Posted on 03/21/2009 7:41:56 AM PDT by Publius
I’m not just saying government is bad now. I said it then. I cheered from the rooftops when the bailout was initially defeated in September. Then the worthess polititcians (of both parties) twisted arms and put in sweeteners to get it passed. Then we had the ridiculous stimoulous bill, which was written behind closed doors and wasn’t allowed to be read or amended. So now the politicians are covering their asses.
Last fall we were told that AIG is too big to fail. Nonsense. It should have been allowed to go bankrupt, then all contracts would have been null and void and there wouldn’t have been any money for bonuses.
But we didn’t choose that path. The government should not be an owner of any company. It’s dangerous.
“Where’s the chapter that has the holy captialist privatizing years and years of gains only to run to the government for hundreds of billions of dollars in bailout money paid for by taxpayers in order socialize their losses and maintain their plutocracy”
Check your premises. This NOT capitalism!! This is socialism in the name of not allowing businesses to fail, or jobs to be “lost”. And we (our government) should not have bought in to it. Capitalism DEMANDS that businesses and individuals be allowed to fail, in order to free capital and labor to move to where it is needed and away from where it is not. Read Joseph Schumpeter.
One can hardly expect anyone, Capitalist or Socialist, Marxist or Feudalist not to look to his own self-interest, and accept (or even demand) alms, IF THEY ARE AVAILABLE. But that doesn’t reflect on the economic system, rather on the people within it. The free market is the ONLY one in which society is benefitted by the natural selfishness of men, and is not dependent on largesse (even if such selflessness might exist in sufficient amount to provide for society’s needs).
I’ll state it baldly: NO economy can long exist which ignores the individual and his selfish motives as its driving force, and when “selfless” people, usually bureacrats with a vested interest in the status quo, attempt to drive an economy in the direction in which they THINK it should go, regardless of economic reality, you will get the kind of chaos we are now seeing.
It will be interesting to see how many “green” cars GM will sell per government mandate (it’s easy talking “green” when it doesn’t cost anything), and how long it will be before they come to Washington to ask for more money. Oh, wait; they already did.
BTW, has anyone noticed, re. a previous thread, that “General Motors” has its corporate mouth firmly pressed to the Federal teat, but (Henry) Ford does not? And (Walter) Chrysler doesn’t count; I doubt they will see the end of the year as an “independent” company. Schumpeter will be satisfied, at least to that extent.
Kirk
Eugene Lawson allowing the Community National Bank of Madison to fail simply because he was "doing good" for people who needed money. His decision to loan based on that simple criteria, and his statement that he was proud to have never made a profit in his life, not only destroyed everything his grandfather and father worked for, but in the long run helped to destroy his ability to help people who needed it further down the road. It was a short term solution to a long term problem.
Lee Hunsacker too expressed disappointment that after he was given a loan from Eugene Lawson no one would GIVE him a railroad. His indignation at the people who took him in when he had nowhere else to go, yet expected him to earn his keep.
Ivy Starnes who completely blew a fortune by setting up a workers paradise at the Twentieth Century Motor Company by paying everyone the same, then distributing "from each according to their ability, to each according to their needs", the meetings to determine how money would be split up, then getting mad at people for quitting. Her statement that the company was ruined by people who didn't understand the concept of "requiring men to be motivated NOT by personal gain, but by love for their brothers."
Finally the passage of laws that made everyone "equal" thereby eliminating competition. Mr. Wyatt, however, has the last laugh as he purposely destroys his oil fields before the "looters" can get their hands on a gold mine and leaving it as he found it.
All these things had me seeing red throughout the chapter. HOWEVER, look at this quote and see if it could have been put into Rand's novel in this chapter:
"The rich and powerful think mainly about preserving and expanding their wealth and power. President Obama must realize that under the emergency powers of his office, he not only has the authority to seize our assets, but also has access to all the assets of America’s richest men for meeting those emergencies that threaten the common good."
The above was taken from a post at DemocraticUnderground TODAY..truly, truly scary..
“Now, let me address my second issue, and that is the manual underwriting process itself. While Countrywide’s own internal evidence supports the notion that manual underwriters are approving a good majority of the loan applications that get referred, the fact of the matter remains that a human is involved in this step of the process thereby creating the possibility that a decision is made based upon the level of the borrower’s FICO score.
Thus, the current protocol intentionally creates an environment where borrowers with lower FICO scores are subject to being disproportionately affected by the manual underwriting process. I say we need to amend these systems to do more than just approve the “cream of the crop,” by creating a system that says “no” only to those deemed unwilling to make their mortgage payments.
We must understand that the credit scoring system we have built is still imperfect, and that if we are to have any chance at closing the homeownership gap, we must make a serious investment in improving its capacity and capabilities. We must do this through improved automated underwriting models that take into account more variables, and measure true indicators of risk and willingness to pay. We need an ongoing educational process, not only at the primary market level, but also in the secondary markets and with mortgage insurers to help lead this effort to recalibrate the scoring system. And finally, it must be recognized that borrowers with credit scores below what is currently defined as “creditworthy” levels can still be acceptable credit risks. Thus, the credit score bar dividing creditworthy from high-risk borrowers, must be substantially lowered by the GSEs, the secondary market in general, and with bank regulators. The GSEs have made good progress over the last few years in expanding their credit criteria, but I encourage them to become much more aggressive in this regard.”
Angelo Mozilo, CEO Countrywide and flaming leftwing idiot, February 4, 2003 speech to shareholders.
There was no down side when the government said write and we will back it up. Until, they wrote more than the country could afford. Congress couldn't be bothered with overseeing, what, with all the votes bought with others people's money. Congress stills does not see a problem. They see a solution that is the problem. Obozo makes the claim that the deficits are not that large compared to GDP, not once, realizing the GDP is getting smaller. They are playing a numbers game that a Dow 15,000 is better than Bush had, but, those dollars are worth less than when Bush was there. Obummer's treasury is, probably, planning a million dollar note with his picture. They can be used as toilet paper in Zerovilles.
I am struck by how far they can drive in desolate Wisconsin.
And the only thing Mozillo didn't say was that he was proud that he had never earned a profit.
While you’re reading, check in with the earlier threads to keep up. And check out the introductory thread because there’s some good stuff in there, too.
Bureaucrats crave stability, and feudalism was the most stable economic and social system ever seen.
True. Everything you said in your post was true.
But the path from one system to another passed through something I call "creditism".
Henry Clay was correct when he said, "The United States were built on credit," back when the renewal of the Second Bank of the United States was being discussed during Jackson's second term. Credit is very important, a precious object that needs to be properly maintained in order to work. Hamilton understood that when he monetized our war debt to make those worthless Continentals have some value. What went wrong was the profligate use of credit where it was not warranted.
Our own modern Lee Hunsacker (Mayor Young) perverted credit when he insisted on managing the growth of Detroit according to liberal principles that had nothing to do with capitalism or Schumpeter. Detroit should have been plowed back into the farmland from which it rose if it served no useful purpose. Social need trumped wise use of credit.
By creating the character of Eugene Lawson, Rand pinpoints the abuse of credit as the source of what went wrong. Compare this with Hank's willingness to defer accepting payment from the railroad for his metal. That decision was driven by financial wisdom, not trying to do Dagny (and Jim) a favor. It was credit well applied.
We seem to have lost that value in our current world.
That quote was almost verbatim Claude Slagenhop from the party at Hank’s house in a previous chapter.
Good grief! That speech from Mozillo could have come out of the mouth of Eugene Lawson. Or maybe Mark Yonts before he looted his S&L and disappeared.
Boy, did you ever say a mouthful! The abuse of credit created this whole mess from the derivatives protecting mortgages sold upstream to huge swaths of commercial paper based on betting on interest rates. The banks didn't take the stance of Midas Mulligan. They agreed to be raped if the price was right. And what a price!
I am struck by how far they can drive in desolate Wisconsin.
And I was sruck by the fact that they had to go 200 miles to find a phone. Where were the gas stations?
So we’ve made Chapter 10, Wyatt’s Torch, one of the most significant chapters in Atlas Shrugged. Chapter 10 is a quest chapter, a series of episodes describing Dagny’s search for the engineer who created the mysterious motor that Dagny and Hank found in the wreckage of the Twentieth Century Motor Company. Each step along the way helps us fill in the picture of what happened there to cause the company’s downfall, the abandonment of the motor, and the crippling poverty now gripping the surrounding countryside.
Our first stop is the decaying community of Rome, Wisconsin, (the Rome of AD 476, perhaps, that has not fallen but is in the hands of the barbarians) wherein one Mayor Bascom presents an argument that is critical to the understanding of the economic and philosophical underpinnings of socialism.
Within a long and frightening list of characters and events chronicled in the next few chapters is Rand’s own Bernie Madoff, a fraudulent financier named Mark Yonts:
“He wasn’t the kind who ever operates anything. He didn’t want to make money, only to get it.”
That didn’t, of course, prevent the Mayor from helping Yonts’s plunder:
“There’s plenty of laws that’s sort of made of rubber, and a mayor’s in a position to stretch them a bit for a friend. Well, what the hell? That’s the only way anybody ever gets rich in this world” – he glanced at the luxurious black car – “as you ought to know.”
“Property is theft” said Pierre-Joseph Proudhon, the proto-anarchist. (He also stated that “Anarchy is Order” in Confessions of a Revolutionary. A bit of trivia there – I capitalized both nouns in the second sentence to highlight the origin of the “circle-A” logo that anarchist kiddies like to spray-paint on vertical surfaces, raging against the capitalist machine with weapons purchased on special from Costco at $1.39 a pop). Interesting fellow, Proudhon. Before his breakup with Marx he was quite the thing in post-revolutionary France, at one point attempting to institute a curious scheme for the redistribution of wealth - a bank that obtained its money from the evil capitalists through an income tax and lending it to the workers at what amounted to sub-prime rates of interest. It failed, of course. Surely nobody would be stupid enough to try that in the United States? All that we learned from it is that folly renamed and taken to a national scale is still folly.
This fundamental article of faith, of received truth underlying socialism is that wealth is theft; that any movement from the “natural” even distribution of wealth is illegitimate, that the wealthy are ipso facto criminal, and that as such it is not a criminal act, but one of “social justice” to steal it back on behalf of the people (and take a prime cut off the top for being clever enough to figure the whole thing out). I’ve never run into a thief yet who didn’t consider himself cleverer than his victims. Clearly the Mayor feels he has the whole thing figured out, and Hank has to restrain his hands from the Mayor’s throat.
A crooked financier, and next a failed bank. The reader is to be forgiven for suspecting that Rand owned a crystal ball.
“Some say it was this motor factory that broke the bank, but others say it was only the last drop in a leaking bucket, because the Community National had bum investments all over three or four states. Eugene Lawson was the head of it. The banker with a heart, they called him.”
This is the same Eugene Lawson who is now working with Wesley Mouch at the Bureau of Economic Planning and National Resources. The “banker with a heart,” meaning he made loans on a basis of something other than the likelihood of repayment. Banks that do that tend to fail, as we are learning so bitterly of late, having compounded one banker’s foolishness to all the banks by governmental mandate. Incredibly, Rand anticipated that as well.
One of Dagny’s stops involves a fellow named Hunsacker, who was attempting to raise the capital necessary to come into possession of the old Starnes/Twentieth Century factory. A hard-hearted, classic, and very successful banker Midas Mulligan, who disappeared under mysterious circumstances seven years ago, turned him down as incompetent to make enough money for repayment. As if that were the primary criterion, instead of ”Need, not greed,” as Eugene Lawson puts it later. And so what does Hunsacker do? Why, he sues, of course:
“…the state of Illinois had a very humane, very progressive law under which I could sue him…I had a very smart, liberal lawyer who saw a way for us to do it. It was an economic emergency law which said that people were forbidden to discriminate for any reason whatever against any person…[Judge Narragansett threw it out]…but we appealed to a higher court – and the higher court reversed the verdict and ordered Mulligan to give us the loan on our terms.”
We’re living this part of the chapter, and notwithstanding what Marx said about it, the first fictional occurrence of this history was the farce and the second, real one, the tragedy – a government forcing banks to lend money at an unacceptable risk for criteria other than ability to repay, and an ensuing default when the borrower proves incapable of generating wealth sufficient to meet his obligations. It took half a century for this to grow from a fictional tadpole to a real-world Godzilla, but grow it did. This was not prophecy, it was a necessary consequence of the sort of corruption she was positing and that the United States came later to embrace.
Mulligan paid off all of his creditors and got the heck out. We’ll meet him later. But lest anyone think it outlandish that a bank could be punished for not making loans at unacceptable risks I offer that individual This Story. Once again, reality has caught up with fiction.
Dagny next tracks down the Starnes siblings, offspring of the entrepreneur Starnes who founded the Twentieth Century Motor Company. They ruined it within a few short months following a set of precepts that make an observer of 20th-century history shudder with recognition. After Starne’s death his children actually tried to manage the firm on the Marxian basis of “From each according to his ability to each according to his need.” Literally. The factory was run by workers’ councils – the Russians call these “soviets” – who adjudicated salary on the basis of the employees’ abilities to state their need. Naturally where need was rewarded and achievement punished the achievers departed very rapidly and the needy remained to divide the pie, dwindling because those capable of replenishing it were gone.
Lenin actually tried something like this between 1918 and 1921. His industries went broke nearly as quickly as Rand’s fictional one, and the upshot was a new, “realistic” approach named the New Economic Policy. But along with this was a subtle difference that Trotsky pointed out in The Revolution Betrayed that “to each according to his need” was shown not to be a feasible principle during this “stage” of historical progress toward communism. It became “to each according to his work,” and naturally that work included a premium on the activities of the ruling class, to their enrichment. Stalin followed this with full collectivization and central direction, after which the workers’ soviets went the way of the workers’ councils at the Twentieth Century Motor Company. Some of their inhabitants were stood against a wall and shot, blinking, never understanding why their socialist fantasyland had such a grim ending.
In the event, however, one of the Starnes heirs did manage to leave with some of her fortune intact and all of her self-righteousness. Djilas’s “New Class” always does. Dagny manages to keep her jaw from dropping at this cold recitation of ruin.
Dagny heard a cold, implacable voice saying somewhere within her: remember it well – it is not often that one can see pure evil…
The result of this ethical and economic catastrophe was the broken bits of a revolutionary motor residing in the rubble of the abandoned factory. They’d run out of things to steal, but what they ran out of first was the vision necessary to recognize the motor for what it was. Those capable of that left early on, disgusted. One of these was named William Hastings, the supervisor and defender of the young engineer who invented the motor. Dagny tracks down his widow, who gives her two interesting pieces of information in addition to verifying the connection with the inventor. First, that her late husband disappeared for one month each year, in the summertime, to where she does not know. And second, that she has seen the inventor himself in the company of a white-haired gentleman on a railway platform. Can this inventor be his mysterious third student, the friend of both Ragnar Dannerskjold and Francisco d’Anconia?
Dagny is given a lead to the older man (with rather improbable precision) by Mrs. Hastings, and she tracks him down to a diner in which the quality of the food, and everything else, is high enough for her to offer the cook a job. He declines. She ups the offer and still he declines, but she finds out that he is, in truth, the philosopher Hugh Akston. She is close to her quarry now, very close. But what on earth is Akston doing as a fry cook in the middle of Wyoming?
“What are you doing out here?”
“Making a living.”
“This doesn’t make sense!”
“Are you sure? …By the essence and nature of existence, contradictions cannot exist. If you find it inconceivable that an invention of genius should be abandoned among ruins, and that a philosopher should wish to work as a cook in a diner – check your premises. You will find that one of them is wrong.”
“Check your premises.” It is Aristotle’s iron law and the war cry of Objectivism. It is the answer to an individual who presents you with a logical conclusion that flies in the face of observed fact. Check your premises.
She started: she remembered that she had heard this before and that it was Francisco who had said it.
Akston’s other student. But Akston will not help her find the inventor. Dagny remains determined.
“I will find him.”
“Not until the day he chooses to find you – as he will.”
Dagny abandons her search out of a sense of honor, at least for the time being. Nothing she can do honestly will take her any closer to the elusive inventor of the motor. She returns to the frantic world of politics and industry to find a distraught Eddie Willers, who has been holding Taggart Transcontinental together with his bare hands, describing what to him is simply unbelievable:
“Dagny, you’re going to think I’m insane, but I think they’re planning to kill Colorado.”
He is correct. Eddie understands what the looters do not, that wealth is the product of achievement, not theft, and that when the achievement ceases or is deliberately prevented, wealth is no longer created. Eventually the theft ceases as well, because as we have seen at the Starnes company, there is nothing left to steal.
But to the looters – we may openly call them socialists by now, I hope - wealth is a pile of material goods that someone has amassed immorally, to be confiscated and divided by those who have established political control over it. They are killing Colorado because they cannot control it, and because it represents a threat to the piles of material goods they do control. And, on a deeper level, they are killing Colorado so that the achievers, who appear to them only as particularly skilled thieves (although not so skilled as themselves) will have nowhere else to go.
That is, parenthetically, the reason that communism – its own proponents state this – can only succeed if it is established on a worldwide basis. There must be no escape. That strikes me as a particularly revealing admission. If communism is, as Marx insists, the acme of human actualization, then why would anyone wish to escape from it? And yet every communist state ever established became a prison camp in pursuit of some mythical, never realized benefit to the prisoners. To the communist the inhabitants wish to escape because they are not yet perfect enough for the system. In no sense must the system be perfect enough for them. It is the collective, after all, that is supreme, not the individuals making it up. But in fact this is the death of the human spirit, not its transcendence, and that is the point Rand is attempting to convey in Atlas Shrugged.
And so the Bureau of Economic Planning and National Resources makes its move, and if this too sounds disturbingly familiar it ought to:
“The laws shouldn’t be passed that way, so quickly.”
“They’re not laws, they’re directives...there’s no time to palaver when it’s a national emergency.”
We have to remind ourselves here that it is a fictional character speaking this and not Rahm Emanuel, for whom such an emergency is not to be wasted. It is a complete enough package, to be sure. The railroads on which Colorado depends are to be limited in performance, the mills limited in output, existing firms prohibited from moving there, and the interest on the bonds they purchased in order to stay alive is placed under a moratorium for five years. And in addition the cost for all of this is to be covered by a special tax on the very people at whom it is aimed.
And, in reply, Ellis Wyatt makes his own move:
[Dagny recalled] two pictures: Ellis Wyatt’s implacable figure…saying, “It is now in your power to destroy me; I may have to go; but if I go, I’ll make sure that I take all the rest of you along with me” – and the circling violence of Ellis Wyatt’s body when he flung a glass to shatter against the wall.
“Ellis, don’t! Don’t! Don’t”
…In a break between mountains, lighting the sky…the hill of Wyatt Oil was a solid sheet of flame…later, she looked at his handwriting on the board… “I am leaving it as I found it. Take over. It’s yours.”
And so Rand strips us of the romantic hope that persons of achievement must always prevail over the obstacles presented to them by lesser men. It isn’t so. And a society corrupted to the point where it isn’t so, is committing suicide. Gone now is the hope for an industrial renaissance in Colorado, for the presumptive progressive ascension. It turns out that progress can also descend. And here, at the end of the first section of Atlas Shrugged, we realize which direction progress will be progressing.
Have a great week, Publius!
The story is very PRO-capitalism, PRO-limited government, so, in that sense, it is very conservative/libertarian - on the Right. The book was written in the late '50's, but it strangely coincides with what's happening today. I recently read it for the first time, too (thanks to this FReeper book club). The story affirms the free market, limited government priniciples that we all espouse here (well, most of us).
The story's heroes are the "producers" - industrialists and businessowners who, through the virtue of their own hard work and talent, create products and services that have value to people and also create jobs. But, they are criticized by society for their wealth and pride. (Sound familiar?)
The antagonists are the "looters" and the "moochers" - the people who expect the producers to provide everything for them, the people who want to nationalize industry, the businessowners who destroy their competition through government under the guise of "anti-monopoly", and those who want to punish the producers and reward the looters.
What I just gave is an overly simplistic description of the story, but the answer is, yes, this is a very FReeper-friendly book!
I look forward to this thread every week. The two of you are doing a great job.
Aw, gosh, golly and shucks. Thank you. (blush blush)
That's in the book, too. The government bails out bad businesses in this story.
I’d say Mozilo wasn’t as interested in altruism as he was in turning a profit by tweeking credit scores so that he could sell more and more mortgage securities.
What I like about “Atlas Shrugged” is that not all businessowners are heroes in the story. Some are looters. It does seem the companies who drove us into this “subprime mortgage crisis” fall into the category of looters.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.