http://en.wikipedia.org/wiki/Marx%27s_theory_of_history

Of course the rest of history after Marx shows that we prefer our market capitalism because of the freedom to develop and choose our goods and services. However, two things that Marx told us was that capital would pursue profit from other countries through globalization and that in pursuit of profit there would be a drive towards monopolization. Phillip Blond, the English, Red Tory philosopher uses the term modal monopoly in reference to the globalization of credit and manipulation of the financial markets. See here for a brief explanation of his view with a link to his original Prospect magazine article that fully develops his thesis:-

http://www.humaneeconomy.com/?p=199#comments

Phillip Blond is clearly saying that capitalism is ambivalent. It may give freedom to develop and choose our goods and services but it also creates massive dysfunction through the relentless pursuit of profit. He also argues that it is more basic than that, it is a splitter of human society. We increasingly live in an age of two human tribes. The Invisible Hand under our current predominant version of capitalism separates a few one way and the many another. The prospect of unity for the human tribe is, therefore, denied by this ambivalence. It is generated we know by our hard-wired natures of being both self and other concerned. Through the development of language, however, we are dialogical creatures, prone to have dialogue with each other to discuss matters and take joint decisions to deal with those matters and frequently these include problems arising from our hard-wired natures. It, therefore, seems obvious that the worthiness of any economic and political philosophy should be defined by its prospects for healing this split. The act of deciding matters together, to use democracy, is our best way to achieve this. It is the absence of democracy that creates the tribal split.

What was that perjorative use of the word “socialism?” Well it was somebody saying that because democracy is weak in an era of global monopolization we live in an age of “Socialism for The Rich.” And that I guess brings us back to the start, this article on China!

For me the contracts issue is still the same that political views and agency issues intrude into the legal enforcement (It’s the same old trustee issues. Take corporate person-hood as an example.). I also don’t think you can separate out the market from government as you do. They’ve grown up together in the sense that lying behind money is a bunch of regulations that need enforcing but also that money represents votes and a lot of people get out-voted in the marketplace leading to income problems which government ameliorates. You only have to look at government expenditure breakdown to see how much is going to make up for income not gained in the marketplace. It would lead to a more peaceful life if you could take politics and agency issues out of human affairs but you can’t and this is why we continue to look for democratic solutions articulated through more representative bodies.

Some of the other proposals have some merit and may work to some degree to limit collusion amongst bankers.

But earlier you said, “There is no example of a complex society where these issues are resolved solely on a contractual basis.” That’s because it has never been tried in a complex society! If the contracts aren’t enforced then the contract is null and void anyways!

I asked before on this forum what tort reforms could be implemented so that citizens have equal access to the legal system. No response. Now the problem may have been I asked an actual working attorney. The problem with Epstein’s proposals are they still are vulnerable to politics and collusion. If you want real democratization of the Fed open up the closed legal system so that contracts can actually be enforced. Make the bankers actually hold up their contracts instead of bailing them out. Their is nothing inherently wrong with derivatives as they spread risk but when it’s done in a closed system with no real consequences the bankers have nothing to lose.

And speaking of pejoratives, “counterfeit cdo and cds’”, “warmongering”, etc., make my comments seem quaint.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/2794461/Governments-caused-the-credit-crisis-but-capitalism-gets-the-blame.html

Obama wants the Federal Reserve to be the lead enforcer for the proposed Regulatory Oversight Council!

Finally, in using the terms “covetous” and “socialism” I would argue you are again using them perjoratively and coercively in trying to denigrate the idea that there should be democratic regulation of capitalism, or indeed democratic decision about the provision of other goods and services such as education. The double irony of this coerciveness, however, is the socialism you so much detest already exists right under your nose in the form of oligarchic socialism as I state earlier. This, of course, is also the irony that over the last thirty years of the neo-liberal mantra of market fundamentalism the ideology was conspicuously silent with regard to democratic theory. The result has been the ideology’s unglorious unmasking with the Financial Crash.

I don’t have a problem with these proposals but my point is that under the current leadership these reforms don’t have a snowballs chance in hell.

And its far worse than just the Agency theory, which is clearly evident, but the fact that through the Agency theory the electorate is soft pedaled Socialism to make it more appeasable by word games and Ad Hom attacks against its opponents. Probably a 1/3 of the electorate is already convinced of Socialism and another 1/3 of the electorate is gullible to emotive appeals for it. Add to that the Education system is run and taught by Socialists.

The best we can hope for is that the next election cycle the electorate wake up and remove some of the Socialists so that the bullet train to Socialism that we are currently riding slows down some. The earliest possible date for these proposals is probably 4 years but that would require some pretty nifty politics to occur. One of the keys to that will be how we frame the issues and the words we use. If we frame it the same as the Socialists, as an envy of wealth and the covetous taking of that wealth, how would the electorate discern the difference?

http://www.youtube.com/watch?v=pVmxQsvj6lo&feature=related

http://www.peri.umass.edu/fileadmin/pdf/conference_papers/SAFER/Epstein_Federal_Reserve_Policy.pdf

Also Professor Alan Blinder states when he was a Clinton Vice-Chair appointee on the Federal Reserve “As I often said, while I was on the Fed it’s their economy, not ours.” See Axel Krause’s essay in this link:-

http://www.notre-europe.eu/uploads/tx_publication/Etud7-en.pdf

Indeed as a consequence of the Federal Reserve’s mishandling of the economy leading to the Financial Crash under Alan Greenspan’s tutelage Congress is currently attempting to redress the accountability issue through a half-hearted and hence controversial bill S.1803.

The point I have been trying to make is that the use of checks and balances to provide democratic accountability is required not only in government but also in private enterprise beyond a minimum size. Of course, I understand Agency theory where the politician can often have a self-interested agenda in opposition to the electorate, but that is equally true of the businessman being in opposition to the interests of the workforce and the economy as a whole, for example, by squeezing wages and global outsourcing, or the example of deliberate fraud in the case of Wall Street counterfeit CDO’s. In the end though you are still left with the need to provide checks and balances to mitigate unfair self-interest and the requirement of human beings is consistently one that these check and balances are imposed fairly and openly through a democratic process which means legislatures and enforcement by government. There is no example of a complex society where these issues are resolved solely on a contractual basis.

Nobody in their right mind would disagree that in theory property ownership should encourage a sense of stewardship and citizenship but the reality has turned out to be different in the world of money making or we would not be in this latest of many recessions and have a society of so much unfairness and dysfunction. I have suggested it’s the ambivalence in capitalism namely unequal power, or lack of democracy, that creates these problems of unfairness and dysfunction and that the Invisible Hand is not invisible but actually obscures this issue. I also suggest two things that in a world of globalized capital only central government working with local government support and at least equal control of capital by workforce and citizens can possibly hope to democratically regulate these adverse effects. If there is a better way forward I have not yet seen it convincingly argued.

The Marxists have certainly seized upon this sentiment but don’t count on a “democratization of the power” because it will only result in exchanging the Finance oligarchs with the Political oligarchs. Personally I’d prefer the tryanny of the former.

No, the sub prime debacle is simply a bunko operation gone badly…on a massive scale like the Credit Mobilier crisis or the financial mishaps of the French when they were attempting the Panama Canal or any of a thousand other brazen criminal acts meshed to “new financial realities” and the enhanced technological avenues for criminal actions when wed to a government that has excessive confidence in the voodoo and entrails reading of its clubby FED.

Property ownership does encourage a sense of stewardship and citizenship. the fact that this generation of propertied sots decided to turn the sense on its head and treat property as a slot machine and no verification loan credit derivative does not remove the efficacy of property ownership from the republic’s guidebook to probity. Had they observed real property controls, we would not be in this mess.

So where does this leave us? If you’ll excuse the dreadful pun it means for the American and other people not to shoot themselves in the foot by failing to recognize this political power of money and see that this latest recession caused by the Financial Crash was no accident but stemmed from the disproportionate political sway over government that a speculating minority have with control over many barrels of money. Having recognized the cause of the problem a move to preventing its re-occurrence has to be the democratization of the power obtained from excessive money holding and a reform of central government to regulate finance and unfair global trading. It means recognizing, particularly for Americans, that capitalism has ambivalence; very good for matching up need with supply and in part “efficient” use of resources but vulnerable to concentrating power in the hands of a minority who will use it unaccountably. It also means for Americans that they clearly see that even the most cynical observer of human nature and principal constitutional framer James Madison failed in the midst of the world’s biggest land grab to understand how the commoditization of nature could lead to abuse of power. It is difficult to know whether Madison’s fellow framers also understood the full implications of this commoditization. They knew that property represented power since even Thomas Jefferson proposed that all Virginian men be given fifty acres of land to make them eligible to vote. Virtually all of the Framers were wealthy men and many through ownership of property which paradoxically and naively was perceived to make men responsible citizens! To be fair to Madison the industrial revolution had not really developed to be the barrel filling money cow that it is today but both he and Jefferson had deep reservations about the economic ideas of Alexander Hamilton and feared the damage that would be caused by the encouragement of speculation. Irrespective of all this history, it has to be understood that the achievement of a moral nation is far from guaranteed by the American constitution which does not protect the majority of its citizens from abuse by a minority with their enormous powers of control gained from proprietorial ownership over many barrels of money. This year Hallowen casts a shadow across the land as we realize the majority have gotten the tricks and the minority the treats!