The Titans of Tech

I reprint this article in full with citation from Quillette. The tone might sound a bit strident, but the warning signals pointing to a form of 21st-century feudalism are real. We’re seeing this in the CA housing crisis today and in the divergence in wealth and incomes since 1980, driven by cheap credit and technology. The oligarchs of tech have been able to leverage their wealth to dominate entertainment and information. They have set their sights on politics and the ideological politics of the tech industry are particularly disturbing and contradictory to its genesis in free-market entrepreneurialism.

You see, the idea here is to socialize the costs of wealth concentration and information centralization, using politics to buy off the unwashed masses who provide the raw material for their business models. Makes one feel good with noblesse oblige of the oligarchy, using the middle class’s money though.

Success can go to the brain.

What Do the Oligarchs Have in Mind for Us?

June 18, 2019

By Joel Kotkin

There seems to be no good reason why a thoroughly scientific
dictatorship should ever be overthrown.
~Aldous Huxley, Brave New World Revisited


What has not been discussed nearly as much is the end game of the oligarchs. What kind of world do they have in mind for us? Their vision of what our society should look like is not one most people—on the Left or Right—would like to see. And yet, unless unchecked, it could well be the world we, and particularly our children, will inhabit.

Almost 40 years ago, in his book The Third Wave, the futurist Alvin Toffler described technology as “the dawn of a new civilization” with vast opportunities for societal and human growth. But instead we are lurching towards what Taichi Sakaiya has called “a high-tech middle ages.” In his landmark 1973 work, The Coming of Post-Industrial SocietyDaniel Bell predicted that, by handing ultimate economic and cultural power to a small number of technologists and financiers the opportunity to monetize every aspect of human behavior and emotion, we would be handing them the chance to fulfill “a social alchemist’s dream: the dream of ordering mass society.”

The New Aristocracy

Like the barbarian princes who seized control of western Europe after the fall of Rome, the oligarchs have captured the digital landscape from the old industrial corporations and have proceeded to concentrate it in ever-fewer hands. Like the Medieval aristocracy, the ruling tech oligarchy—epitomized by firms such as Amazon, Google, Facebook, Apple, and Microsoft—have never produced a single coherent political manifesto laying out the technocratic vision of the future. Nevertheless, it is possible to get a sense of what the internet elite believe and, more tellingly, to see the outlines of the world they want to create.

This tiny sliver of humanity, with their relatively small cadre of financiers, engineers, data scientists, and marketers, now control the exploitation of our personal data, what Alibaba founder, Jack Ma calls the “electricity of the 21st century.” Their “super platforms,” as one analyst noted, “now operate as “digital gatekeepers” lording over “e-monopsonies” that control enormous parts of the economy. Their growing power, notes a recent World Bank Study, is built on “natural monopolies” that adhere to web-based business, and have served to further widen class divides not only in the United States but around the world.

The rulers of the Valley and its Puget Sound doppelganger now account for eight of the 20 wealthiest people on the planet. Seventy percent of the 56 billionaires under 40 live in the state of California, with 12 in San Francisco alone. In 2017, the tech industry, mostly in California, produced 11 new billionaires. The Bay Area has more billionaires on the Forbes 400 list than any metro region other than New York and more millionaires per capita than any other large metropolis.

For an industry once known for competition, the level of concentration is remarkable. Google controls nearly 90 percent of search advertising, Facebook almost 80 percent of mobile social traffic, and Amazon about 75 percent of US e-book sales, and, perhaps most importantly, nearly 40 percent of the world’s “cloud business.” Together, control more than 95 percent of operating software for mobile devices, while Microsoft still accounts for more than 80 percent of the software that runs personal computers around the world.

The wealth generated by these near-monopolies funds the tech oligarchy’s drive to monopolize existing industries such as entertainment, education, and retail, as well as those of the future, such as autonomous cars, drones, space exploration, and most critically, artificial intelligence. Unless checked, they will have accumulated the power to bring about what could best be seen as a “post-human” future, in which society is dominated by artificial intelligence and those who control it.

What Do the Oligarchs Want?

The oligarchs are creating a “a scientific caste system,” not dissimilar to that outlined in Aldous Huxley’s dystopian 1932 novel, Brave New World. Unlike the former masters of the industrial age, they have little use for the labor of  middle- and working-class people—they need only their data. Virtually all their human resource emphasis relies on cultivating and retaining a relative handful of tech-savvy operators. “Software,” Bill Gates told Forbes in 2005, “is an IQ business. Microsoft must win the IQ war, or we won’t have a future.”

Perhaps the best insight into the mentality of the tech oligarchy comes from an admirer, researcher Greg Ferenstein, who interviewed 147 digital company founders. The emerging tech world has little place for upward mobility, he found, except for those in the charmed circle at the top of the tech infrastructure; the middle and working classes become, as in feudal times, increasingly marginal.

This reflects their perception of how society will evolve. Ferenstein notes that most oligarchs believe “an increasingly greater share of economic wealth will be generated by a smaller slice of very talented or original people. Everyone else will increasingly subsist on some combination of part-time entrepreneurial ‘gig work’ and government aid.” Such part-time work has been growing rapidly, accounting for roughly 20 percent of the workforce in the US and Europe, and is expected to grow substantially, adds McKinsey.

Of course, the oligarchs have no more intention of surrendering their power and wealth to the proletariat than the Commissars did after the 1917 revolution in Russia. Instead, they favor providing what Marx once described as a “proletarian alms bag” to subsidize worker housing, and provide welfare benefits to their ever expanding cadre of “gig” economy serfs. The former head of Uber, Travis Kalanick, was a strong supporter of Obamacare, and many top tech executives—including Mark Zuckerberg, Y combinator founder Sam Altman, and Elon Musk—favor a guaranteed annual wage to help, in part, allay fears about the “disruption” on a potentially exposed workforce.

Their social vision amounts to what could be called oligarchal socialism, or what the Corbynite Left calls “fully automated luxury communism.” Like the original bolshevist model, technology and science, as suggested by billionaire tech investor Naval Ravikant, would occasion “the breakdown of family structure and religion” while creating the hegemony of a left-wing identity-centered individualism.

Life in a world dominated by these oligarchs would depart from the model of democratic and competitive capitalism that emerged over the last half-century. Rather than hope to achieve upward mobility and the chance to own property, the new generation will be relegated largely to the status of rental serfs. For the next generation, this promises a future not of upward mobility and owned houses, but of rented apartments and social stagnation. Here in California, Facebook is leading the drive to vastly expand this kind of housing, where the serfs and technocoolies can lose themselves in what Google calls “immersive computing.”The poor, most of whom simply want opportunity, will be relegated to permanent dependent status.

The World They Are Creating

To get a preview of the society the oligarchs want to create, the best place to look is where oligarchal domination is most complete. Wired magazine’s Antonio Garcia Martinez has called Silicon Valley “feudalism with better marketing.” In Martinez’s view, the new aristocratic class is an “Inner Party” of venture capitalists and company founders. Well below them is an “Outer Party” of skilled professionals, well paid, but forced to live ordinary middle-class lives due to high housing prices and high taxes. Below them lies the vast population of gig workers, whom Martinez compares to sharecroppers in the South, “…with the serfs responding to a smartphone prompt rather than an overseer’s command.” Further below still lie those who constitute, in Martinez’s phrase, “the Untouchable class of the homeless, drug addicted, and/or criminal.”

California, and particularly the Bay Area, already reflects this neo-feudal reality. Adjusted for costs, my adopted home state suffers the overall highest poverty rate in the country, according to the US  Census Bureau. Fully one in three welfare recipients in the nation live in California, which is home to barely 12 percent of the country’s population, while a 2017 United Way study showed that close to one in three of the state’s families are barely able to pay their bills. Today, eight million Californians live in poverty, including two million children. Roughly one in five California children lives in deep poverty and nearly half subsist barely above that.

For all its protestations of progressive faith, the Golden State now suffers one of the highest GINI rates—the ratio between the wealthiest and the poorest—among the states. Inequality is growing faster than in almost any state—it now surpasses that of Mexico, and is closer to that of Central American banana republics like Guatemala and Honduras than it is to developed countries like Canada and Norway. There’s even the return of medieval diseases such as Typhus tied to the growing homeless encampments. We could soon even see the return of Bubonic plague, although the mainstream media seems to be ready to blame this, like most ills, on climate change as opposed to failed social policy.

Urban website CityLab has described the tech-rich Bay Area as “a region of segregated innovation,” where the rich wax, the middle-class wanes, and the poor live in increasingly unshakeable poverty. Some 76,000 millionaires and billionaires call Santa Clara and San Mateo counties home. At the other end are the thousands of people who struggle to feed their families and pay their bills each month. Nearly 30 percent of Silicon Valley’s residents rely on public or private assistance.

As recently as the 1980s, the San Jose area boasted one of the country’s most egalitarian economies. But in the current boom, cost-adjusted wages for middle class workers, Latinos, and African Americans in Silicon Valley actually dropped. Many minorities labor in the service sector in jobs such as security guard, for around $25,000 annually, working for contractors. There’s ever-greater segregation of minority and low income families, workers forced into mobile home parks or sleeping in their cars, as well as some of the nation’s largest homeless encampments. According to the Brookings Institution, in the last decade, increasingly tech-dominated San Francisco has suffered the most rapid growth in inequality while the middle class family heads towards extinction.

Needed: An Alliance of Progressives and Conservatives against the Oligarchy

Americans, enamored of the entrepreneurial spirit, were initially slow to see in the tech oligarchy a threat to the future of the republic. But public skepticism, notably in California, towards the tech lords is growing; many on both sides of the political divide see them much like modern versions of the gilded age mogul, successfully playing the political system to avoid regulation, anti-trust action, and taxes.

Yet overcoming the oligarchs will not be easy. Far more than the old industrial giants, they enjoy unprecedented sway through their manipulation of the information pipelines, as is widely evidenced in de-platforming of largely conservative voices on outlets such as Facebook, YouTube, and Twitter. Nearly two-thirds of readers now get their news through and their dominance among younger generations is, if anything, more overwhelming. As the Guardian put it: “If ExxonMobil attempted to insert itself into every element of our lives like this, there might be a concerted grassroots movement to curb its influence.”

To this influence, they have added control over what is left of the traditional media they have helped to undermine. Often getting bargain basement prices, the oligarchs have been able to buy up prestigious outlets, including the New Republic in 2012, the Washington Post in 2013, the Atlantic in 2017, and Time last year.

In the coming political storm, the oligarchs will also retain some supporters on both the Left and Right, all aided by a huge, growing, and politically hermaphroditic lobbying operation. Some California progressives have backed the oligarchs on privacy and Senator Kamala Harris, one of the leading Democratic contenders, has gained widespread support from the oligarchs. Meanwhile, on the Right, some libertarians at places like the Wall Street Journal and conservative think-tanks, continue to defend the oligarchs as the rightful winners of dogged economic competition.

But these well-placed defenders may not be enough to fend off regulatory assaults, particularly as more people recognize how the world being created by the tech elites offers little promise for the middle class, democracy, or free thought. Rather than the saviors many once saw, the oligarchs now represent a clear and present danger to the most basic foundations of our democracy. Resisting them represents the great imperative of our era.


Political Autopsy



Specific comments in red below:

Executive Summary

The Party’s Base








Populism and Party Decline






Party Operations and Outreach







Party Policies and Programs







G–gle Culture

















What’s G–gle’s motto again?





National Identity as a Force for Peace



The Case for Nations


By Roger Scruton




























The Presumptuousness of Urban Blue America



Now what?


Outside the Bubble

The Arrogance of Blue America


Joel Kotkin

04.29.17 10:00 PM ET





Marie Antoinette Economics






Basic Errors in Geography




Urban Innovation







Migration and the American Future








Quality of Life: The Eye of the Beholder






The Deconstruction of the West


Reprinted from The American Interest:

The Deconstruction of the West


April 12, 2017









It’s the Fed, Stupid!



Read more

The New Old World Order

I cite this article because it is quite insightful of the failed political culture in the modern democratic West and particularly the failures of US party elites. It also exposes the larger historical forces at work that suggest the road forward may be rather rocky.

For me this 2016 moment resonates with historical analogies such as the Savonarolan episode in Renaissance Florence that I wrote about in The City of Man, the dissolution of the Weimar Republic in 1930s Germany, and the Iranian Fundamentalist Revolution in 1979. We haven’t reached those precipices yet, but all arrows point in that direction unless we come to grips with our current failures of both modern liberalism and neo-conservatism.


The post-1989 world order is unraveling. Here are 6 ideas Trump has to replace it.

Politico, September 15, 2016

Ideas really don’t come along that often. Already in 1840, Alexis de Tocqueville observed that in America, “ideas are a sort of mental dust,” that float about us but seldom cohere or hold our attention. For ideas to take hold, they need to be comprehensive and organizing; they need to order people’s experience of themselves and of their world. In 20th-century America, there were only a few ideas: the Progressivism of Wilson; Roosevelt’s New Deal; the Containment Doctrine of Truman; Johnson’s War on Poverty; Reagan’s audacious claim that the Cold War could be won; and finally, the post-1989 order rooted in “globalization” and “identity politics,” which seems to be unraveling before our

Yes, Donald Trump is implicated in that unraveling, cavalierly undermining decades worth of social and political certainties with his rapid-fire Twitter account and persona that only the borough of Queens can produce. But so is Bernie Sanders. And so is Brexit. And so are the growing rumblings in Europe, which are all the more dangerous because there is no exit strategy if the European Union proves unsustainable. It is not so much that there are no new ideas for us to consider in 2016; it is more that the old ones are being taken apart without a clear understanding of what comes next. 2016 is the year of mental dust, where notions that stand apart from the post-1989 order don’t fully cohere. The 2016 election will be the first—but not last—test of whether they can.
Story Continued Below


These six ideas together point to an end to the unstable experiment with supra- and sub-national sovereignty that many of our elites have guided us toward, siren-like, since 1989. That is what the Trump campaign, ghastly though it may at times be, leads us toward: A future where states matter. A future where people are citizens, working together toward (bourgeois) improvement of their lot. His ideas do not yet fully cohere. They are a bit too much like mental dust that has yet to come together. But they can come together. And Trump is the first American candidate to bring some coherence to them, however raucous his formulations have been.


(Blog Note: It’s Not about Trump.)

Most of the commentary about Trump has treated him as if he is a one-off, as someone who has emerged because of the peculiar coincidence of his larger-than-life self-absorption and the advent of social media platforms that encourage it. When the world becomes a theater for soliloquy and self-aggrandizement, what else are we to expect?
But the Trump-as-one-off argument begins to fall apart when we think about what else happened in politics this year. First of all, Trump is not alone. If he alone had emerged—if there were no Bernie Sanders, no Brexit, no crisis in the EU—it would be justifiable to pay attention only to his peculiarities and to the oddities of the moment. But with these other uprisings occurring this year, it’s harder to dismiss Trump as a historical quirk.

Furthermore, if he had been just a one-off, surely the Republican Party would have been able to contain him, even co-opt him for its own purposes. After all, doesn’t the party decide? The Republican Party is not a one, however, it is a many. William F. Buckley Jr. and others invented the cultural conservatism portion of the party in the 1950s, with the turn to the traditionalism of Edmund Burke; the other big portion of the party adheres to the free-market conservatism of Friedrich Hayek. The third leg of the Republican Party stool, added during the Reagan years, includes evangelical Christians and Roman Catholics of the sort who were still unsure of the implications of Vatican II. To Burke and Hayek, then, add the names John Calvin and Aristotle/Thomas Aquinas. Anyone who really reads these figures knows that the tension between them is palpable. For a time, the three GOP factions were able to form an alliance against Communism abroad and against Progressivism at home. But after the Cold War ended, Communism withered and the culture wars were lost, there has been very little to keep the partnership together. And if it hadn’t been Trump, sooner or later someone else was going to come along and reveal the Republican Party’s inner fault lines. Trump alone might have been the catalyst, but the different factions of the GOP who quickly split over him were more than happy to oblige.


Any number of commentators (and prominent Republican Party members) have said that Trump is an anti-ideas candidate. If we are serious about understanding our political moment, we have to be very clear about what this can mean. It can mean Trump’s administration will involve the-politics-of-will, so to speak; that the only thing that will matter in government will be what Trump demands. Or, it can mean that Trump is not a candidate who believes in “principles” at all. This is probably the more accurate usage. This doesn’t necessarily mean that he is unprincipled; it means rather that he doesn’t believe that yet another policy paper based on conservative “principles” is going to save either America or the Republican Party. In Democracy in America, Tocqueville was clear that the spirit of democracy is not made possible by great ideas (and certainly not by policy papers), but rather by practical, hands-on experience with self-governance. Ralph Waldo Emerson’s mystical musings in his essay, “Experience,” corroborate this. American democracy will not be rejuvenated by yet another policy paper from the Inside-the-Beltway gang. What I am not saying here is that Trump has the wisdom of an Oakeshott, a Tocqueville or an Emerson. What I am saying is that Trump is that quintessentially American figure, hated by intellectuals on both sides of the aisle and on the other side of the Atlantic, who doesn’t start with a “plan,” but rather gets himself in the thick of things and then moves outward to a workable idea—not a “principled” one—that can address the problem at hand, but which goes no further. That’s what American businessmen and women do. (And, if popular culture is a reliable guide to America, it is what Han Solo always does in Star Wars movies.) We would do well not to forget that the only school of philosophy developed in America has been Pragmatism. This second meaning of being an anti-ideas candidate is consonant with it.

If, as some have said, Trump’s only idea is, “I can solve it,” then we are in real trouble. The difficulty, of course, is that in this new, Trumpean moment when politics is unabashed rhetoric, it is very difficult to discern the direction a Trump administration will take us. Will he be the tyrant some fear, or the pragmatist that is needed?

It’s not unreasonable to think the latter. This is because, against the backdrop of post-1989 ideas, the Trump campaign does indeed have a nascent coherence. “Globalization” and “identity politics” are a remarkable configuration of ideas, which have sustained America, and much of the rest of the world, since 1989. With a historical eye—dating back to the formal acceptance of the state-system with the treaty of Westphalia in 1648—we see what is so remarkable about this configuration: It presumes that sovereignty rests not with the state, but with supra-national organizations—NAFTA, WTO, the U.N., the EU, the IMF, etc.—and with subnational sovereign sites that we name with the term “identity.” So inscribed in our post-1989 vernacular is the idea of “identity” that we can scarcely imagine ourselves without reference to our racial, gender, ethnic, national, religious and/or tribal “identity.” Once, we aspired to be citizens who abided by the rule of law prescribed within a territory; now we have sovereign “identities,” and wander aimlessly in a world without borders, with our gadgets in hand to distract us, and our polemics in mind to repudiate the disbelievers.

What, exactly, is the flaw with this remarkable post-1989 configuration of ideas? When you start thinking in terms of management by global elites at the trans-state level and homeless selves at the substate level that seek, but never really find, comfort in their “identities,” the consequences are significant: Slow growth rates (propped up by debt-financing) and isolated citizens who lose interest in building a world together. Then of course, there’s the rampant crony-capitalism that arises when, in the name of eliminating “global risk” and providing various forms of “security,” the collusion between ever-growing state bureaucracies and behemoth global corporations creates a permanent class of winners and losers. Hence, the huge disparities of wealth we see in the world today.

The post-1989 order of things fails to recognize that the state matters, and engaged citizens matter. The state is the largest possible unit of organization that allows for the political liberty and economic improvement of its citizens, in the long term. This arrangement entails competition, risk, success and failure. But it does lead to growth, citizen-involvement, and if not a full measure of happiness, then at least the satisfactions that competence and merit matter.

Trump, then, with his promise of a future in which the integrity of the state matters, and where citizens identify with the state because they have a stake in it rather than with identity-driven subgroups, proposes a satisfying alternative.

This is also why it would be a big mistake to underestimate Trump and the ideas he represents during this election. In the pages of the current issue of POLITICO Magazine, one author writes: “The Trump phenomenon is about cultural resentment, anger and most of all Trump. It’s primal-scream politics, a middle finger pointed at The Other, a nostalgia for a man-cave America where white dudes didn’t have to be so politically correct.”
I have no doubt that right now, somewhere in America (outside the Beltway), there are self-congratulatory men, probably white, huddled together in some smoky man-cave, with “Make America Great Again” placards on their John-Deere-tractor-mowed lawns.
But do not mistake the part for the whole. What is going on is that “globalization-and-identity-politics-speak” is being boldly challenged. Inside the Beltway, along the Atlantic and Pacific coasts, there is scarcely any evidence of this challenge. There are people in those places who will vote for Trump, but they dare not say it, for fear of ostracism. They think that identity politics has gone too far, or that if it hasn’t yet gone too far, there is no principled place where it must stop. They believe that the state can’t be our only large-scale political unit, but they see that on the post-1989 model, there will, finally, be no place for the state. Out beyond this hermetically sealed bicoastal consensus, there are Trump placards everywhere, not because citizens are racists or homophobes or some other vermin that needs to be eradicated, but because there is little evidence in their own lives that this vast post-1989 experiment with “globalization” and identity politics has done them much good.

The opposition to the post-1989 order is not just happening here in America; it is happening nearly everywhere. The Brexit vote stunned only those who believe in their bones that the very arc of history ends with “globalization” and identity politics.
The worry is that this powerful, growing disaffection with the status quo—both within Europe and elsewhere—will devolve into nefarious nationalism based on race, ethnicity or religion. To combat this, we are going to have to find constructive ways to build a new set of ideas around a very old set of ideas about sovereignty—namely, that the state and the citizens inside it matter. If we don’t find a way to base nationalism on a healthy understanding of what a liberal state is and what it does and expects from citizens to make it work well, dark nationalism, based on blood and religion, will prevail—again.
Nothing lasts forever. Is that not the mantra of the left? Why, then, would the ideas of globalization and identity politics not share the fate of all ideas that have their day then get tossed into the dust-bin of history?

Of course, when new ideas take hold, old institutional arrangements face upheaval or implosion. There is no post-election scenario in which the Republican Party as we knew it prior to Trump remains intact. The Republicans who vote for Hillary Clinton will not be forgotten by those who think Trump is the one chance Republicans have to stop “globalization-and-identity-politics-speak” cold in its tracks. And neither will Inside-the-Beltway Republicans forget those in their party who are about to pull the lever for Trump. One can say that Trump has revealed what can be called The Aristotle Problem in the Republican Party. Almost every cultural conservative with whom I have spoken recently loves Aristotle and hates Trump. That is because on Aristotelian grounds, Trump lacks character, moderation, propriety and magnanimity. He is, as they put it, “unfit to serve.” The sublime paradox is that Republican heirs of Aristotle refuse to vote for Trump, but will vote for Clinton and her politically left-ish ideas that, while very much adopted to the American political landscape, trace their roots to Marx and to Nietzsche. Amazingly, cultural conservatives who have long blamed Marx and Nietzsche (and German philosophy as a whole) for the decay of the modern world would now rather not vote for an American who expressly opposes Marx and Nietzsche’s ideas! In the battle between Athens, Berlin and, well, the borough of Queens, they prefer Athens first, Berlin second and Queens not at all. The Aristotle Problem shows why these two groups—the #NeverTrumpers and the current Republicans who will vote for Trump—will never be reconciled.

There are, then, two developments we are likely to see going forward. First, cultural conservatives will seriously consider a political “Benedict Option,” dropping out of the Republican Party and forming a like-minded Book Group, unconcerned with winning elections and very concerned with maintaining their “principles.” Their fidelity is to Aristotle rather than to winning the battle for the political soul of America. The economic conservatives, meanwhile, will be urged to stay within the party—provided they focus on the problem of increasing the wealth of citizens within the state.

The other development, barely talked about, is very interesting and already underway, inside the Trump campaign. It involves the effort to convince Americans as a whole that they are not well-served by thinking of themselves as members of different “identity groups” who are owed a debt that—surprise!—Very White Progressives on the left will pay them if they loyally vote for the Democratic Party. The Maginot Line the Democratic Party has drawn purports to include on its side, African-Americans, Hispanics, gays, Muslims and women. (Thus, the lack of embarrassment, really, about the “basket of deplorables” reference to Trump supporters.) To its credit, the Democratic Party has made the convincing case, really since the Progressive Era in the early part of the 20th century, that the strong state is needed to rearrange the economy and society, so that citizens may have justice. Those who vote for the Democratic Party today are not just offered government program assistance, they are offered political protections and encouragements for social arrangements of one sort or another that might not otherwise emerge.

But where does this use of political power to rearrange the economy and society end? Continue using political power in the service of “identity politics” to reshape the economy and society and eventually both of them will become so enfeebled that they no longer work at all. The result will not be greater liberty for the oppressed, it will be the tyranny of the state over all. Trump does have sympathies for a strong state; but correctly or incorrectly, he has managed to convince his supporters that a more independent economy and society matters. In such an arrangement, citizens see their first support as the institutions of society (the family, religion, civic associations), their second support as a relatively free market, and their third support as the state, whose real job is to defend the country from foreign threats. Under these arrangements, citizens do not look upward to the state to confirm, fortify and support their “identities.” Rather, they look outward to their neighbor, who they must trust to build a world together. Only when the spell of identity politics is broken can this older, properly liberal, understanding take hold. That is why Trump is suggesting to these so-called identity groups that there is an alternative to the post-1989 worldview that Clinton and the Democratic Party are still pushing.

Now that Trump has disrupted the Republican Party beyond repair, the success of the future Republican Party will hang on whether Americans come to see themselves as American citizens before they see themselves as bearers of this or that “identity.” The Very White Progressives who run the Democratic Party have an abiding interest in the latter narrative, because holding on to support of entire identity groups helps them win elections. But I do not think it can be successful much longer, in part because it is predicated on the continual growth of government, which only the debt-financing can support. Our debt-financed binge is over, or it will be soon. The canary in the coal mine—now starting to sing—is the African-American community, which has, as a whole, been betrayed by a Democratic Party that promises through government largesse that its burden shall be eased. Over the past half-century nothing has been further from the truth, especially in high-density inner-city regions. While it receives little media attention, there are African-Americans who are dubious about the arrangement by which the Democratic Party expects them to abide. A simultaneously serious and humorous example of this is the long train of videos posted on YouTube by “Diamond and Silk.” To be sure, the current polls show that Trump has abysmal ratings among minorities. If he wins the election, he will have to succeed in convincing them that he offers an alternative to permanent government assistance and identity politics consciousness-raising that, in the end, does them little good; and that through the alternative he offers there is a hope of assimilation into the middle class. A tall order, to be sure.

These observations are not to be confused as a ringing endorsement for a Republican Party that does not yet exist, and perhaps never will exist. But they are warning, of sorts, about impending changes that cannot be laughed off. The Republicans have at least been given a gift, in the disruption caused by Trump. The old alliances within it were held together by a geopolitical fact-on-the-ground that no longer exists: the Cold War. Now long behind us, a new geopolitical moment, where states once again matter, demands new alliances and new ideas. With the defeat of Bernie Sanders in the primaries, Democrats have been denied their gift, and will lumber on, this 2016, with “globalization-and-identity-politics-speak,” hoping to defend the world order that is predicated on it. If Sanders had won, the Democrats would have put down their identity politics narrative and returned to claims about “class” and class consciousness; they would have put down the banner of Nietzsche and taken up the banner of Marx, again. And that would have been interesting! Alas, here we are, with, on the one hand, tired old post-1989 ideas in the Democratic Party searching for one more chance to prove that they remain vibrant and adequate to the problems at hand; and on the other, seemingly strange, ideas that swirl around us like mental dust waiting to coalesce.


Book Review: Makers and Takers


Crown Business; 1st edition (May 17, 2016)










Politics, Economics, and the State of Our World

QE paradox

This is an interesting graphic that not only illustrates the futility of current monetary stimulus (the QE-ZIRP Paradox), but also the larger contradiction we’ve created in the relationship between politics and economics. I’ll explicate how this contradiction also explains Europe’s predicament with Greece and the other periphery countries in Eurozone, and also applies to emerging countries, especially China.

We can envision economics as a boundary of constraints or possibilities on the choices we can make in life. We might call these budgetary constraints, but it also pertains to constraints on growth and expansion. Relate this to personal finance:  economics constrains the choices we have on what kind of house we buy or rent, what cars we drive, what vacations we can take, what schools we attend, etc., etc. Within those constraints we often have many choices and possibilities for trade-offs. We can decide to buy a small house to afford a big car, or a tuition-free school in favor of more exotic vacations. We make these decisions everyday throughout our lifetimes.

The personal choices we make within the constraints of economics are analogous to the social choices we make through democratic politics. So, economics is like the box within which politics can allocate resources by democratic consensus. We can decide on more social welfare, or more national defense, or more leisure time. The irrationality is believing that we can somehow make choices that lie far outside the constraints of economics. Fantasies like we can all fly to the moon, all have a heart transplant, or perhaps live high on the hog without working to produce the necessary prosperity.

Economic constraints and political choices interact, an important dynamic since both are malleable over time. We can make choices that expand the constraints of economics, which would mean an expansion of possibilities through growth. Or we can make choices that shrink the boundaries of the economically possible, reducing our choices in the future. The interesting point to make at this stage of our exposition is that, like the boundaries we set for our children, economic constraints are a disciplinary factor that helps to keep our political choices honest.  In other words, economics disciplines our political choices by penalizing bad choices and rewarding good choices.

This has profound implications for how society works.

One can imagine that one of the major economic constraints on our personal set of choices is the amount of money we have. In other words, the fungible value of our assets and savings. Rich people have fewer economic constraints than poor people. But this supply of money is not fixed and can be augmented by borrowing through the issuance of credit and assumption of debt obligations. So, one can buy a more expensive house by borrowing the necessary funds from a mortgage lender and then paying it back over time. We soon figured out that when the supply of money is too strict, economic constraints are unnecessarily tight, so money supply should adapt to the needs of the political economy.

Thus, we can expand the economic constraints facing society by expanding the supply of money through credit. One might think, “Wow, that was easy. Now we have lots more choices!” And the next thought should be, “Well, what’s the limit on how much money we can create?”

First, we should remember that money is not wealth, it merely represents wealth. When money was backed by gold reserves, the supply of gold limited the amount of money in the system. If  Country A adopted bad policies relative to its trading partner Country B, gold reserves would flow out, threatening the underlying value of Country A’s currency. This would force Country A to correct its policies or risk impoverishment. The exchange rates between currency A and B did not reflect these changes because both were fixed to gold; but the underlying values had obviously changed demanding a revaluation of both currencies relative to gold. While workable, this was a herky-jerky way of adapting to changing economic conditions and resulted in many financial,  economic, and political crises along the way. It took WWI and WWII to finally break away from a gold standard as an economic constraint.

In 1948, the western powers that had been victorious in WWII established an international currency regime (called Bretton Woods) backed by the US$ fixed to gold and a host of institutions to help manage international relations, such as the IMF, the World Bank and the United Nations. Unfortunately, this regime depended on US policy to defend the monetary regime, even when it contradicted US domestic economic interests. With Vietnam war spending and Great Society social spending (guns and butter), too many dollars were created, causing a run on US gold redemptions by countries like France. In 1971, the Bretton Woods system finally broke down as Nixon closed the gold window to redemptions and all currencies began to float in value relative to other currencies. There was now no fixed relationship of the currency to anything of tangible value – its value was established by government fiat. The initial effect was a stagnating economy plus inflation, a decade-long slog in the 1970s that gave birth to the term stagflation.

At the time, it was thought that exchange rate movements would signal necessary policy changes to keep each countries’ political priorities aligned with economic constraints. It turns out this assumption did not hold up to political realities because volatile exchange rates do not necessarily affect domestic economic interests to the point where politicians feel the need to respond. How many of us know or care how the US$ is performing relative to the other currencies of the world? The result was that politically favorable (more for everybody!), but economically detrimental, policies could be pursued, while exchange rate volatility could be largely ignored. Thus, the economic discipline to guide political choices was lost, permitting bad policies to persist. We have seen this in the explosion of credit and debt around the world and the volatility in exchange rates and asset markets.

Now we can see the problem illustrated in the graphic above. Instead of forcing necessary fiscal reform, we end up throwing more monetary stimulus at the problem. The results have been rising inequality, asset booms and busts, and massive resource misallocations that will cost society economically for a long time. On the global stage, China is the poster child of excess. It will all end when we finally hit the wall and throwing more money at the problem no longer works.

Europe, the EU, and Greece.

We can consider another case in Europe where volatile exchange rates after 1971 inhibited trade with unnecessary currency risks and conversion costs. The idea was that a currency union under the euro would greatly expand intra-European trade by eliminating these costs. But a currency union requires consistent monetary and fiscal policy and a re-balancing mechanism. In the US this is achieved through a Federal government that taxes and redistributes resources. In the European view, economic discipline would by imposed by a set of consistent policy rules established under the European Union and Parliament. Once, again, the result was that individual country governments found ways to skirt the rules or outright deceive the EU on its government budgets. Sometimes this was necessary given the varying needs of uneven development among countries. We see the result in Greece, when it was soon discovered that Greece had borrowed and spent public funds far in excess of the 3% boundary established by the EU.

So, a currency union also has failed to discipline politics, and the result has been a catastrophe for the Greek people and a severe blow to the concept and credibility of the European Union and the euro.


The bottom line is that democratic politics needs a firm disciplinary constraint, or else a financially manipulated economy will give society just enough rope to hang itself with. Unfortunately, this has happened quite frequently in history.