 2002. “The Run-Up in House Prices: Is It Real or Is it Another Bubble.” Washington, D.C.: Center for Economic and Policy Research [http://www.cepr.net/index.php/publications/reports/the-run- up-in-home-prices-is-it-real-or-is-it-another-bubble/].

2 Horsman, Greg. 2012. Objectivism Lost and an Age of Disillusionment (p 91)

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The New Normal

Posted on February 15, 2013 by admin

In the 17th century the word normal evolved from the Latin norma (noun), the carpenter square, and  normalis (adjective), meaning forming a right angle. Until the middle of the 19th century normal was used in geometry and simply meant ‘standing at right angles, perpendicular.’ In 1733 Abraham de Moire recorded the discovery of the normal curve of error (the proper name for the bell curve), through the analysis of the results of games of chance. Laplace, the mathematician, in 1773 presented a  paper in which he showed that the planetary motions were stable solving the error in Newton’s observation of planetary movement. Laplace believed that probability was a measure of the degree of certainty or rational belief that an event would occur.

Giuseppi Piazzi, discovered Ceres (a dwarf planet in the asteroid belt between Mars and Jupiter) on January 1, 1801. He made 19 observations over 42 days until it was lost behind the glare of the sun. Carl Gauss calculated the orbit of Ceres using three of Piazzi’s observations, and predicted where it would reemerge from behind the sun in the fall. The successes in astronomy led many to believe the normal distribution of a bell curve, or ‘law of errors,’ provided the potential for statistical analysis of many other populations. In the 1820s the French mathematician, Jean Baptiste Joseph Fourier (1768-1830), noticed that the statistics on the number of births, deaths, marriages, suicides, and various crimes in the city of Paris had remarkably stable averages from year to year.

Adolphe  Quetetet (1796-1874) was a Belgian mathematician and astronomer who promoted the use of the bell curve in measuring social phenomena. He observed that heights of any group of people tend to array themselves neatly around an average value.  His concept was that human traits (physical characteristics and social aptitudes) were grouped according to normal distribution, or the Bell curve. In 1842 Quetelet described his ideas in Treatise – that included the concept that the correction of effects must begin with a correction of causes, thus the improvement of social conditions will require the reform of social institutions . He believed that the statistical measurements of social phenomena would identify the effects and it would be “the province of the legislators to ascertain these causes and to remove them as far as possible.”  Francis Galton used Quetetet’s ideas to support eugenics – the science of improving the human species by breeding. Scientists at the turn of the 20th century applied Galton’s ideas to test for abnormalities in various populations, which were then used to define the normal.

By locating disease within individuals, the system fails to consider the broader social context in which problems are occurring, creating a world picture that people are fundamentally separate. In statistical measures behaviour is normal if it is frequent, and abnormal if it is rare. When applying the bell curve, the per cent of the population that are at either end of the bell curve would be considered abnormal as they are ‘rare’. There is no agreed upon definition of how much behaviour must deviate before it is considered abnormal. Social norms are standards set by society that show what is expected. These norms can change over time.

Over the last couple of years we have been told to get used to the new normal. The new normal is characterized by slow economic growth and what some call a ‘natural’ rate of unemployment that is higher than in the past.  We haven’t seen the kind of economic growth that we would normally expect to see after a major recession and, in fact, it has appeared more than once in the past four years to be slipping back into another recession. Some claim this is the result of weakness in the global economy; others say it reflects the loss of confidence in the ability of governments and central banks to keep economies on a steady, low inflation growth path.  The downturn has left governments struggling with new deficits and debts, while revenues have fallen. Central banks are unable to move away from the emergency point setting (low interest rates) that were put in place to deal with the financial meltdown of 2008 and its aftermath.

What are the measures of social phenomena associated with this new normal? There is an epidemic of chronic disease in Canada and the United States consisting of obesity, type 2 diabetes, cardiovascular disease and neurodegenerative disease. The factors that link these diseases are chronic inflammation and insulin resistance. Significant causes include environmental exposures to which we now realize the individual is much more sensitive than previously thought – external factors over which one has little control. The external factors responsible for the epidemic of chronic disease includes the change in diets such as the change from grass fed meat to corn fed, and edible oils that have introduced mankind to abnormal omega-3: omega -6 essential fatty acid ratio that enhances inflammation in the body. In addition the increased consumption of the unnatural sugar, high fructose corn syrup that is found in cheap foods – sugary drinks and processed foods that enhance obesity in the community, along with insulin resistance. The other external factor is increased stress – attributed to increasing economic inequality.

The root cause behind these changes in the environment started over 40 years ago with the changes associated with small government and minimal regulation world view that has driven the globalization philosophy. Agribusiness drove the mono culture of corn which favours corn fed beef (that can be brought to market faster than grass fed beef). The edible vegetable oil industry was dominating markets well before the minimal regulation ideology appeared. The last four decades has seen the widening of the economic gap between the wealthy and the rest of society. Hidden from the unemployment  statistics is pay cuts, reflected in reduction of both days worked and hourly pay. The amount of money one makes affects their health. Generally the lower an individual’s socioeconomic position the worse their health, creating a social gradient in health that runs from top to bottom of the socioeconomic spectrum.

The stress that comes from the inequality in our society, in particular, from economic inequality, may have more effect on our health than any other single factor. The analysis of social phenomena associated with the new normal means the new generation, starting in the workplace, can expect to earn less than their parents, and are on track to enjoy poorer health – the consequence of an increasing income gap and the epidemic of chronic disease associated with changes to the environment supported by globalization and minimal regulations. Our generation’s task is to correct the causes of the new normal in order to improve social and political equity for the next generation.

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The Challenge to the Middle Class: “Sapere aude!” Dare to Know!

Posted on February 1, 2013 by admin

Those in power would like us to keep quiet – one man who did not adhere to this unwritten memo was the German philosopher, Immanuel Kant (1724-1804). During the Enlightenment of the 18th century, a movement that introduced critical thinking to replace the dead weight of tradition and challenge the blind faith in institutions, Kant claimed that one ought to think for himself, free of the dictates of external authority. In Kant’s view, one should use his intelligence without being guided by others. He addressed his messages to the German bourgeoisie (middle class) who seemed resigned to their fate. Kant challenged them: Dare to know! Have the courage to use your own intelligence.

In Germany, during the 15th and 16th centuries, feudal lords transformed themselves into feudal princes. They were able to reduce the freedom (feudal rights) of the people under the explanation that they were defending the people from an outside threat, the Emperor. By the 18th century the princes across Germany had secured control of various states; the people only had the rights and liberties which their territorial princes gave them. They had given up various freedoms held in medieval times; now the prince had the power to determine the content of their freedom.[i]

The fact is the person or vested interest controlling the individual is not static. As one prepares to take a step to freedom and maturity, Kant noted, these authorities identify to the people whose ideas they control that the step is very dangerous and difficult to achieve. Once the vested interest (system) secures control of an individual it goes to great lengths to identify the dangers one would encounter if they attempt to do something without their aid – which frightens people from questioning the rules. In the 18th century, the German middle class did not feel they could do anything to change their lot, thus they adhered to convention.

From 1921 to 2008 the top 10% and the bottom 90% shared income gain equally. (as calculated by Emmanuel Saez) From 1971 to 2008 real income declined for the bottom 90% – all growth went to the top 10%, with more than half to the top one per cent.  The remarkable gains that the middle class enjoyed during the middle of the 20th century, abruptly disappeared in the last 25 years (of the 20th century). Corporations orchestrated the dismantling of middle class prosperity through unchecked deregulation. The first year of the recovery following the 2008 economic debacle, the top one per cent collected 93% of the income growth.

The largest institution of the 21st century, the corporation, is designed to create wealth and avoid paying taxes. Today’s convention, trickle down economics, gives the richest corporations (business and the wealthy) the biggest tax breaks, on the basis that economic growth flows down from the top to the bottom, indirectly benefiting those who do not directly benefit from the policy changes. In reality, during the last 35 years workers have seen their gains that were achieved after World War II reduced – benefit cuts for the poor, underemployment, a culture of job insecurity, pensions disappearing or slashed. The lower standard of living is being driven by global competition. The system cannot be changed, apologists claim, because minimal government and low taxes are required to create jobs with the ongoing threat from world competition. In fact, they claim, things would get worse if taxes were raised!

Occupy Wall Street protesters challenge the middle class to have the courage to think for themselves, challenge the blind faith and convictions in the present deregulated market, and support interventions to reduce the influence of the dominant institution, the corporation, on the government. The focused challenge to the middle class in the 21st century is – “Sapere Aude!” – Dare to know! – recognize that there is no correlation between top tier tax rates and unemployment, recognize the need for regulatory standards and accountability for businesses and a strong role for government, and the need to take a stand against the corporate special interests that have led us down the wrong path.

[i] Foster, Harold J. An Outline of European Intellectual History: Locke to Hegel  p (89-90)

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