Party Over People

Party Over People

 

As the 2020 summer and election seasons heat up amidst the most tumultuous period in America 

in half a century, look for signs that the cause of the nation’s problems isn’t Democrats, or Republicans. 

It is the two-party system they both protect and serve. No matter which side wins in November, 

the two-party system wins, and the people lose.

I have seen this firsthand in the policy realm where proposals that would place the interests of the 

general population over both political parties are met with derision and dismissed. 

America’s policy making apparatus is party-interested rather than rational.

In the first case, I suggested that the way to stop mass shootings is to remove barriers preventing 

entrepreneurs from developing a network of (hu)manned drones that would swarm, harry, and 

incapacitate bad guys. Please do not be the person who raises engineering objections to the idea. 

I swear if I said hey “let’s shrink a nuclear reactor down and use it to power a boat that can stay 

underwater for months at a time” some genius would say that it is “impossible.” To paraphrase a 1970s 

television program, quaintly called The Six Million Dollar Man, “we have the technology.” 

The problem lies not with technology but with incentives and regulations.

Members of neither party wanted to be anywhere near the idea, though, even though the drone system 

could also have been used in other first response scenarios, including fires and medical emergencies. 

Republicans feared its success would weaken support for the Second Amendment by reducing 

incentives for people to arm themselves while Democrats disliked reducing the power of government 

police forces and their public unions.

Another policy idea that went nowhere due to party politics is the notion of direct budgeting. That system 

entails elected legislators establishing programs and tax levels but each taxpayer deciding how their tax 

dollars are spent. Let hawks allocate their mite to military might and doves earmark their taxes for foreign

aid. Let MMTers pledge their all for current spending while debt realists apply all their taxes to paying 

down the national debt. 

Allow statists to spread their money about as the Deep State requests and libertarians to put all theirs 

toward the Government Accountability Office, which at least sounds like a good idea. In other words, 

make the budget truly democratic (except for solemn outstanding obligations like Social Security and 

debt interest payments).

If you bring such an idea up in a room full of politicians, you will quickly learn that bipartisanship is still 

possible, at least on the issue of you being a loon. If they engage at all, they will ask questions like 

“What if people used their power to ... oh I dunno something crazy … like defunding the police?” Well, 

then they would have no reason to peacefully protest, riot, tear down statues, or spread contagion for 

starters because they would hold something much more powerful than the right to vote for an

 elephantine or equine “geriatric racist.” Taxpayers would collectively hold the power of the purse. 

But that would smack of real democracy instead of plutocratic party rule so it cannot happen, at least not

while the powers that be, be.

Another idea that harkens back to rule of, by, and for the people that cannot gain traction because it would

 destroy the dastardly duopoly of party is sortition or lottocracy. Why elect rulers when we can select

 them, randomly, from a pool of qualified candidates? There would be no more campaign finance rules 

because there would be no more “running” for office, no more quid pro quo of promises for cash, just an 

email stating that you have been identified as qualified for such and such office and asking if you would 

serve if selected on such and such terms. It would be a lot like jury selection but with less coercion 

(i.e., higher pay!).

The details regarding qualifications for different offices would have to be worked out but, if we are really 

committed to being a democracy, it could be approved by a plebiscite before going into effect. Personally, 

I’d vote “yes” to any set of qualifications that kept Biden, Trump, and Putin out of the selection pool. 

 As I have noted before, if the idea of selecting POTUS frightens you, work to reduce the power of the 

position, which is supposed to be just the head of the executive branch of the national government, 

not the CEO of the nation or the leader of the free world.

As the November elections approach and civil unrest continues, look for other plausible policy proposals

 to be pronounced “dead on arrival.” Like Presidential assassins, they will be labeled insane or foreign 

plots or some other damnable thing to dissuade rational debate about their (de)merits. 

It is high time that Americans become (non-eugenical) Progressives again. No, not today’s Marxian 

Progressives, the original Progressives from the late nineteenth century, the ones who managed to 

reform government through referendum and recall, anti-corruption legislation, and the direct election of 

U.S. Senators. We do not really need much government at all, but if Americans insist on having a large 

one, they need ways to bring it, and its lapdog parties, to heel. That, though, is going to require thinking 

outside of the narrow confines of party politics and policy frames. 

Are we again ready to place people over party? Recent political polarization over masks and other 

responses to COVID-19 suggests not. Instead of debating the merits of articles like this one, which 

claims that there is NO scientific evidence that masks reduce the spread of SARS-COV-2 virus, we 

bash each other on Twitter in a desperate gambit to become or remain popular. If masks

 do help reduce the spread, shouldn’t people be debating whether it was legal or ethical for the CDC and

 WHO to value the lives of HCPs over others in the early part of the crisis, when they adamantly told 

mere commoners not to wear them?

So I still think America has jumped the shark, but hope that the recent uprisings 

(which I predicted back in March) shake the party duopoly enough to spur real reforms.

Capital Strike!

NOTA BENE: Most of my thoughts on the economic effects of COVID-19 and the policy responses to it can be found here: https://www.aier.org/staff/robert-e-wright/

I will, however, continue to share some content here, on my award winning blog.

***

Capital Strike!

By Robert E. Wright

As I have previously related here and elsewhere, the US economy began to grow (increase in per

 person output in inflation-adjusted terms) at modern rates right after ratification of the US Constitution 

because, as contemporaries explained, they believed that the document created a government that 

protected their lives, liberty, and property from three principal and eternal threats:, foreigners, other 

Americans, and domestic governments, including the national government itself.

Those early Americans were largely correct but of course they could not foresee the Civil War, 

the New Deal, or the worst policies since the New Deal, the unprecedented economic lockdowns 

associated with COVID-19. 

Matters grew so worrisome during the New Deal that many businesses engaged in what was termed 

a “capital strike,” a concept that readers of Ayn Rand’s Atlas Shrugged will find familiar. Instead of

 investing in new enterprises or improving existing ones, they hunkered down, waiting for less 

repressive government policies, a reaction that of course exacerbated the prolonged economic 

downturn now termed the Great Depression.

Another capital strike may loom if Elon Musk is openly articulating what entrepreneurs are thinking to

 themselves;, that our systems of governance are so deeply flawed that taking big risks trying to 

innovate is no longer worth the effort. 

How long until innovators decide to stash their cash in real estate and drop out? If any “public health” 

crisis can be used to shutter businesses indefinitely, spur massive bailouts that give the

 Federal Reserve unheard of power, and impede foreign trade, it is only a matter of time before an 

AOC recasts climate change into a public health crisis and uses the state’s apparently unlimited police

 powers to initiate a Green New Deal, or worse. Any legislator willing to say “[expletive that rhymes with 

duck] Elon Musk” merely for moving his property to a, let’s face it palpably better, state is ready to seize

 that property on whatever pretext she can concoct.

Yes, the stock market has recovered from the shock of lockdown policies but it is a poor indicator of

 innovative gumption because public policies induce most Americans to save for retirement via the 

stock market, artificially inflating demand for stocks. The stock market rebounded because retirement 

savings are largely automatic and essentially have nowhere else to go, especially in a potentially 

inflationary environment. I, for one, would love to turn my 403b into the outright purchase of real estate 

but regulations and taxes render it extremely costly to do so. The CARES Act allows people directly 

affected by COVID-19 to tap $100,000 without the usual extra penalty but of course most employed 

people cannot take any distribution, leaving them stuck with stocks.

Besides, a capital strike is much more fundamental than the stock market because it refers to slowing 

or stopping new business investments, not merely the prices of claims on the fruits of past investments. I fear that entrepreneurship and innovation are no longer as attractive as rent- seeking activities, especially in blue states like New York and California where the sovereign expropriation risk has grown very high. Their recent lockdown policies, arguably unconstitutional actions, have simply made a brewing controversy more salient.

That controversy strikes at the heart of America’s two- plus century growth miracle, belief that 

Americans’ lives, liberty, and property are safe. Before the present crisis, the controversy took its most

 palpable form in the Corporate Social Responsibility (CSR) movement, which recently has begun 

denying that investors own their own investments in corporations! 

According to a recent article by David A. Ciepley, Americans today are under the misapprehension that 

stockholders are owners or members of corporations because of some unusual happenings 

associated with the formation of the British East India Company hundreds of years ago.

After reading Ciepley’s piece, I felt like Consuela, the maid on Family Guy who knows one word in 

English because it is the same word in Spanish. “No.”

Ciepley, an Associate Fellow at UVA’s Institute for Advanced Studies in Culture, has missed almost the 

entire literature on the history of corporate governance and finance so he fails to see, as

 Amanda Porterfield clearly does in Corporate Spirit, that corporations pre-date the EIC by almost two 

millennia and were always viewed in the West as groups of individuals voluntarily associated in one 

“body” (corpus) for some common purpose, from worshipping Christ (literally the body of Christ), 

to encouraging some laudable social end, to engaging in commerce.

By natural right, individuals can associate and create rules to govern themselves so long as those

 rules do not contravene the laws of nature or of humans. Moreover, those associations can engage in

 any activity as lawfully as any one of its members or owners could. That includes owning assets and

 borrowing on the basis of them under contracts that may, or may not, limit the liability of each member. 

Statutes called charters or acts of incorporation added the state’s sanction to that natural right of

 association and clarified the relationship between the corporation and its owners or members. 

You can read about the details of the (d)evolution of the governance of America’s corporations to your 

heart’s content here. 

Basically, bad laws made it possible for executives with little equity stake in businesses to entrench 

themselves in management. Several times, shareholders fought back, only to lose back the ground 

they made during the reign of corporate gadflies like Wilma Soss and the Gilbert Brothers and then the 

temporary ascendance of leveraged buyout firms like KKR. Corporate governance history may be the

 most important topic that hardly anyone studies.

And that is a crying rotten shame, not just for the sales of my books (including a forthcoming biography 

of Wilma Soss with Bucknell’s Jan Traflet that will blow your socks off!) but for important national policy

 discussions. Instead of helping shareholders to re-assert tried and true checks and balances against 

managerial rent extraction (you know, sky high salaries, golden parachutes, unnecessary corporate jets

 and such), a lot of “progressive” commentators waste their time and talents on counterproductive CSR

 initiatives.

The worst of these, perhaps, are the constant calls to prevent corporations from buying their own 

shares. All that practice does is to reduce the number of shares, thereby raising the price per share.

 It is, then, simply a tax-efficient mechanism for returning capital to voluntary shareholders. Members of

 the CSR movement dislike it, however, because stock buybacks could also signal a capital strike.

Executives can use buybacks to enrich themselves with stock options but that is a governance 

problem, not a problem with buybacks per se, which are only one of a bazillion ways that unchecked 

managers can expropriate resources from shareholders.

But the bigger problem with CSR advocacy is forgetting that corporations are, at root, voluntary 

associations. When properly governed, they exist to serve the ends of their owners and members, 

not the ends of government, or some activist law professors, or some twits on Twitter who couldn’t 

tell the difference between a common and a preferred share.

That means that corporations can issue more shares if they want, or fewer, which can only be done by

 buying them in the open market. Or they can organize as mutuals, or non-profits. It’s their own 

business and they should be left to it.

Want to know what happens when donors, investors, or innovators fear that their money will be under 

somebody else’s control? They stop donating, investing, and innovating. Want to know what happens 

then? Poverty. Especially today, seemingly all of nature conspires to keep human beings poor. We don’t

 need CSR “progressives” helping, we need to re-establish confidence in the Constitution’s protection 

of life, liberty, and property. Otherwise, we will end up sharing our economic pie equally, but it will be a 

very small one indeed.

We might have to eat catfish due to the policy response to COVID-19 (a threat thankfully less ominous

 today than two weeks ago), but we will eat pie crumbs if governments and CSR progressives trigger 

a capital strike.

Combating the Evolution of SARS-CoV-2 (novel coronavirus)

My fans have been wondering why I have not been commenting on the unfolding crisis. But I have! See my posts on AIER: https://www.aier.org/staff/robert-e-wright/

1. Should Government Go Medieval During Pandemic Disease? Hint: No!
2. The Parasites Exacerbating COVID:  "Instead of identifying and focusing on its core mission, the government, like any good parasite, has bloated and stretched itself into so many areas that it is over-extended. Instead of doing a few key things well, it does many, many things it shouldn’t be doing at all, and usually poorly at that."
3. Revolution Is In the Air: Warns that if basic services goes down and the lock downs are not working to quell the pandemic, things could get "real" real quick.
4. The Columbia-NYT Model Can't Be Right: Critiques one of the more dire predictions of the virus spread with math (it seems to use an exponential rather than a logit or epi function) and intimate knowledge of South Dakota.
5. Government Common Stock Ownership: Cure Worse Than Disease: Argues on Jacksonian grounds that the federal government/Federal Reserve should not buy common shares in corporations.
6. Look also for still forthcoming articles on life insurance and Social Security and the coronavirus crisis.

In this post, original to this blog, which I want to keep alive with original content whenever I can muster some, I offer some thoughts on the biological evolution of SARS-CoV-2 and the best policy for minimizing its future impact, which is to match evolutionary process with evolutionary process.

Combating the Evolution of SARS-CoV-2 the Novel Coronavirus

Scientists cannot know how SARS-CoV-2, the virus that causes COVID-19, will evolve, only that it will change in the face of selective pressures. They used to believe that pathogenic lethality faced natural limits but now are not so sure. That, however, is no reason to panic as markets can keep pace with viral mutation. In many ways, market participants and viruses are subject to similar evolutionary processes. What must be combated are attempts to centrally plan the response to SARS-CoV-2’s inevitable evolution.

In a famous 1950 article in the Journal of Political Economy entitled “Uncertainty, Evolution and Economic Theory,” American economist Armen A. Alchian argued that the firms that come closest to maximizing profits, even if due simply to dumb luck, are the most likely to survive.

In the biological world, those organisms that maximize the production of reproductively successful offspring are also the most likely to survive, even if the organisms themselves know nothing of what they are doing. No intelligent design, or plan, is necessary as the environment, the set of constraints and conditions faced by firms or organisms at any given moment, selects the winners and weeds out the losers.

Epidemiologists (scientists who study the spread of disease) try to discover which viruses and other pathogens will be selected in different environments, including human bodies. For a long time, they believed that the virulence of viruses faced natural limits because pathogens that killed their hosts were less likely to spread to new hosts than were ones that merely made their hosts ill.

Happily, many pathogens do evolve to become more benign. However, two other key variables, ease of transmission and recovery time, complicate matters. Pathogens can evolve to become more easily transmitted to other hosts, like through the air, or to linger longer in their hosts. In both those cases, pathogens can become more deadly without diminishing their chance of being transmitted to a new host (person!) before the original host perishes. In the first instance, the chance of infecting a new host increases and in the second, the number of opportunities to infect a new host grows.

In short, scientific models alone cannot predict the evolutionary path that a particular pathogen will take. Evolution may drive it towards reduced virulence but it might also make it easier to transmit or more difficult to shake off, which in turn could allow increased virulence without reducing the production of successful offspring.

To gain some insights into the possible evolutionary paths of pathogens, and strategies for their containment, scientists study epidemiological history. Even a brief survey reveals large variations in pathogenic evolution and the outcome of human responses to it.

Variola major (smallpox), for example, could kill one in three of the adults it infected because it spread relatively easily in two phases, first by causing vomiting and then by forming pustules that covered the host pretty much head to toe. It killed about half a billion people in the century before its eradication, which incidentally in most places was brought about by herd inoculation, not quarantine.

Tuberculosis (TB), by contrast, remains a scourge of Biblical proportions. It lays dormant in about 2 billion people worldwide and will emerge with active symptoms in about 10 million every year. It can be cured with a course of drugs but of course drug-resistant strains are appearing due to selective pressures. Johnson & Johnson is on the case, though, developing an entirely new type of anti-TB drug.

Cholera is also highly virulent, spreading by causing massive diarrhea that can quickly lead to death. It is best prevented through modern sanitation so in less developed nations or places where water systems have gone done due to war or catastrophe outbreaks remain common and deadly. Some 9,000 people died of the disease, for example, after the earthquake that struck Haiti in 2010.

The bubonic plague responsible for the Black Death that killed about a third of the population of parts of Europe in the medieval period also remains extant but it is treatable with antibiotics. Untreated, it can kill up to three in five of the humans it infects because reservoirs of this nasty bug live on in rodents. Marburg and Ebola can also remain deadly to humans because they find safe harbor in bats. Both spread through secretions, so they evolved to cause vomiting, diarrhea, and late stage hemorrhaging in their victims. MERS, which kills about a third of those it infects, also harbors in bats but also in camels.

Yellow fever, which killed about 10 percent of the total population of Philadelphia in 1793, is also highly virulent but spreads only via infected mosquitoes, not person to person. Mosquito suppression and herd inoculation have eliminated it from the United States but epidemics still occur in Africa and, less frequently, in South America. Much the same could be said of dengue, which kills about 50,000 people a year globally, and P. falciparum, more commonly known as malaria (which is a parasite rather than a virus).

Perhaps the most virulent infectious disease, rabies, still kills some 70,000 people a year worldwide. Almost nobody survives once the infection, caused by the rabies virus, progresses. Vaccines and treatments, however, can save most victims if they are treated soon enough after being bitten by an animal carrier. Human to human transmission is of course rare.

SARS-CoV-2, by contrast, spreads easily from person to person. At present, it is not, however, highly virulent except in people already suffering from other serious maladies. 

As noted above, SARS-CoV-2 will evolve and could become more virulent in the process. But it could also become less virulent and/or more difficult to transmit. Of course any mutated forms will have to spread from host to host again and with proper incentives vaccines should be available by then, as they are for the flu and many other contagions. 
Ultimately, to combat the evolution of SARS-CoV-2 effectively over the medium and long term we need to nourish another evolutionary form, the free market. Instead of restricting competition and imposing top-down plans, government should let a thousand firms bloom, as South Korea has. Most experiments will fail but a few, if only out of dumb luck, will find a way to check SARS-CoV-2 regardless of its evolutionary path.