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Robert P. George’s Cross of Gold

Originally posted at Talk to Action.

“Having behind us the producing masses of this nation and the world, supported by the commercial interests, the laboring interests and the toilers everywhere, we will answer their demand for a gold standard by saying to them: You shall not press down upon the brow of labor this crown of thorns, you shall not you shall not crucify mankind upon a cross of gold.”

-William Jennings Bryan, July 8, 1896

I recently discussed how the Right has howled about the judicious use of debt and taxes to ensure a sound economy for the past thirty years. Now Catholic neocon-turned-Tea Party avatar Robert P. George is leading a a coalescing alliance of economic and social conservatives that aims to crucify common prosperity, once more, upon a cross of gold.

After the Panic of 1893, the nation was suffering from a period of deflation — the downward spiral of prices and wages. Farmers were among the hardest hit. Crop prices dropped the point where many faced financial ruin.

Democratic presidential candidate William Jennings Bryan, campaigned in the election of 1896 against the Republican economic plan of setting the value of the dollar to the value of the amount of gold the United States held in reserve. At his party’s convention Bryan gave his famous Cross of Gold Speech. Therein, he accused the Republicans of failing to employ commodity or “demand-pull” inflation (as opposed to wage inflation, an increase in prices for commodities such as agricultural products, petroleum or minerals) as a means if checking deflation.

Now, more than a century after Bryan’s historic speech, and almost eighty years since FDR ended it — the gold standard is rising in our national discourse like zombies from the grave in a bad horror movie.

Back then, before the creation of the Federal Reserve System, Bryan was arguing for a monetary standard based upon bimetallism — one that would have established a fixed rate of exchange between gold and silver. The economic landscape has changed since then, but the role of governmental action to improve the standard of living remains an issue.

Inflation pegged to increases in worker productivity is the reason why a couple that bought a house in 1960 saw their fixed mortgage become more manageable with each passing year. Moderate increases in wage inflation make debt more manageable for the employed. It also reduces the reliance upon tenuous credit. In other words, a judicious amount of annual inflation is a vital component of wealth creation and thus, economic liberty for the many, not just the few.

The web site The Aporetic explains why the Right is getting so gold buggy:

People who like the idea of a gold standard like the idea that gold has “real,” “intrinsic” value, which is a fancy way of saying it just is valuable, in the same way that lead is heavy. “Value,” they argue, is a property installed in gold by God or nature. An economy based on gold is thus an economy founded in natural law: gold bugs dream of an economy which government can’t tamper with. All values will be “real” values. The government can’t issue more gold, so it can’t create debt by simply printing more money.

Slate ran a good piece on what would happen if we returned to the gold standard. You can add to that rapid deflation and spikes in interest rates. Deflation sounds good, except that interest rates would spike while the prices manufacturers and businesses could get for their goods would collapse. Deflation was precisely the problem in 1932. But one set of people would benefit to a remarkable degree, and that is, those who hold capital, e.g the rich. The value of their money would sky-rocket, as would the price they could demand for lending it.

Get it? As wages go down, workers rely more and more on credit instead of their own earnings to obtain property and services. In short, the American economy goes from being one made up of upwardly mobile individuals to larger numbers of debtors in living in one huge company town. This is not exactly the concept of individual liberty envisioned by Adam Smith in 1776.

There was no better example of the way that the Right is campaigning against the controlled use of inflation than recent comments by Sarah Palin.

Palin – echoing Glen Beck, attempted to take on the Wall Street Journal over the rising costs of groceries, erroneously implying that food prices are a reliable indicator of overall inflation (they are not, as explained below).

The problem with Palin’s analysis is that food and fuel costs are so volatile that they are not counted as a core indicator of inflation. Paul Krugman pointed out, for example, that over the past decade, food prices have not been that far a field of the general rate of inflation, which in and of itself is practically non-existent. If anything, there is a much greater risk of overall deflation.

What the gold bugs like Glen Beck, Palin and George won’t acknowledge is that the economy could use a bit of moderate wage inflation, the type that does not exceed increases in the percentage of worker productivity, but keeps pace with it. The reason they won’t say anything about it is that it requires the use of the other defamed economic tool, taxation.

There is nothing new about gold bugs. But what is new is Religious Right strategist and well-connected GOP neocon of Robert P. George’s emergence as a leader of the contemporary gold bug brigade. I suspect that George sees that advocating a doctrine of classical, laissez-faire economics. enhances his appeal with non-Catholic fundamentalist Protestant Reconstructionists

In short, it makes for good coalition building on the far right. As Julie Ingersoll recently at observed at Religion Dispatches:

For the former Alaska governor’s audience, though, her attack on the Fed is adequate-shall we say-stimulus. In the Tea Party’s short life, the Federal Reserve has been a target of its oppositional rage, spurred by Tea Party godfather Rep. Ron Paul’s persistent calls to eliminate it.

While Paul’s anti-Fed crusade is widely thought of as economic libertarianism, the roots of this combat lie in a theocratic reading of the Bible, arising out of the nexus between Paul (and now his son, Senator-elect Rand Paul), Howard Phillips and his Constitution Party, and Gary North and the Christian Reconstructionists.

This supposed Biblical prosciption against the Fed — as well as inflation — is described by Gary North:

The Bible is clear on three legal principles: (1) monetary debasement is wrong (Isaiah 1:22); (2) multiple indebtedness, which is the basis of fractional reserve banking, must not be allowed (Exodus 22:26) ; (3) weights and measures must not be tampered with (Lev. 19:36). All three are violated by modern economic policy.

That’s why it is so significant that the gold standard is a featured issue of George’s American Principles Project. The goal of Gold Standard 2012 is “…to reach out to lawmakers to advance legislation that will put the U.S. back on the gold standard.” They claim to be alarmed about the “…explosive growth of government and unrestrained deficit spending kicked into high gear by the Obama administration and the 111th Congress…” But I suspect that their real concern is Keynesian economics.

Using deficits to create aggregate demand and then judiciously using taxation to pay down the resulting debt (which simultaneously applies the brake to any possible resulting inflation), has a proven track record.

Add to my suspicions the vital role that organized labor plays in increasing wages. We must remember that many of (the economists Robert P. George and friends subscribe to (Amity Shlaes, Richard A. Epstein) believe that if workers would just work for lower wages, unemployment ceases to be a problem. This is economic conservatism’s dirty little secret — the exposure of which is liberalism’s opportunity.

And this brings us back to William Jennings Bryan. He is speaking to us from the past. Bryan’s unimpeachable credentials as fundamentalist Christian refute the Reconstructionists who cite inflation as sinful. And he fully understood the perils of wealth inequality built solely upon political power.

And to that end, in 1896 Bryan reminded the nation who creates wealth:

When you come before us and tell us that we shall disturb your business interests, we reply that you have disturbed our business interests by your action. We say to you that you have made too limited in its application the definition of a businessman. The man who is employed for wages is as much a businessman as his employer. … The farmer who goes forth in the morning and toils all day, begins in the spring and toils all summer, and by the application of brain and muscle to the natural resources of this country creates wealth, is as much a businessman as the man who goes upon the Board of Trade and bets upon the price of grain. The miners who go 1,000 feet into the earth or climb 2,000 feet upon the cliffs and bring forth from their hiding places the precious metals to be poured in the channels of trade are as much businessmen as the few financial magnates who in a backroom corner the money of the world.

More than a century later, Bryan still refutes the zombie gold bug madness of Robert P. George. Yes, like the Princeton neocon Bryan was orthodox in his Christianity. But unlike George, Bryan did not put his faith at the disposal of his generation’s oligarchs. Instead, he tried to to use it to improve the lot of all God’s people..

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Catholic Tea Party Economics

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Catholic Neocons Distort Church Teachings on Economics

Catholic Tea Party Economics

In my last post I discussed how the Catholic Right now seems to be decoupling from the neoconservative philosophy of empire and behind-the-scenes philosopher elites, and hooking up with paleo-conservative elements of the Tea Party movement.

While there are significant philosophical differences between these tendencies, they both believe in a form of laissez-faire capitalism steeped deeply in the neo-platonic notion of knowing one’s place in society. This shift reveals what many suspect: That the leadership of the Catholic Right – like much of the Religious Right movement – is using faith as a tool to accomplish a laissez-faire economic agenda.

While there is a distinct and identifiable trend here, the Tea Party movement defies easy characterizations. Tea Partiers often hold contradictory opinions – for example, wanting to preserve their Social Security benefits while opposing “big government programs.” Their leadership, however, know exactly what they want – laissez-faire, “casino” capitalism – and what they don’t want – Keynesian capitalism.

As I previously noted, GOP insider Deal Hudson has gone so far as to call for “a Catholic Tea Party” faction.

With that in mind, I have been reading up on John Maynard Keynes. I am currently working through his Magnum opus, The General Theory of Employment, Interest and Money, which was published in 1936 during the Great Depression. It is often difficult reading, but it is well worth the effort. And in order to understand how Keynesian economics can be successfully applied to correct today’s economic woes I have read and reread both economist Paul Davidson‘s The Keynes Solution: The Path to Global Economic Prosperity as well as ‘s Keynes: The Return of the Master.

You may by now be asking yourself why I would dust off these tomes in search of answers to contemporary economic problems. The answer is simple: Because Keynesian economic principles explain many of the fallacies of laissez-faire capitalism while offering an alternative way to help a market economy to function in a more robust and healthy manner. In short, Keynes proposed an alternate style of capitalism, one instilled with healthy doses of realism, self-discipline and fairness. It is also a potent weapon to blunt Christian Tea Party laissez-faire economics. As we will explore in an upcoming related post, Keynes’ belief in “living a reasonable life” strongly echoes Monsignor John A. Ryan’s Distributive Justice goals..

But before we can apply Keynes’s solutions as “a refudiation” of Tea Party economic policies, we must first understand what is in need of refudiating.

Hayek’s Ghost

What most Tea Partiers advocate is a form of Austrian School flavored libertarian economics, epitomized by the life and work of the movement’s new hero,, economist F.A. Hayek (1889-1992). Hayek is often remembered for his 1944 book Road to Serfdom, a defense of laissez-faire and dire warning about where New Deal liberalism and British Labour would lead – dictatorship; an outcome already refudiated by history.

But the Austrian-born economist is also known for his theory of spontaneous order, defined by the Online Library of Liberty as “…an order which emerges as result of the voluntary activities of individuals and not one which is created by a government, is a key idea in the classical liberal and free market tradition.” As one modern Keynesian put it, “In other words, government economic policy is the problem, the free market is the solution.”

This is very much the essence of Classical and its progeny, libertarian economic thought. Its mantra is that government efforts to jump-start stagnate economies can only throw off the equilibrium or natural order of business. Unlike Keynes who believed that it was government’s role to ensure enough demand so that wages – and thus, the standard of living – do not decrease, today’s laissez-faire advocates subscribe to Say’s Law; the belief that supply creates demand.

“Let the system take care of itself and damn the human consequences.” It echoes the harsh advice Secretary of the Treasury Andrew Mellon gave President Hoover at the outset of the Great Depression, “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” The belief being that when available jobs pay less, workers will be required to take less pay. This “equilibrium” will the supposedly restore boom times. It is in this callous way markets “correct themselves.”

Calvinist Libertarianism

But boom times for whom? Keynes pointed out in chapter 19, page 262 of The General Theory:

What will be the effect of this redistribution on the propensity to consume for the community as a whole? The transfer from wage-earners to other factors is likely to diminish the propensity to consume. The effect of the transfer from entrepreneurs to rentiers [a rentier is a person who lives on income from property or investments.] is more open to doubt. But if rentiers represent on the whole the richer section of the community and those whose standard of life is least flexible, then the effect of this also will be unfavourable.

Beyond that, such laissez-faire dogma calls for a world where there are no labor contracts; one where workers must docilely accept lower wages. That is why we hear conservative economists such as Amity Schlaes make the bogus claim that FDR’s support for unionization supposedly prolonged the Great Depression.

Laissez-faire is nothing less than an economic form of Calvinism, replete with its belief in predestination. It is a theory that preaches that the past is a shadow of the future and that government has no role in addressing future economic uncertainty. And if government does attempt to address unseen contingencies, it will only aggravate things a delay a return to prosperity? Why? Because laissez-faire advocates believe that economics operates pursuant to an ergodic axiom – that the outcomes are predetermined.

The inherent absurdity of this proposition is not lost on Keynesian economist Paul Davidson:

The assumption that the economy is governed by an ergodic stochastic process means that the future path of the economy is already predetermined and can not be changed by human action today. Astronomers insist that the future path of the planets around the sun and the moon around the earth has been predetermined since the moment of the Big Bang beginning of the universe. Nothing humans can do can change the predetermined path of these heavenly bodies. This “Big Bang” astronomy theory means that the “hard science” of astronomy relies on the ergodic axiom. Consequently by using past measurements of the speed and direction of heavenly bodies, astronomical scientists can accurately predict the time (usually within seconds) of when the next solar eclipse will be observable on the earth.

Assuming that this hard science astronomy is applicable to the heavenly bodies of our universe, then it should be obvious that the United States Congress can not pass legislation that will actually prevent future solar eclipses from occurring even if the legislation is designed to obtain more sunshine to improve agriculture crop production. In a similar vein, if, as [Paul] Samuelson claims, economics is a “hard science” based on the ergodic axiom, then Congress can neither pass a law preventing the next eclipse nor pass a law to prevent the preprogrammed next systemic financial crisis. The result is a belief in a laissez-faire non government intervention policy as the only correct policy.

And why is this theory so appealing to advocates of laissez-faire? Again, Paul Davidson explains:

Thus, for example, it is often argued that the government creates unemployment in the private sector when it passes legislation that all workers are entitled to at least minimum wage that cannot be lowered even if unemployed workers are willing to work for less rather than starve. Similarly if government passes legislation that protects and encourages unionization, the effect will be to push wages up so high that profit opportunities will be ultimately eliminated and unemployment of workers assured. Thus, it follows from classical theory, that the market, and not the government should decide what wage rate should be the minimum that workers should receive. Consistency therefore would require arguing that government should never constrain the pay of top management but rather should leave it to the market to determine the value of CEOs. Is it not surprising that these CEO’s then hire these classical economists as consultants?

This is what Tea Party advocates such as Dick Armey and Matt Kibbe mean when they demand “Give us liberty!”. It is liberty for a select, fortunate few; the freedom from having profit distributed based upon merit, contribution or special skills but instead via unchecked power.

Such casino capitalism (Keynes’s term) has been at the foundation of GOP politics for the last thirty years. As the editor of the journal U.S. Catholic Bryan Cones observed of Hudson:

Can we just be honest here? Deal Hudson is a Republican. He thinks everyone should be a Republican, and he thinks if you’re a Catholic, you should be a Republican because the only issues you should ever cast a vote on are abortion and gay marriage (as if the GOP is really pure in practice on either of those issues).

Thus, it is a no-brainer for Hudson the GOP insider to serve up über-orthodox Catholic agenda with some hot Tea Party rhetoric.

In the next installment Keynes’s principles will be examined as a means to refute the Religious Right.

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