The Face of Capitalism (Part Two)

(This is the second segment in a three part series. The first segment traced the economic system of capitalism to its birth during the administration of President George Washington and through the winding course of US history.)

The 2012 Republican presidential nominee, Mitt Romney, projects the face of capitalism. As such, his face has become a lightning rod. It's not personal. It's strictly business...

What is it that ordinary citizens rather like about Mitt Romney’s face, the smiling face of capitalism? What is it that we do not like about his face, when it frowns, or the smile seems more unfriendly, or contrived? It depends on how we value certain matters of importance, how we set and follow our priorities.

Based on ample historical precedent, the sometimes questionable business practices behind the face of capitalism may be assumed. But will that same face still seem so very desirable behind a mahogany desk as the chief executive officer of the land?

The US brand of capitalism is particularly unique, the individual path to success extraordinarily difficult to navigate. Although America is a land of opportunity, there is masked peril seemingly behind every rock. One must be a maestro on several dimensional planes. It is not enough merely to master a particular business niche or technological innovation. History is replete with examples of brilliant inventors who were business failures. More is required. One must adopt the changing form of a chameleon: “Who do you want me to be?”

Today the face of capitalism uses a variety of economic tools at its disposal. First and foremost, the face takes advantage of a system where there is one set of rules for the moneyed class, and another set of rules for those who are not moneyed. With the playing field tilted, fairness and equal protection, the kind the constitution is supposed to guarantee, are put into serious question. Is that what Thomas Jefferson seemed to be complaining about way back when?

Financial gain is privatized, while loss is socialized.  Reward is doled out to individuals privately.  But risk is spread out socially among the masses. The corruptive influence of money naturally extends to its influence over lawmakers.

Let’s return to the example of candidate Romney. The goal of his successful company was to buy stakes in undervalued companies and then in his own words “harvest them at a significant profit” years later. American jobs were eliminated en masse and outsourced to foreign shores.

Certainly this is legal – and beneficial. And it hardly breaks new ground. The idea that a country should outsource a particular service or commodity to another country which does the job cheaper and better traces to Scottish economist, Adam Smith, and his iconic book, The Wealth of Nations, published in 1776. This is how business efficiencies are created, and out-of-whack balances restored.

The face of capitalism takes rightful advantage of the law of contracts, the US legal system and its global military strength, to earn individual profit and then protect it from plundering. But then the face uses the US tax code which has been favorably tweaked by the unnatural alliance (of politics and corporations to enthrone privilege) to shelter its fully ingested meal from taxation.

Some is placed in Swiss bank accounts, some in places like the Cayman Islands, neither within the reach of American law. Through use of generation skipping trusts, the face avoids gift and estate taxation altogether as it passes the money safely down through the generations, controlling wealth from beyond the grave. The digestion process is complete. With a full belly, the face can now settle in for a good long nap on the couch.

The face of capitalism recently released its 2011 tax return, which reflected $20 million in “unearned income on investments” with a taxable rate of about 14%. This is a lower effective rate than an ordinary citizen earning a pedestrian salary of $50,000 per year. Does the face pay a fair share? Or is it just effectively writing off 47% of ordinary Americans as dependents?  Theodore Roosevelt, a Republican in another time, would have recognized a textbook case in successful dishonesty and undertaken appropriate remedial measures.  But T.R. no longer commands Republicans.

Since at least the time of President Reagan, the face has argued that lower taxes on high individual wage earners is “fair” as a driver of additional investment and job creation. But the facts as revealed in the monthly employment numbers consistently fail to support the argument. The one important factor which these so called pro-business policies do bear out decisively is a growing disparity in wealth between the rich and poor. Society’s unrest naturally follows.

(The third and final segment ventures from the shared success of Henry Ford with his assembly line worker to the dark side of outsourcing and the Walmart model of individual economic dependency for displaced American labor.)

-Michael D'Angelo

The Face of Capitalism (Part One)

(Note: This is the first segment in a three part series.)

A certain group of citizens tends to confuse and disregard the basic principle that capitalism is an economic system.  It is not a form of government.

We begin by straightening out some facts and establishing some definitions.  In 1776 we declared our independence from Great Britain and established a large scale experiment in republican democracy.  We are a nation of laws by elected representatives.  By 1789, with the experiment at serious risk of failure and to preserve internal political stability, we held a constitutional convention.  With a perfect record of attendance by the founding fathers, we ditched our first constitution in favor of our second and present one.  It was a significant but bloodless revolution.

The form of government having been decided, George Washington was elected our first president.  This was at a happier time pre-dating politicians, partisanship and political parties.  President Washington had many important decisions to make, precedents to set, not the least of which was to decide upon a preferred economic system.  His troubles started with the knowledge that the new constitution did not espouse a particular economic theory.  In fact, the constitution said nothing at all about an economic system nor mentioned the word "bank."

To help get things moving, Alexander Hamilton, the Secretary of the Treasury, proposed a system of capitalism based on the highly successful model of the British mother country.  But Thomas Jefferson, the Secretary of State, objected.  He was sure that Hamilton’s proposed system flowed from principles adverse to liberty.  By creating an influence of his department over members of the legislature, Hamilton’s system was calculated by Jefferson to undermine and demolish the republic.  This was a most serious charge, a difference of opinion which also pointed to the birth of political parties.

President Washington sided with Hamilton, reasoning soundly that his plan would provide the greatest good for the greatest number.  Following the Civil War, the forces of capitalism coupled with the onset of the Industrial Revolution enabled our economy to take off.  By the time 1900 rolled around, our manufacturing capacity enabled us to become the #1 economic power in the world.  The rest, as they say, is history.

Capitalism puts money to work for specific, profit oriented ventures.  Through use of corporations, money can be amassed and concentrated quickly and efficiently under one roof.  Typically, investors’ downside is limited to the amount of their investment.

The early capitalists of that era featured names like Rockefeller in the oil business, Morgan in banking, Carnegie in steel, and Vanderbilt in railroads.  They were firm believers in a free, unregulated market promoted by competition.  A new consumer class was created and became a thriving force in the industrial economy.  Its name was the middle class, a new term in the vocabulary of ordinary citizens.

With the incentive to reap great profits, the leading men consolidated operations, streamlined the various systems of production, eliminated redundancies and maximized efficiencies.  While consolidation permitted them to control their industries, a primary goal was still to give the customer the best product at the lowest price.

While capitalists were champions of competition, ironically, their goal was to eliminate competition.  Specifically, they sought to accomplish this by creating and then maintaining a hierarchy with themselves at the top.  This highlighted one of capitalism’s main criticisms.  If left to its own devices, capitalism will by definition concentrate wealth into the hands of a very few.

Many had arrived at the top through superior intellect or other legitimate means.  But some used questionable or even illegal business practices.  Bribes, kickbacks and other monopolistic trade practices were all utilized to destroy competitors.  Human labor was exploited as no more than an expense item on an income statement. Stewardship of the environmental was disregarded. Short term gain trumped any long term considerations.  For this reason these early capitalists were sometimes referred to disparagingly as robber barons.

They used their vast financial resources in an unnatural alliance with the elected representatives of government to cement their place at the top.  In a final assault on equality of opportunity for all citizens, they enthroned their privilege through favorable manipulation of the laws of taxation and inheritance.  And the rout was on over the ensuing generations.

Theodore Roosevelt tried his hand at reforming this growing wealth disparity through various innovations of government.  But it wasn’t until after the 1929 Great Depression and the 1932 election of his distant cousin, Franklin D. Roosevelt, that we learned the hard lesson that capitalism needed meaningful  regulation by the government of its creation.

That government was not simply to be about condoning an economic system of capitalism and the gamesmanship that went along.  It was also about helping its citizens, especially in time of need.  In providing a social safety net, it was about restoring our faith in capitalism by making it seem more humane.

Since those dark economic times, we have ebbed and flowed, debated both in theory and practice through our national political parties the extent to which capitalism should be regulated.

In the aftermath of the Great Recession of 2008, Democrats under President Barack Obama favor sensible regulation as the last defense against unbridled individual greed.  Republicans favor less regulation as the most efficient means of achieving the American Dream.  Democrats see government and business working in partnership for the common good.  Republicans see government, especially more government, as the enemy of business and individual initiative.

(Next week’s second segment discusses how the face of capitalism goes about the business of amassing wealth in present day America.)

-Michael D'Angelo

The Man in the Arena (Part Three)

(This is the third and final segment in this series.  The previous segments (Part One and Part Two) documented the advantages of flying under the radar. But sometimes, flying under the radar just doesn't fly.  More is necessary.  A different approach may be required.)

Are there advantages to being in the arena, as opposed to flying under the radar?  How effectively can light be projected from under a bush?

Despite the apparent advantages of flying under the radar, it is not without valid criticism, mainly highlighted by the old adage that “talk is cheap.”  Anyone can talk, but doing is the hard part.  In truth, there is something most favorable to infer from the image of the gladiator in the ring, as opposed to the spectator on the sidelines.  As Theodore Roosevelt reminds us:

It is not the critic who counts, nor the man who points out how the strong man stumbled or where the doer of deeds could have done them better.  The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes short again and again, who knows the great enthusiasms, the great devotions, and spends himself in a worthy cause, who at the best knows the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who know neither victory nor defeat.

T.R.’s famous Man in the Arena quote was meant as an attack on skeptics “of lettered leisure” who, cloistered together in academia, “sneered” at anyone who tried to make the real world better.

And then there is the following quote from Christ, which appears in the Holy Gospel of Matthew:

Neither do men light a candle, and put it under a bushel, but on a candlestick; and it giveth light unto all that are in the house.

Let your light so shine before men, that they may see your good works … 

It’s both easy and convenient to sit back and criticize, rather than take action.  This is because human nature is such that ordinary people are naturally averse to change.  Change involves the unknown, which generates the fear response in human nature.  It follows logically, then, that the unknown is feared.  It also follows that certain individuals have figured out that ordinary citizens can be controlled en masse simply through use of scare tactics.

This phenomenon helps to explain, in part, Franklin D. Roosevelt’s famous quote, during the very depths of the Great Depression of the early 1930s:

So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself - nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.

F.D.R. was speaking of the Great Depression, and its effect on the morale of ordinary Americans.  He was saying, essentially, that if the mass of ordinary citizens could not shake out of their pessimistic economic outlook, then it would be difficult, if not impossible, to turn things around.  In the election that brought F.D.R. to the presidency, his adversary had campaigned on a platform which called for no change from the status quo.  This despite economic conditions that had brought record and, in fact, staggering national unemployment numbers, hunger and bread lines.

More recently, former President George W. Bush/“43” seemed to deftly transform the tragic events of September 11, 2001 (“9/11”) into a successful politics of fear campaign.  Many have said that his successful exploitation of this particular vice of human nature assured his re-election to a second term.  National security was said to be at risk.  Whether it was or was not involves another discussion.

But, consequently, many of the personal freedoms to which ordinary citizens had become accustomed, including the right to free speech, were curtailed, under the provisions of the Patriot Act.  While there is ample legal precedent for this in US History, President Bush reduced that precedent to an art form, deploying the familiar “Listen to me, or we’re all doomed” politics of fear rhetoric.

Here is seemingly yet another useful lesson in the science of human nature.  Staying the course, and avoiding change, even at seemingly exorbitant cost, is the easier and preferred method.  Human beings are imitative creatures of habit, by nature, comfortable with the routine they know.  Life outside the box (of accepted knowledge or practice), so to speak, is unsettling, even troubling.  Content with the world they know, most ordinary citizens rarely challenge themselves even with minimal risk, perceived to be inordinate and thus unacceptable.

We've all heard the familiar expression that “the devil is in the details.”  Implementing change involves many details that involve experiment and thus can be worked out neither in advance nor easily.  Absent some precedent that provides a known comfort level that ordinary citizens can latch on to, the devil we know typically is preferable to the devil we don’t.  This helps to explain why many ordinary citizens will decline the prospect of a new job.  Even though the potential reward may be greater, the details are unclear, and the risk of the unknown is consequently too great and therefore unacceptable.

Put another way, if you want something you’ve never had before, you have to do something you’ve never done before.  But which is the better approach: flying under the radar or being the man in the arena?  The debate remains an interesting one on the path to human progress.

-Michael D'Angelo

Flying Under the Radar (Part Two)

(Note: This is the second segment in a three part series. The first segment discussed the first of two distinctly different approaches to enlightened affairs on the path to human progress. Sometimes, for a variety of reasons, it is most prudent to fly under the radar.  Robert E. Lee, if not the greatest military general in US History, then certainly one of the most admired and revered heroes of Southern lore, is a primary example.)

U.S. Grant presents another interesting, yet entirely different, flying under the radar story.  The eventual head of all Union armies during the Civil War, Grant’s name is linked for eternity in military terms with his adversary, Lee.  For one thing, he looked more like a common foot soldier, rather than the man who at the Civil War’s end had grown to become the most trusted Northern man in the Southern Confederacy.  But, Grant did not receive the title until a series of Northern generals had failed miserably before him.

U.S. Grant’s background had also included graduation from West Point, but, unlike Lee, he was no better than an average student in the classroom.  He was an uncomplicated man from humble beginnings in small town Ohio, with a pleasant and straight forward disposition and a plain writing style to match.  His most noteworthy talent during his school days was a legendary proficiency in the handling of horses.  Even the most rambunctious, wild and stubbornly resistant to authority were brought to him and in short order these horses were broken and became obedient.  Grant consistently demonstrated the uncanny ability to become seamless with the four legged equine.  This would serve him well in his ensuing military career.

U.S. Grant’s journey to greatness, however, was neither direct nor without controversy.  After graduation from West Point, he was stationed in the West Coast territory above the new state of California, lonely and separated from his wife and family.  Bored and despairing, he began to drink more than what was good for him, and it began to affect his performance.  Having reached the degree of Captain, his commanding officer had then found him inebriated during a visit to the outpost.  The consummate military man, Grant’s commanding officer gave Grant a choice.  Grant could either resign the military without further inquiry into his conduct or face a damaging military court martial trial, during which all of the dirty laundry would be aired in public.  Grant abruptly chose to resign without giving reason, but the involvement of alcohol was confirmed.  Years later, Grant stated that “the vice of intemperance had not a little to do with my decision to resign.”

Returning home to Illinois, a subsequent attempt at farming failed.  When the Civil War broke out in 1861, Grant was broke and destitute, found peddling firewood on a street corner in St. Louis.  To say that he was flying under the radar at that point would be a gross understatement.  Nevertheless, a premium was placed on men who had officer’s training and experience, which fortunately Grant had, thus enabling him to re-enlist and entertain a command.

In 1863 President Lincoln summoned Gen. Grant to Washington, D.C. to attend the official ceremony, commemorating Grant’s appointment to the rank of Major General.  The ceremony truly was a big deal, since it marked the first such appointment, since Gen. George Washington ascension to the same rank generations before.

Grant traveled to the nation’s capital with typical understatement, in the company of his 13-year-old son.  A welcoming committee to meet the train and escort him to his hotel failed to materialize.  He was inconspicuous and unrecognized, most of his uniform hidden by mud and travel stains.  When the pair entered the hotel, the desk clerk, bored and accustomed to dealing with the capital city’s most distinguished guests, saw no one in particular.  The clerk suggested there might be a small room, if agreeable.  Grant politely accepted and signed the register.

However, when the clerk twirled the book around and saw the name, “U.S. Grant and son, Galena, Illinois,” suddenly everything clicked.  Recognizing the magnitude of his error, the stunned clerk was transformed into a model of hospitality.  The previously offered small room was forgotten, and instead the clerk suggested the best suite in the hotel, where President Lincoln had stayed the week before his inauguration.  Grant accepted the change without comment, not wanting to call attention to himself.  As he saw it, any room would do.  He was flying under the radar.

To be sure,

Not a sign about him suggested rank or reputation or power.  He discussed the most ordinary themes with apparent interest, and turned from them in the same quiet tones, and without a shade of difference in his manner, to decisions that involved the fate of armies, as if great things and small were to him of equal moment.  In battle, the sphinx awoke.  The outward calm was even then not entirely broken; but the utterance was prompt, the ideas were rapid, the judgment was decisive, the words were those of command.  The whole man became intense, as it were, with a white heat.

Grant’s rather ordinary, pedestrian disposition provided the perfect cover from which to fly under the radar.

One of the enduring legacies of U.S. Grant, his rightful place as the face on the $50 bill aside, is the trust and respect, if not the love, which the South had developed for him.  These accolades were earned largely on account of his having given Gen. Lee “honorable terms” of surrender at Appomattox.  They were also largely responsible for his accession to his place as the nation’s 18th president during the turbulent era of Reconstruction following the Civil War.

More than any other single factor, perhaps, the presidential administration of U.S. Grant set a more constructive, flying under the radar tone for Reconstruction, which could have been  much bloodier than it already figured to be.

(The third and concluding segment identifies the contrasting second approach to enlightened affairs on the path to human progress.  Sometimes, flying under the radar just doesn’t fly.  More is necessary.  The shirt sleeves must be rolled up tightly.  A man must stoop down into the mud and get dirty.  There is no better way.  He must enter the arena…)

-Michael D'Angelo

Flying Under the Radar (Part One)

(Note: This is the first segment in a three part series.  There are seemingly two distinctly different approaches to enlightened affairs on the path to human progress.  This segment identifies and discusses the first of these approaches.)

Is there any appreciable benefit to flying under the radar?  What is the enduring message to be taken from the life of Civil War General Robert E. Lee?  For whom did General Lee reserve his greatest reverence?  And why?

I’ve heard it time and again.  Friends routinely lament my very existence (or so it seems) in a rant that goes something like this: “What is it with you?  You live right in amongst us.  You’re accessible most of the time.  You show up at enough social events to conclude that you’re still alive and in the loop.  Yet no one truly knows what you’re doing.”  In fact, even while in the course of writing this, a colleague called and left the following voice message, which I will paraphrase for convenience: “You have a new nickname: ‘The Phantom,’ who is mysterious, who comes and goes.”

“That’s because I fly under the radar,” I respond glibly.  But what does it mean?  Why is it important to fly under the radar?

In a commercial setting, radar is a device typically used to locate and map the direction of airplanes, travelling in different directions or flight paths and at different speeds and altitudes.  This facilitates safe, efficient civilian air travel.

But, consider the concept of radar in its more ominous, military application.  The radar operator uses the device to locate and lock on a target, typically an enemy plane, to deliver information to a weapons system designed to bring the plane down.  These days, the weapons system is guided by radar actually affixed to the weapon.  During the Persian Gulf War in the early 1990s, military briefers reveled in public briefings to display the devastatingly accurate effect of radar guided bombs on their intended military targets.

So, if one flies under the radar, as the expression goes, one may go about the business of daily, ordinary life with fewer distractions and minimal detection.  This enables sharper focus with corresponding productivity gains and a higher quality of life.

Another way to minimize the glare of the spotlight in one’s life is to keep it simple, or, if it is overly complicated, to learn to simplify.  US History is replete with examples of exceptional men who had begun their lives as merely ordinary men, flying under the radar and keeping it simple.  But, due to a sudden change of circumstances beyond their control, these men would become forever immortalized by historians, academics, as well as ordinary citizens, thereafter.

A primary example is Robert E. Lee, if not the greatest military general in US History, then certainly one of the most admired and revered heroes of Southern fame, to this day.  Robert E. Lee was a Virginia native, a top student at West Point, a born leader by all accounts -  tall, handsome, spirited, yet reserved in many ways, and honorable to a fault.  In a letter to his son in 1860, a copy of which Mattie Truman also gave to her son, Harry, on his 10^th birthday in 1894, Lee counseled:

You must be frank with the world; frankness is the child of honesty and courage.  Say just what you mean to do on every occasion, and take it for granted you mean to do right.  …  Never do anything wrong to make a friend or keep one; the man who requires you to do so, is dearly purchased at a sacrifice.  Deal kindly, but firmly with all your classmates; you will find it the policy that wears best.  Above all do not appear to others what you are not.

Few will recall that the lasting message of Gen. Lee was not his legendary generalship against great numbers in numerous acts of courage on the battlefield.  Rather, the enduring message of Robert E. Lee was the way in which he handled defeat.  Perhaps you could say that Gen. Lee’s message has flown under the radar.  The issues which had brought on military hostilities could not be solved politically.  Consequently, they were submitted to the battlefield, and then resolved on the side of the Union.

Gen. Lee was aware of the script that had to follow.  On that fateful day in April 1865, Lee agreed to a meeting with Gen. U.S. Grant at Appomattox to negotiate the terms of surrender, like the gentlemen that he was.  He accepted his fate and the fate of his fiercely loyal troops, put down his sword and returned to peaceful civilian life.

But what would Lee do, now as a former general?  After declining several more lucrative financial opportunities, he finally settled on what he felt was an appropriate position which would permit him to fly under the radar in a new civilian role.  He agreed to accept the presidency of Washington College, a small, Southern school located in rural Virginia (better known today as Washington and Lee University).  Lee understood the implications of his enormous influence as a role model to his devoted people that they, likewise, must bury the ax and carry on peacefully.

But perhaps it is best for the ordinary citizen to appreciate that his greatest reverence was reserved for the common foot soldier, infantryman (or GI, standing for government infantry, as these soldiers are called today).  According to Lee, these soldiers did what they were ordered to do without complaint, without question, and without regard for what might be in it for them.  Lee’s men would perform any act; endure virtually any hardship, of which there were many, if Lee would only say the word.  Fight hard and spirited, endure incredible deprivation, and usually prevail in battle against the overwhelming material and numerical superiority of the North.  This would be proven time and again.  His common foot soldiers were totally selfless, according to Lee, who took care of his men.  Not flashy, perhaps, nor even newsworthy, they flew under the radar.  But, Lee loved his men, and they loved him.  So, they performed for him.

(Next week’s second segment in this three part series on the approach to enlightened affairs on the path to human progress continues through the story of Lee's military counterpart, U.S. Grant.  Grant and Lee were very different men in appearance.  Yet despite their differences they shared common traits which underscored both their popularity and success...)

-Michael D'Angelo