Let's Reason

Two weeks ago, NYT columnist Frank Bruni wrote a column titled “The Democratic Primary’s God Deficit.”  In it, Bruni argues the Democtratic candidates should talk more about God and religion.  This, according to Bruni, would help connect them to religious Americans and increase their appeal with such voters.  Moreover, it would be smart politics because it would not cede this block of voters to President Trump.  This is an interesting proposition but not without problems and challenges notwithstanding certain opportunities.

First, should voters be interested in a candidate’s religious beliefs?  The constitution does not permit any test based on religious persuasion for those seeking a political office.  Then, why would pubic knowledge of the religious beliefs of a candidate matter?  The constitution also provides for a separation of church and state.   Therefore, voter awareness of a candidate’s religious affiliation should not matter, unless a voter expects favorable treatment of his or her church and faith from a coreligionist candidate, which in essence would be contrary to the Establishment Clause of the First Amendment.

Second, bringing God into political debates frivolously and selfishly might also offend Christians and Jews in light of the third Commandment “You shall not take the name of the Lord your God in vain.”  Finally, how are atheists, agnostics and nones (i.e., those unaffiliated with any church) supposed to talk about religion?  These are some of the challenges I see in inserting God in politics.

Having said that, I recognize that given the separation of church and state and the right of religious liberty enshrined in the First Amendment, the public has a legitimate interest in knowing a candidate’s views in regards to these matters regardless of the religious persuasion of a politician.  The point of interest then is how politicians respond to this challenge.

In 2016, Christian conservatives (comprised mostly of Evangelicals) saw an opportunity to further their religious agenda by decidedly siding with Donald Trump in spite of his revealing a character and using tactics that would have little chance meeting the moral test question “Would Jesus do this?”  Interestingly, the Christian Right saw in Donald Trump a stronger crusader of its cause than Ted Cruz, who also campaigned for that block’s support.  Even, Trump’s unfounded and scurrilous accusations against Cruz’s father and wife were not enough to halt conservative Christians’ enthusiasm for Mr. Trump.

Religions have a long history of seeking alliance with and protection from state leaders in order to survive or to dominate the spiritual domain.  As Ross Douthat (NYT, 9/16/2018) put it, Christian conservatives made a Trump bet that his support of their religious agenda justified his personal moral failings just like fourth century Christians made a bet with Emperor Constantin in order to secure religious freedom, and whom they even elevated to sainthood despite that Emperor’s involvement in family murders.  In a similar fashion, the leaders of conservative Christian churches have lost no time to declare that God’s will is behind Mr. Trump’s ascendancy.  Thus, they admonish their faithful to “render to God and Trump”; that God “wanted Donald Trump to become president”; that President Trump is meant to be a new King Cyrus sent by God to save Christians as the real Cyrus delivered the Jews from Babylonian captivity.  Many more such messianic pronouncements are in record.

The anxiety, rational or not, of the Christian Right, has been masterfully manipulated by Mr. Trump and his closest associates.  Several examples prove the point.  “If you don’t win this election, you’ll never see another Republican, and you’ll have a whole different church structure,” candidate Trump said on the Christian Broadcasting Network.  Not to be overshadowed by the President, Vice President Mike Pence has not let up in his persistent support of religious causes with little regard to the First Amendment.  More recently, Attorney General William Barr, in a speech at Notre Dame University, reportedly derided secularism and called it a threat to America aiming at destroying the traditional moral order.  This from the guy who is supposed to enforce the Establishment Clause; the clause that guarantees both freedom for religion as well as freedom from religion.

Here, the invocation of God and religion is part of a political agenda that leaves many Americans dismayed and uncomfortable in its sectarian partisanship.  To accept a generalization of this approach across political parties and campaigns risks taking us all down a very slippery road.

So, how should politicians talk about God and religion?  I would argue that politicians can address the public’s interest in the First Amendment while respecting the constitution by avoiding language that politicizes favoritism for this or that religious sect or for people of faith versus those without.  Expressions of personal religious beliefs should inform us about the person’s moral compass and not signal endorsement of a religious establishment.  In the same context, secularists can also discuss how reason and universal humanism informs their morality and their views about religious liberty and the separation of church and state.

I believe the public service both Democratic and Republican politicians can render to their country is to educate their fellow Americans about the proper role of religion in politics, the rights of all regardless of adherence to faith or not, and the perils of letting sectarian politics dominate political discourse and competition.

And a final note.  Contrary to Bruni’s column, Democrats have been talking about God in their campaign trails.*  See the Atlantic article in  https://www.theatlantic.com/ideas/archive/2019/06/2020-democrats-are-talking-about-religious-faith/592966/

I have just come back from a conference for board directors of credit unions and it’s time that I talked about this type of financial institution.  Not because I want to make you a credit union member, although this would be great, but because, in some special ways, credit unions are the anti-paradigm of for-profit businesses and what we come to take for granted regarding human economic behavior.

First, a few things about credit unions.  They operate as financial cooperatives that belong to their members.  In contrast to earlier times, anyone can now join a credit union without the condition of a common bond among members.  Like commercial banks, credit unions are regulated by the federal government or their state.  Because credit unions are recognized as not-for-profit entities, they enjoy a tax-free status.  Historically speaking, credit unions were a German invention imported in the US early in the twentieth century.  The idea was to allow people of low economic means with limited access to the banking system to pool their savings together so that they could borrow from this common pool of funds.  Today’s credit unions have grown in size and sophistication, rivaling banks in the range of retail banking products and services they offer, including financial technology.

One hundred fifteen million Americans – slightly more than one third of the US population – belong to 5,500 credit unions, which control $1.5 trillion worth of assets.  Of course, for-profit banks far outweigh credit unions in value of assets; for example, JP Morgan-Chase alone controls $2.3 trillion of assets.  But the membership size clearly shows that Americans are eager to embrace an economic institution with a social purpose.  And this is true in blue and red states.   Indeed, the US credit union movement is the strongest and biggest in the world.

Credit unions are a different business species in several important respects.  First, their members are both owners and consumers of their credit union products and services.  Profits remain within the organization or are distributed to members which implies that the members never lose value to somebody else.  Whether they pay higher interest rates on loans or receive lower interest rates on deposits, in either case, the resultant surplus remains with the credit union and, thus, belongs to the members.  This is entirely different from the case of for-profit businesses where shareholders can benefit at the expense of customers.  Because of the dual status of members as owners-consumers, credit unions are very responsive to the needs of their members.  In fact, on average, credit unions charge lower loan rates and pay higher deposit rates than banks.

Credit unions are governed by board of directors comprised of volunteers.  Federal rules allow only one board member – usually the chair – to be paid a stipend.  Board volunteers (as well supervisory committee* volunteers) are reimbursed for expenses to attend meetings and conferences.  Some states allow stipends for board members but such payments are kept quite low.  In general, direct and indirect compensation of board and supervisory committee volunteers is meager when compared to the compensation packages paid to members of corporate boards.

Now, one may infer that since credit union volunteers receive very low compensation, credit unions attract low-skill volunteers.  Nothing would be farthest from the truth.  Credit unions are governed just fine by these – let’s call them – lay people.  Credit unions have fared much better than banks through various financial crises, including that of 2008.  Board members come from all professions and backgrounds.  By applying common sense and a high dose of diligence and loyalty to their fellow members, these volunteer directors provide competent and responsible custody of their credit union’s assets through booms and busts.

This experience begs two questions.  First, why corporations lavish inordinately high compensation packages to their boards when the credit union governance model shows successful governance can be had at a much lower cost?  Second, why do credit union volunteers offer their services for no or very low compensation when this type of service commands hefty rewards in the for-profit sector?  One answer is that not every type of effort has to be monetized to attract takers.  The reason behind this is the presence of a strong social altruistic instinct that we see through out the volunteer movement.  So, when we are told that monetary reward is necessary to induce certain effort and the more of it the greater the effort is, this neglects to consider that not all things can be bought with money only.  My hypothesis is that if corporate boards were open to all – as opposed to the members of “boys or girls” networks, we would see a lot of people stepping forward willing to do the job at much lower compensation.

There is an important reason why credit union boards remain competent.  Board members (as well as supervisory committee members) attend one or two conferences a year.  This way, they are updated about new laws and regulations, learn about developments in the financial sector, and how to be more effective directors or supervisory committee members.  Most importantly volunteers learn from each other.  Because credit unions are part of a movement under the motto “People helping People,” volunteers feel no competitive pressure to be secretive.  That is, the cooperation spirit extends to exchanging ideas among volunteers for the purpose to make credit unions as a whole successful.  This is unheard in the world of for-profit businesses.

The overall success of credit unions is also driven by another advantage in governance.  Credit union boards are chaired by one of the volunteer directors, not the CEO, as is typical in the corporate world.  That implies there is a clear distinction between those who set policy (the board) and the top executive who executes the policy.  This way, the main stakeholders, i.e., the members/owners, are directly represented in the top echelons of governance and the chief executive has less opportunity or power to pursue self-dealing, as we frequently see in the corporate world.**

Of course, financial cooperatives cannot replace the for-profit banks.  But by being part of the market, they enhance competition and help us better understand the pros and cons of different corporate governance models.  This is a gain for all – credit union members and bank customers.

* Supervisory committees have the purpose to stave off fraud and lapses in operational rules within credit unions.

** Exhibit A here is the case of pharmaceutical firm Theranos.  A twenty something founder and CEO of this start up was able to fool high-caliber board directors, including the former Secretary of State, Henry Kissinger!!!  So much for lavishly-paid corporate boards. 

 

The exit of American military forces from the Middle East has ended the same way as it started: as a failure of judgement and honesty.  Sixteen years ago, we entered the Iraq war under the cover of fake information and false evidence.  A week ago, we exited on the whim of a President under the cover of his “great and unmatched wisdom.”  The former was the result of collective deception.  The latter was the result of one individual’s self-delusion.  Neither served the interests of the country.

Last week’s decision to exit the Middle East, and especially the way it was done – abandoning the people, the Kurds, that fought with us, is perhaps the last episode of what has been a seventy-year period of American preeminence in the global stage.  Or it can be looked at as the first step into a future America that turns inward and isolationist.  No doubt it satisfies a good number of Americans who, tired of the unwise waste of blood and treasure in foreign fronts, would like to see that priorities turn toward domestic needs.  It also satisfies those who believe that American power was abused to prop up undemocratic regimes or the narrow economic interests of US firms and their international collaborators.

Nonetheless, somewhere between selfish abuse of power and arms-length indifference lies the space for a powerful and wealthy country, like the US, to play a constructive role in global affairs.  This is especially true today, as we recognize that to expand economic prosperity, eradicate illnesses, improve educational opportunities and deal with the climate challenge in the interest of all of humanity more not less international cooperation is needed.

This constructive role seemed to be what America would commit itself to in the aftermath of the WW II.  The Marshall Plan, NATO, the World Bank, the International Monetary Fund, GATT (the General Agreement on Tariffs and Trade) and the UN had the purpose to establish a world order that would foster international cooperation and peace and promote economic development.  In many of these initiatives, America was willing to absorb the cost (not necessarily without the anticipation of future benefits) because it had three exclusive advantages: military strength, economic power, and the soft power of a liberal democracy.  The result was 70 years of relative peace and economic growth that set the post-World War II period apart from the periods that had preceded it.  Robert Kagan (The Cost of American Retreat, WSJ Sept. 2018) makes the point that the US-underwritten world order had rules that America often flaunted.  But “[A]t the heart of the order was a grand bargain: The other liberal powers ceded strategic hegemony to the US, but in return the US would not use that hegemony to constrain their economic growth.”  That’s what Trump’s transactional approach to foreign policy never managed to grasp.

Unfortunately, each of these advantages dissipated as time went on.  First, the legitimacy of military power came into question either for being used in the pursuit of dubious and self-service objectives or not used enough.  Thus, Clinton was criticized for his inaction in Uganda and his delayed intervention in the former Yugoslavia to end the inter-ethnic atrocities.  Similarly, Obama was blamed for his hesitation to deal with Assad and Sissy that left the Arab Spring an unfulfilled dream under the forceful pushback of two dictators, one seasoned and the other newly-minted.  Under the emotional weight of the 9-11 terrorist attacks, Bush listened to his neocon advisers to seek retribution against the wrong country, Iraq, instead of the country of the perpetrators, Saudi Arabia.

Confidence in the ability of our economy to generate prosperity for all fell victim to domestic policies that opened an unjustifiable gap between the privileged few and the masses of working Americans.  With crumbling infrastructure, festering but underfunded social problems and rising costs for the welfare net America is a country immensely rich in the aggregate but unwilling to absorb the economic cost to pursue its strategic interests through trade and climate agreements or defense treaties.  In years past, trade relations and agreements with other countries, including China, were part of a national strategy.  Eventually,  working class Americans came to see globalization as a project run by large corporations for their own interests not theirs.  Thus, globalization became the bane for an inward-looking nationalistic sentiment.

And finally, but most importantly, America’s soft power to promote liberal democracy has been dying by a million cuts under the continued onslaught of the current president against free press, the justice system, the electoral process, and the assiduous coddling of authoritarian strong men or one-party rulers.

So, here we are.  American troops, not even given the president’s thought for an orderly and dignified exit, are retreating in haste from the Syrian front, reminiscent of the exodus from Vietnam.  Russian flags, hoisted on armored vans, are seen entering American military campgrounds as they fill the void, a void that is both territorial and geopolitical.  And Pompeo and Pence are now in Ankara as supplicants to plead for restraint.  All this must grate the patriotism of Republican politicians.  But it’s the price for their Faustian bargain with Mr. Trump.

Make America Great Again was just a slogan from another era.  Millions of Americans took it as genuine precursor to something grand.  But now, MAGA lies disfigured along the US-Mexican border, victim of the grotesque and inhumane treatment of impoverished and frightened migrants.  It lies along the Syrian-Turkish border full of shame for the betrayal of our army’s brothers-in-arms.  And it lies in the web of the incoherent utterings of a man without credibility.

It is up to the next president to pick up the pieces and restore America’s place in the world.

Right after policewoman Amber Guyger had been sentenced for the murder of a black man in his apartment in Dallas, the judge, Tammy Kemp, walked up to her, hugged her, and handed her a Bible.  In the words of the NYT article, “Some praised it [her gesture] as a rare and much-needed moment of humanity; others criticized it as potentially unconstitutional…”  Unique perhaps among nations, Americans have to live with such contradictory viewpoints thanks to the First Amendment that, besides protecting free speech, states that “Congress shall make no law respecting the establishment of religion, or prohibiting the free exercise thereof,” which has come to be known as the Establishment Clause.

Of course, Judge Kemp, a representative of the state, was not making a law by giving out a Bible, but in the hotly contested wars about the intent and scope of the Establishment Clause her gesture could be interpreted as supporting Judeo-Christian beliefs contrary to the intent of the First Amendment.  This is so because court opinions have ruled that the separation of church and state also refers to actions by the government and its official representatives.

Clashes around the Establishment Clause are at the heart of the culture wars in American politics and courts.  To the combatants, secularists on one side and religious adherents on the other, how the Establishment Clause is interpreted and enforced is central to building a national narrative and unifying anchor.  So, I decided to revisit a book I had read more than ten years ago, titled Divided By God by Noah Feldman (then at the New York School of Law and now at Harvard Law).  The historical and legal account of the book is very instructive.

Let’s start first with the historical fact that separation of church and state has never been truly enforced in the US.  From the early decades of the Republic, publicly funded schools inculcated a Protestant viewpoint that glossed over differences across Protestant sects (the nonsectarian approach).  When Catholics came to the country, their requests to allow their pupils to receive a Catholic religious teaching were rebuffed by the Protestant majority.  The result was the establishment of Catholic parochial schools without any state funding.  The same was the treatment of students of other Non-Protestant Christian sects as well as of the Jewish faith.

When the courts and the Supreme Court, in particular, finally started to take up cases regarding the separation of church and state in the wake of the Second World War, the decisions were premised on different legal arguments, often outside the strict purview of the Establishment Clause.  For example, the right not to salute the flag claimed by Jehovah Witnesses was rejected in 1940 as violating the Establishment Clause but the same right was accepted shortly thereafter for different plaintiffs as a right protected by free speech.  This practice of basing court opinions on different legal premises has continued to our day and it is a major reason why the public is so much perplexed as to what is right and wrong under the Establishment Clause.

Over the years, Supreme Court decisions have bifurcated into two approaches.  Incursions of religious teachings and practices, like prayer in public schools, Bible reading, and teaching of creationism in biology courses, have been struck down by the Supreme Court on the ground they favor religion and, thus, violate the separation of church and state.  On the other hand, the Supreme Court has decided in favor of the use of public funds and resources for religious purposes, like vouchers to attend religious schools, or the use of school facilities.  The Court has also ruled to uphold the display of religious symbols in public places as long as not any religious or non-religious group (like atheists) is excluded.  Therefore, the courts have moved to interpret the Establishment Clause to mean not an absolute exclusion of religion from the public space, but rather a fair and neutral treatment of religious and non-religious expressions, the so-called neutrality principle.

At the same time, we have witnessed a realignment in the rival groups and their approach concerning the place of religion in public policy and discourse.  The original movement of Protestant fundamentalists aspired to run the US as a Christian polity while pure secularists demanded an absolute separation of church and state.  Eventually, the Protestant fundamentalists morphed into a group Feldman calls Values Evangelicals.  They advocate that, irrespective of differences, religious people share a common set of moral values which they would like to be at the core of a national unity project for America.  On their part, the pure secularists evolved into a group Feldman calls Legal Secularists.  They espouse religious liberty and freedom of expression for all, secularists and religious people, with the caveat, however, that religious arguments would not inform the establishment of laws or government actions.   Thus, to them the national unity ought to be built on arguments informed by reason.

Feldman finds that neither group has a convincing case.  By demanding that religious beliefs are left behind before entering public discourse, Legal Secularists deny religious people the right to inform their positions by what is central to their thought systems.  But Values Evangelicals also face serious contradictions as they try to build a common base of values for their national unity project.  In such issues as the death penalty and divorce, Protestants and Catholics often disagree.  On abortion and gay rights, Christian values do not square well with values held by adherents to the Jewish faith.  And, Judeo-Christian values do not necessarily align with those of Muslims, Hindus and Buddhists.

In light of all the contrasting views and legal opinions, Feldman adopts a middle position.  He suggests that religious symbols (like displays) or gestures (like the one by Judge Kemp) be allowed as long as they do not appear to discriminate against other beliefs, but we should walk back from government actions and policies that avail public funds and resources to religious purposes,  which the Framers of the Constitution would find much more objectionable.

What Feldman leaves out is the, by now, unmasked partisanship among politicians and jurists in interpreting the Establishment Clause.  If every citizen should have the right to inform discourse on matters of church and state by secular or religious beliefs, who is to be the honest referee?  Shouldn’t that be those who mediate these debates, our politicians and most critically our jurists?  The public deserves to have an impartial and honest interpretation of the First Amendment from those who have this constitutional duty and responsibility.

Climate and environment; gun controls; use of technology; private wealth and public needs.  These are some of the major issues that bedevil Americans these days.  With the exception of gun controls, the rest are of major concern to the world as well.  All these issues have one common denominator: the rights of the individual versus the rights of the society.  How we decide to resolve these issues in the near future and beyond depends on which side we decide to come down on this very old conundrum, that is, the balance between the interests of the unit, i.e., the individual, and those of the collective, i.e., the society or its political expression, the state.

Within the Western world, this question has been debated since the days of Plato and Aristotle.  Their ideas have been refined, revised, expanded and subtracted by Western scholars and philosophers over the intervening centuries without however coming to a solid guiding conclusion.*  In the words of a writer, when it comes to the individual versus the society, we are all either Platonists or Aristotelians.  Outside the Western world, the same question has been raised but it has been resolved more decidedly in favor of the interests of society.  Under the influence of Confucius and the imperative of social harmony, China, Japan and other East Asian societies prioritize the interests of society, and by extension those of the state, over those of the individual.  India and the Muslim world also put more value to traditional secular and religious customs and norms that keep individual discretion circumscribed.

So, what does it mean to say we are Platonists or Aristotelians.  For Platonists, each one of us attains goodness and excellence if we serve the society in the position we can perform best: as guardians, if we have leadership talents; as warriors, if we have bravery and physical strength; as artisans, if we have talents for business and industry.  As individuals we excel when we take our best-suited station in life and thus help our state to excel.

For Aristotelians, the individual attains goodness and excellence when each one of us fulfills his or her human potential, a potential the way we see it and actualize so that we live happy lives in the world as is.  To this end, the state ought to offer individuals the means and opportunities to actualize this potential.

Both thought systems value the quality of society and state.  And both consider each individual to be critical for the success of society or state.  In Plato’s society, however, the individual has a more prescribed mission.  In Aristotle’s, the individual is more master of his or her course in life.  Both, nonetheless, call on individuals to act as responsible and virtuous citizens that care about the collective good.

It is not difficult to understand, even from the above brief description, that Platonists are willing to live in more ordered societies, societies with a top down organizational design.  Aristotelians, on the other hand, prefer to live in less rigid societies that follow a bottom up organizational design.  Plato’s societies and states have the advantage of social cohesiveness and efficiency.  However, too much of that and Plato’s model can lead to rigid dogmatism and the stifling of individual creativity and expression.  Aristotle’s system can avoid that, but too much of it and it can degenerate down to individual aggrandizement and materialism.

The modern fields of evolutionary psychology and sociology confirm that the human species is selected by nature to live as a being with individual identity and rights to friendship, love and mating within groups that rely on cooperation, as well as learning and teaching from each other in order to survive.  This set of traits is what Nicholas Christakis of Yale U. calls the social suite.**  Research on involuntary communities (like those resulting from shipwrecks) as well as voluntary and experimental communities shows that to restrict too much the individual’s rights or the cooperation among the members of a community most often leads to its collapse.

What makes the whole question of individual versus society so difficult is none else but the heavy emotionality and the fears, rational or not, that surround its polar outcomes.  Those who believe that societies ought to be the sum total of individual rights no matter what will not easily surrender to the calls for collective action at the expense of individual rights.  And those who believe society is more than the sum total of its members’ rights and that by protecting its interests enhances individual welfare will not stop calling for collective solutions.

Societies have oscillated between the two polar ends of individualism and social imperative.  America, for example, was founded on the rights of the individual for “life, liberty and the pursuit of happiness.”  When, however, economic disintegration threatened the state, Roosevelt did not hesitate to embark on the New Deal which introduced social welfare institutions, like Social Security, and extensive regulations.  Modern Communist China was founded by putting the interests of a collectivist state ahead of the interests of the individual.  But by 1980 China was facing dire economic crises.  So, Deng Xiaoping made the bold move to loosen individual rights to confront the crisis.  The American case was one of moving from unfettered individual rights to greater social solidarity.  That of China was a case of moving from rigid economic order toward individual economic freedom.  Both moves faced ferocious criticism and resistance.  Herbert Hoover decried Roosevelt’s New Deal as socialist and fascistic.  Deng’s economic liberalization also faced criticism by politicians of the old guard.

These and other examples suggest that to reach a better balance between the rights of individuals and society, some crisis is necessary to compel citizens to overcome their emotional and ideological attachment to one or the other polar end.  So, the question then is: what kind of crisis do we need to bear before we decide to do something about gun violence; or about climate and the environment; or about the impact of technology on our lives; or excessive private wealth and neglected public goods?

* Arthur Herman, The Cave and the Light: Plato versus Aristotle, and the Struggle for the Soul of Western Civilization, 2014.

** Nicholas Christakis, Blueprint: The Evolutionary Origins of A Good Society, 2019.

In his novel “Love In The Time of Cholera” Gabriel Garcia Marquez, unfolds a story of long and unrequited love that takes place in a time people are tested by the fear and devastation of a cholera epidemic.  I find ourselves to be in a time reason and emotion cannot come together in this time of political turmoil.  Unlike Marquez’s novel in which the unrequited lover finally finds reciprocal love, I have no way to know how our story, the story of political emotions and reason, will end.

I have written before about the elephant and the rider.  The elephant is our raw emotions and genetic predispositions that move us in a given direction.  The rider is our reason that tries to make sense of our emotions and balance them with rational analysis of the facts.  In our state as political animals, we seem to be driven much more by emotions than reason these days.  We know who is responsible for this: the china buster who somehow made it inside the china store.  How do you react and rationalize the fact that a china buster is in the china store smashing everything with resolute glee? *

First, we all react with surprise that the china buster made it to the china store.  A lot of us react with exuberance and happiness while many others react with fear and anger – china busters are not supposed to be in a china store.  But before we have time to sort out and rationalize on these initial emotions, the surprise guest smashes one china piece after another triggering more emotional turmoil at a rate any resort to reason has no time to materialize or replace the emotions as a basis for debate.

Some of us feel happy the china buster is in the china store because some pieces scare us and we would feel relieved without them in the store.  If you are a white conservative American your fear is the receding whiteness of the demographic make-up of America.   Your reason should tell you, though, there is nothing anyone can do to reverse this but somehow you feel better if you are told this is possible.  Your fear is a future American culture that is supposedly infiltrated by the culture of “others”.  Your reason should tell you America has managed to absorb and synthesize cultures and always find the joy of life in a melting pot of cuisines and fashions, music tunes and dances, cinema and theater, pop art and high literature.  Your fear is that scientific advances threaten the validity of untested beliefs grounded only in faith.  Your reason should tell you faith should primarily fulfill your spiritual needs, not to stake out explanations as to how nature works.

If you are a Congressional Republican you are dismayed to see a china buster in the china store instead of one of your trusted antique dealers, but you are awestruck by how enthusiastically your party supporters relish the havoc, so you just play along.  Your reason should tell you demographic trends will not add to this party crowd, but fear you may lose it holds you back from inviting in new groups.  Your reason would tell you that the china buster, being just that, has no taste for values, conservative or liberal, but for fear of being primaried you betray your conservative roots.

If you are a working-class or rural American you fear educated elites belittle your sense of nationalism, your blue color life style, and your love for guns so you put your faith in politicians who keep telling you your economic advancement begins with their own enrichment (the trickle-down theory).  Your reason should tell you that being the happy warrior of culture wars will hardly relieve you from social stagnation, insecure finances, inadequate education, and the scourge of opioids.

If you are an Evangelical, you fear atheists and secularists, so you like the china buster to smash their precious china pieces.  Your reason should tell you that when you shred the constitutional separation of church and state your religious rights are also at risk but your fear is too strong to contemplate the wisdom of the first amendment.  You know that besides lacking a taste for values, the china buster doesn’t care much about ethics but again your fear pushes this thought away.  Your reason should remind you, though, that Jesus admonished “For what will it profit a man if he gains the whole world but forfeits his soul?”

If you are a liberal your fear is the emergence of voices of racial hate, white supremacy and ethno-nationalism that could bring us back to the dark days of history.  But instead of debating and countering such speech with the compelling and convincing arguments you should have, you attempt to push it out of the public space forgetting your motto “I disapprove of what you say, but I will defend to the death your right to say it.” You fear the erosion of reproductive, gender, sexual orientation and voting rights, but instead of focusing the minds of moderate and liberal voters on winning the Senate, you fight the battles when the “enemy” is already inside.  Because you fear extreme conservative ideology you close your mind to thoughtful and informed conservative thinkers.  Your inclination for healthy skepticism and balanced arguments should have reminded you that you need them as much as they need you.

If you are a Congressional Democrat your fear is the china buster, loose as he is, could break your beloved china pieces, but then you weigh the severity of your restraining him against the reaction of voters and what that might do to your electoral prospects.  Your reason should tell you that accusing your opponents of political calculation for not reigning in the china buster sounds hollow if you also condition your doing this on calculations of your own.  In the middle of so much mayhem, your reason cannot tell you which china pieces to save and which to let go.

By now,  we realize the china smashing has gone too far.  To preserve some common heirlooms still left, the save-the-store crowd has decided to bring in the conservation squad.  Will finally emotion and reason find each other?  Or, as in Marquez’s story, each crowd will tell the captain of its riverboat to sail on and on up the river forever as a way to escape reality.

* The “china buster in the china store” metaphor is inspired by “horse in the hospital” in the standup comedy show Kid Gorgeous of John Mulaney that streams on Netflix.

I recently read that the US Congress plans to pass legislation that will prohibit an $100 million facility, already built in Chicago, to produce subway and train cars.  The reason? Congress and the US government fear the cars will be bugged and could spy on the whereabouts, and not only, of passengers and cargo!  The real reason?  The manufacturer is CRRC Corporation, the biggest maker of trains, which however also happens to be Chinese.  First Huawei, the telecommunication colossus, and now CCRC.  And that’s not all.  Congress and the government also plan to update the Foreign Investment Risk Review Modernization Act so that we can block foreign investments deemed risky for our national security.

That’s what started me thinking about capitalism as a cocktail that comes in many degrees of strength and flavors, each with its own appeal for different people and different times.  Here is the basic recipe.  Recognize property rights; let markets work freely; and let owners of capital deploy it according to their own interests.  Goods are produced and bought according to consumer preferences.  The selfish interest of the butcher and candlemaker guides the invisible hand of Adam Smith.  But this cocktail is not without hangovers.  Goods fall out of favor; factories close; jobs are lost.  There is a lot of wealth creation along with a lot of detritus.  But out of the demise of the inefficient and unwanted the new is born.  And so the system churns going through cycles of Schumpeterian “creative destruction.”

Interestingly, this pure capitalism cocktail is not very popular.  It only sells among libertarians.  The rest of us prefer the watered-down varieties.  Start with taxes that favor and disfavor different types of investments and sources of income.  Next pour in some regulations – who produces what; how markets work.  Then add some state enterprising – take individuals out of the production of some goods and give that to the state.

Take the case of the US, the supposed poster child of capitalism.  Start at the 1950s.  Banks cannot branch anywhere they wish; interest rates are regulated.  Transportation industries, like airlines, are restricted in regards to routes and prices; so are telecommunication firms.  Ownership of TV stations and newspapers also regulated.  And, ….. hold on to your seat, the top marginal income tax rate ranges from 92% in 1950 to 70% in 1980!    And yet the US economy is doing fine.  Between 1950 and 1979, that is, during the three decades of high taxes and heavy regulation, the economy grew at an annual real (adjusted for inflation) rate of 4.04%.  The four decades since, when tax rates were dramatically cut and deregulation ruled, the economy grew at only 2.64%. *

Which capitalism cocktail would you order?  It depends who you are.  In the early post-war decades, workers earned close to their productivity gains and the middle class kept growing.  Things changed in the 1970s.  When some commentators claim how, back then, corporate managers followed a social contract that fairly split economic gains between corporations and workers, they neglect to add that this had a lot to do with the prosperity of American corporations.  Generosity thrives in good times.  There were a lot of spoils for corporate and union bosses to divvy up with less acrimony.  All this went out the window when American corporations ceased to be the only or later the biggest game in town and the economy slowed.  In the 1970s the average GDP growth rate declined to 3.3% from 4.46% the previous decade.  As the pickings got slimmer, equity in distributing the economy’s gains declined and so did confidence in the fairness of capitalism.

How America entered this new period and how its mood changed is what the Hauwei and CCRC examples brought to my mind.  Even in the days of high taxes and heavy regulation, America honored two pillars of liberal capitalism; foreign investments and free trade.  To this end, it pushed hard other market economies to liberalize their industrial policies and financial sectors.  I was still living in Greece and I remember how this liberalization push was greeted with suspicion there and the rest of Europe.  But free movement in investment capital and trade was not something new.  It had been the norm during the long years of Pax Britannica only to be interrupted by the two World Wars.  Liberalization in these areas was a return to normal times.  And liberalization did start to come in the market economies in the 1980s and beyond.

But the greatest surprise came in 1980 when the Chinese President Deng Xiaoping, famous for having said “it doesn’t matter whether a cat is black or white as long as it catches mice,” decided to marry communist rule with free enterprise and markets.  By creating this new and, as time proved, very potent cocktail, Xiaoping took his rightful place as one of the most creative bartenders in the watering hole of capitalism.

But this cocktail, as its other cousins, came with both euphoria and hangover.    China modernized quickly; it reduced poverty; created a middle class larger than the US population; and made a lot of international corporations highly successful and rich.  Back in the American Midwest, however, factories closed, workers lost jobs, towns decayed.  The hangover of Middle America was so mind-numbing that voters would be unable to tell truth from lie, reasonable promise from pie in the sky, honesty from sleight of hand.  But to these voters the alternative was more of the same cocktail that no longer pleased their palate.  Switching allegiance from the earlier American cocktail of capitalism is not limited to working-class people.  Domestic companies are happy to let our growing suspicions about China’s plans restrict competition to their benefit and Republicans look more like Democrats, reluctant to defend the free market advocacy of the Washington Consensus their economic ideology used to espouse. **

I take the recent retreat of American capitalism from its championing of foreign investments and free trade with all their potential risks and losses to be emblematic of our losing confidence in the model we pushed so hard on the world in the days of our undisputed dominance.  That should teach us something about the interplay of ideological purity, pragmatism and self-interest.  We are now applying Xiaoping’s pragmatism in furthering our own economic interests.  Between faith in a more liberal capitalism and preserving our industries and incomes we seem to choose the latter.  That’s why the fearmongering about the coming of socialism sounds so hypocritical.

*My calculations using Standard & Poor’s data.

** The Washington Consensus was a declaration of 10 principles, including free movement of capital and trade, adopted by the World Bank, the International Monetary Fund, and the US Treasury Department in the late 1980s.  It was intended to restore economic stability and growth to regulated and protectionist economies.  Skeptics equated it to market fundamentalism and a neoliberal agenda while John Williamson of the Institute of International Economics, who coined the term, resented its use to promote unfettered capitalism.

Pardon me if I am not one of those who would rush to thank and congratulate Jamie Dimon and his other 180 CEO buddies of the Business Roundtable (BR) for having redefined the purpose of the corporation to recognize other stakeholders besides shareholders.  My note to them would instead read: “What took you so long?  Didn’t you learn anything in the august business schools where you got your MBAs?”

Okay, I admit we should not sneer when we see a good thing no matter how slow its coming has been.  But the August 19, 2019 new statement on the purpose of the corporation adopted by 181 CEOs, members of the Business Roundtable, needs a lot of perspective.  Echoing my own reaction to the statement, the letters to the editor of the NYT were highly critical, even cynical, of this belated change of heart by America’s corporate chieftains.  So was WSJ’s opinion.

Why the BR statement is belated.  The stakeholder theory (the idea that firms can attain better value for their shareholders by also serving their creditors, employees, customers, suppliers and community) is at least 30 years old.  Theory and empirical evidence have made convincing arguments for its validity.  Recent surveys have shown wide-spread acceptance among investors for environmental, social and governance (ESG) sustainability.  Large institutional investors, in the US and abroad, have already embraced sustainable investment criteria.  According to a Morgan Stanley paper, investors can now select socially responsible investments from assets worth $23 trillion globally!  As of last year, 1,715 institutional investors (aka shareholders) that managed $81.7 trillion worth of assets had signed on the United Nations Principles for Responsible Investing.  As a matter of fact, the main concern and effort of investors, as well as of corporate executives committed to responsible management, is to persuade all corporate managers to jump on the sustainability bandwagon.  I would submit that instead of celebrating the BR statement as a moment of unique enlightenment, we should see it as a welcome, albeit belated, response to the pressure from investors, responsible CEOs, civic movements and politicians.

Why shareholder profits and sustainability are not incompatible.  Multiple studies have found that business profits and sustainability goals are not a zero-sum choice.  For example, a Harvard Business Review study found that over a 20-year period investing in firms with social sustainability policies would produce twice the profit the same amount would generate in firms without social sustainability policies.  Another academic study found that firms with ESG sustainability policies achieved a 3% higher return on their stocks per year versus firms without such policies over a 20-year horizon.  A large review of studies revealed that 80% of them had found a positive relationship between sustainability and business profits.  Thus, the BR statement invites CEOs to do the right thing by their shareholders and the other stakeholders!

Why it is value and not profits that matter.  Despite all the talk about maximizing short-term shareholder profits as the main goal of firms, academics and successful executives and investors recognize that the right goal is value, not profits.  Value is built on the profits (and their uncertainty) a firm is expected to produce over the long run.  Therefore, cutting corners with, say, employee benefits or protection of the environment for a short-term boost of profits does not fool the market.  If short-term profits were the only thing that mattered, we would not have the billions of dollars poured into new business ideas – many with negative profitability for several years.  Consider Genentech (an early biotech firm), Amazon, pharmaceutical start-ups and many more.  Sustainability of all the stakeholders of a firm can produce long-term value even when implementing responsible policies may entail short-term costs.  The bulk of invested capital is held by pension funds, insurance firms and index funds, all of which have long-term value objectives and are disinterested in the daily gyrations of the market for stocks and bonds.  That’s another reason why these expansive and influential investors favor sustainability policies.

Why corporate governance can be at stake.  Although welcome, the Business Roundtable statement can turn out to be problematic if CEOs abuse its intent. Disguising and misrepresenting subpar business performance to look like the result of pursuing the interests of other stakeholders could very easily weaken shareholder rights and CEO accountability.  That’s why the Council of Institutional Investors gave the statement a cool reception and commented that “Accountability to everyone means accountability to no one.”  In other words, our concern ought to be whether CEOs abuse their new sense of the purpose of the corporation to ignore long-term value creation as in the good old days of American managerialism.  We should not be fooled in believing that CEOs are the victims of the demand for shareholder profits that supposedly denies them the means to be socially responsible.  The evidence I cited shows that executives can run firms which are both profitable and socially responsible.  And many do exactly that.  Let’s remember that the excesses around 2001-2002 (Adelphia, Tyco, Enron, Worldcom, etc.) were caused by the greed of executives which destroyed value and whole firms laying waste to the investments and livelihoods of countless shareholders, creditors and employees who had no active role in these criminal or unethical decisions.  Similarly, the debacle of 2008 had little to do with long-run shareholder value and a lot with imprudent executive decisions and perverse incentives that emphasized immediate gains and ignored risks. To run a firm with a ratio of $33 dollars of debt for each dollar of equity, as Lehman Bros. and other financial firms did, was not a sustainable policy that favored the shareholders.

What was omitted from the statement.   The new statement of the BR would carry more credibility if it were not silent on various major issues of our times.  It should have shown concern for the absurdly high ratios of CEO compensation to median employee salaries; the persistent aversion to labor unions; the resistance to a livable minimum wage; the disappearance of adequate pension systems.  The BR CEOs should also call for the restructuring of America’s corporate boards by decoupling the roles of CEO and chairman of the board that places inordinate power and control in the CEO’s hands.

Finally, as I have written in previous posts, the responsibility of steering corporations toward socially beneficial goals rests primarily on us.  The marketplace gives us the opportunity and power to entrust our savings and investments with wealth managers that follow ESG sustainability criteria and to patronize firms whose operations reflect our values.   Politicians can do a lot through laws and regulations but it is ultimately the citizens’ responsibility to set the course toward a responsible and socially fair economic and business environment.

Below I provide links to some related posts you can find on my blog:

https://lets-reason.com/2019/01/19/managers-and-shareholder-culture-part-i/

https://lets-reason.com/2019/01/25/the-purpose-of-the-firm-confusion-and-challenges/

https://lets-reason.com/2019/04/12/business-ethics-markets-and-personal-responsibility/

What we leave behind with each passing day it’s not time; it’s experiences.  Like albums of photographs our lives are collections of experiences – good and bad.  But that’s not all.  Life experiences do not stay in the past.  They carry their aftertaste into the present.  They leave behind memories and lessons.  What we decide to take along for the journey ahead depends on how well we husband the experiences of the past or how many of them we turn into waste.

It’s Tuesday, right after Labor Day, and in America this signals that the summer of 2019 is done; the curtain has fallen and the summer season has taken its final bow.  Several years back that would mean I had to get ready for another semester.  The lives of academics are ruled by the semester cycle.  But now I no longer have to worry about that.  I now need to fill my life’s album with other experiences.  So, what did I leave behind this summer of 2019?

Well, I left behind Providence and Newport, R.I., Prague, Greece and the lake in Canada.  In Providence I learned that the progressive offspring of a local family that made its money by transporting slaves to the Americas founded a very fine college, known these days as Brown University.  In Prague, I learned that one of its creative sons and national heroes by the name Alphonse Mucha became one of the most celebrated artists of Art Nouveau.  Ironically, Mucha was not admitted to the Academy of Arts in Prague and had to study in Munich and make a name in Paris before returning and rising to a national figure in Prague.  I also learned that for my taste the most reliable Czech dish is the roasted port knuckle.

In Greece I learned once more that walking around in 100-degree weather is not a comfortable experience; actually, it’s sort of masochism.  Even Yabanaki beach, the one I introduced to you a year ago, was not pleasant in that heat.  But our American friends would not care less.  From the gyro and tzatziki to the wide vistas of the blue Aegean from a hotel terrace on the island of Aegina, everything was magical.

In the lake in Canada, I learned that catching and killing fish to eat for lunch is not what I want to do any more.  After the first bass I released the rest of my catches.  My son and daughter tried hard to convince me that the underdeveloped nervous system of fish spares them of physical pain, but I had none of that.  Reading Frans De Waal’s book about animal emotions has made me more sensitive to animal killing.  Don’t take me wrong.  I am not turning into a vegetarian.  All I am saying is that from now on, fishing will be only a sport for me.  Catch and release; not catch, kill and eat.  With lots of moral compromise I will still eat somebody else’s caught and killed fish.

Besides places, I also left behind several books I read.  The Coddling of the American Mind by Lukianoff and Haidt was one of them.  It makes the case of how by trying to protect young people from everything, including uncomfortable ideas, colleges and protective parents prepare a future citizenry that may stifle liberal discourse and be too weak to face the challenges of the real world.  I also read Firefighting: The Financial Crisis and Its Lessons by Ben Bernanke, Tim Geithner and Harry Paulson, the three main protagonists who looked into the abyss of the 2008 catastrophe and did all they could, some of it not well received, to pull us back from it.  Despite the heat and all the visual distractions and with very little help from the inadequate shade and the ice coffee (frappe) at Yabanaki, I managed to finish Stories of Our Life and Others by Ted Chiang.  A collection of science fiction stories each of them sending us into the dark world of technology and its ability to take an oppressive possession of our lives.  We struggle to escape it by trying to take control of it but we fail.  There is no exit from what we create.  A cautionary reminder that not all that glitters is gold.  My last read of the summer was Beloved by Toni Morrison who recently passed at a well-advanced age.  Fortuitously, it turned out to be the right book-end to where my summer had started, visiting the home of slave traffickers.  Only in the lines of a mesmerizing and at the same time soul wrenching story, as written by Morrison, one can feel the full extent of dispossession of human dignity and utter deprivation that slavery was and why it has left behind so many social ills.

So, it was a summer of memorable experiences and a summer of new things learned.  And speaking of life as a collection of experiences, let me leave you with these verses by Longfellow:

No deem the irrevocable Past,

As wholly wasted, wholly vain,

If, rising on its wrecks, at last

To something nobler we attain.

And on we go into the second year of the blog.

Next week will mark 243 years from July 4, 1776 when the Continental Congress issued the Declaration of Independence that marks the birth of America as an independent state.  But it was thirteen years later, in 1789, the Constitution took effect.  Americans will celebrate the day with picnics, barbecues, local parades and fireworks.  But the reality is that although the Fourth of July is when the thirteen colonies formally broke away from the British Crown, it is the Constitution that rules and affects our everyday lives.

Recent political developments, not only those related to Trump’s election and administration, have raised voices of discontent as to how well the two plus-centuries constitution serves the political needs of the country.

Gerrymandering of congressional districts, the circumvention of the popular vote by the electoral college, election rules and procedures left to the states, the over-presentation of states with low populations in the Senate and the Electoral College, and the politicization of the Supreme Court made up of jurists appointed for life are at the center of the discontent.  Although all Americans are impacted by the effects of these realities, it is mostly Democrats who see themselves as the main losers.  But under other circumstances, it could be Republicans.

Add to all that that the Constitution is not always clear or explicit on the boundaries of presidential powers, something that becomes vivid in the case of occupants of the White House willing to push executive power beyond its traditional limits.

But, are the Framers of the Constitution truly responsible?  How could they have predicted the way the country and the individual states would develop in terms of distribution of population and the demographic profile of states over the ensuing centuries?  Their concern was to establish a democratic governance system based on checks and balances.  Fueled by the fervor and enthusiasm of founding a new independent state, they assumed that future generations would also value and protect the institutions that guaranty democratic governance.  Accused of the possibility the Constitution left room for chicanery and shenanigans for political gain, they would retort by saying “We gave you a country and the best government system of our time.  Protect its essential mission and make it work for the common good.”  In today’s political parlance, they would have said that when it comes to the quality of democracy in America, “It’s the people, stupid!”

I have left for last the biggest and most sensitive issue the Constitution did not resolve. It is America’s original sin, that is, the unwillingness of some and the inability of others among the Framers of the Constitution to abolish slavery and give all colonial Americans, black and white, equal political rights.  Despite a Civil War and the Civil Rights Act a century later, we still live with the legacy and consequences of that original sin.  Covert or overt racism still exists and its more or less ugly expressions are a stain on all of us.

Again, it would be easy to blame this on the Founding Fathers.  In some colleges, including Hofstra University where I taught, students demand that statues of slave holder Founding Fathers, like Thomas Jefferson, be removed. With the wisdom and sentiments of our time two centuries later we can and do condemn their failure in that regard.  But to ignore that we are all products of our time fails to do justice to them as well.  They lived in a world in which, as hideous and inhumane slavery is, many practiced and profited from slavery.  Those times, religious establishments, Christian and Muslim, accepted it or did not officially denounced it.  Enslaving humans on racial or non-racial grounds, has regrettably existed for millennia.  We find it in the Greek and Roman times and in the Bible.  At its founding, Christianity made all people, including slaves, equal before God but also preached that slaves should obey their masters.

Let’s remember that many years from now, we are going to be judged by history in regards to whether we protected the planet and its endangered species; how we kept treating women and children; how we fed and clothed the poor; and how we nursed the sick among us.  Our only defense will be the same we should accord those flawed, quarreling, and sometimes mean-spirited Americans – understanding and forbearance. They gave the people a guiding document.  It was not perfect, nor was it much for its enslaved citizens.  But it was a beginning.

Now let’s do our part.