The Tyranny of Liberty

The conservative element, busily remaining relevant to the dialectic of cyclical economic crisis and the demand for change in a post-industrial society, argues that correcting for the detriment experienced by the vast majority of Americans in the current crisis is a tyranny of liberty that must be reversed in order to preserve the fundamental principles that our nation was founded, has made us strong and will keep us strong.

The conservative principles refered to by the conservative element as fundamental are derived from pre-industrial society when making a profit was the entrepreneurial adventure on the wild frontier. Society has since progressed into a post-industrial productive capacity that is even beyond the classical economic problem of crisis of overproduction being just a lack of demand caused by surplusing value, but sheer productive capacity.

Post-industrial capacity is far beyond the conditions that produced the American Revolution. At that time, the tyrant was the king preventing the businessperson (the bourgeoise, the middle class) the full market value of their work in the marketplace to achieve economic growth and a peaceful prosperity--the profit. The middle class fully intended to replace the king's inherited right to rule with their inherited right to rule, or the natural right to liberty that the tyrant was preventing.

Once the king's power was supplanted by the bourgeoise, a private propertied ruling "class" emerged, no longer middle class. The productive capacity of neo-classical capitalism monetizes the retributive value and allows for the extension of credit for a burgeoning middle class now demanding the retribution of value (the revolution) Keynesian innovations are designed to prevent.

The demand for equitable distribution of economic value by government authority (the sovereign people) in opposition to the old liberty to accumulate it and cause general economic crisis must be rendered a threat to the post-industrial middle class by the conservative element. Fear and loathing is the agendae--liberty is being destroyed by the tyranny of the plenary and complete, absolute power of government (the legal, constitutional sovereign).

For the conservative element, the legal sovereignty of The People is self-rule. The fate of The People is thus self-determined and, therefore, retributing the economic value accumulated can only be ex-post-facto and by bill of attainder, or by illegal, tyrannical means that are the antithesis of freedom. Choosing to retribute the value is tantamount to choosing tyranny and the Hamiltonian (elitist) form of government is thus confirmed as necessary to conserve the liberty the Revolution has confered.

If The People are inherently incapable of ruling, self-rule is naturally the function of, it is to be "attributed" to, the power elite--the "old" liberty that resulted in the accumulation of wealth and power by what was once the middle class.

This conservation of liberty renders the conservative element relevant to the current dynamic of power to redefine, realign, and finally, restructure the elements of the power structure as the value is naturally "retributed" to the middle class. The change that will occur is not to be feared and loathed. It will be a tyranny of liberty that replaces the liberty of tyranny.

Whose Money Is It?

If you are a bourgeois entrepreneur in the old days of an emerging capitalist eonomics, the new economics is in direct conflict with mercantilism--economic expansion financed by the king (the sovereign ruler, or government). Since you did all the work to expand the pie, you claim full ownership of the reward (the profit) that is value generated in the marketplace. The only value legitimately owned by the king is the initial investment, but the king claims the entire reward because he is the ruler.

By definition, it is the ruler that decides the distribution of rewards and deprivations. If the king allows the bourgeois class to keep the profits without it passing from the royal, ruling class, the bourgeoise is the defacto ruling class. In order to retain the status of ruler, the king must claim the wealth as public, sovereign property to be accumulated and distributed by the operaton of sovereign (government) authority--mercantilism. For the entrepreneur, the value, and the power it confers, is expropriated and is destined to be retributed to the private sector. The distinction between what is the public and private domains of power, and what is public and private property, is born.

The dialectic continues today with the private sector not wanting to relinquish ownership of the wealth to the sovereign which, after The Revolution, became The People. While it is illegal to be publicly confered the title of king, it is not illegal to behave like the sovereign ruler in the private sector--to become "successful." The best way to do that is to, like the king claiming public power, organize into being "too big to fail" which, as we have recently observed, commands a public sector investment that rivals a king's wildest dream of avarice and greed that the bourgeoise of old so strongly objected to.

Now that The People are claiming the value (the profit) produced in the marketplace, the bourgeoise are claiming, like the king, the value, and the power it confers, must pass from the private sector to The People (it must trickle down). So, we have the struggle of who is in control of the use of the "bailout money." Is it a public or a private function? Technocrats (the philosophes of old) have decided it needs to be legitimately both, with the value to be trickled down.

The stakes are high for the private-sector power elite. Either they capitulate to public power, or risk the entire value (what confers the power to rule) being retributed. Thus, we have the "public-private partnership," or what Marx called, anti-socialist socialism.

So, whose money is it?

The value has been historically retributed.

Substitution of the Value

Assessing the value of assets requires identifying the substitution of value derived from varying sources. For example, announcement of the Obama administration for a moratorium on mountaintop removal will, if enacted as administrative law (the bureaucratic model), reveals the subsidy (the substitution of value) that gives the profits of coal companies more value than the "actual" cost imparts to the benefit. The asset of coal reserves are thus overvalued, and the rate of substitution (Pareto Optimality) is diminished. The measure of cost/benefit efficiency is rendered an inaccurate technical valuation. The subsidy trades, or substitutes, the value of coal assets for the value of alternative energy assets.

The normative value of recognizing the "real" value of the subsitution effectively reassesses the value of the assets. The subsidy is then recognized as a "market distortion" that will be an incentive to innovate the technology to remove the coal asset to recapture the subsidy (the value-added benefit that had substituted the value-subtracted cost to produce a net inefficiency that was determined to be an asset and not a liability, determining the total assessment of the value). The result is a reassessment of market value and the "natural" incentive to minimize the cost and maximize the benefit, or to optimize the economic value to everyone's benefit. The benefit is rendered more indivisible and the marginal profit more accurately measures the marginal utility.

The subsidy is normatively "bad" because it does not allow for the incentive to attribute the value of the profit margin (the measure of marginal utility) to the value of the possible alternatives: it did not allow for a competitive multiplicity of the marketplace (a pluralistic model). Instead, the subsidy is aquired, and the substitution of value maintained, by access to political process (an elitist model), and the value ultimately retributed to its source--the value of possible free-market alternatives--by administrative law (a bureaucratic model). The value is assessed by operation of a bureaucratic model of power and political economy.

Looking at the Bernanke/Geitner plan for recapitalizing the banking system, Geitner's declaration of needing the authority to seize the assets of a failing company that is too big to fail, including non-bank firms, is a declaration of bureaucratic power that counters, or technically corrects for, the critique that the market has been rigged into a tyranny of corporate power. It is substituting for the positive effect (the optimal efficiency) that would obtain if bureaucratic power were applied to ensure in priority a free-market economics in which the economy is pluralistically not dependant on the success or failure of any one small firm, but instead is dependant on a few interlocked firms that are too big to fail and, thus, dependant on bureaucratic power to survive.

Combining the elements of elitism and pluralism, the Bernanke/Geitner plan operationalizes a legitimacy of outcome (of power) that combines the value of market efficiency (pluralism) with the absolute arbitrary value of government (elitism). The synthesis, while being an ad hoc organizational measure to allow what is a failure to succeed, is the organizational technology that can be utilized to effectively ensure free-market efficiencies and the fair and accurate valuation of assets and liabilities that is, in this case, clearly lacking and critically needed.

To incentivize, or optimize the marginal utility like a free-market would, the subsidy, the substitute, of the latest plan to lure private capital to support what is too big to fail but not too big to be government controlled (absolute arbitraty value) is, predictably, entirely at the expense (the risk) of public capital and is, predictably, consistent with the bureaucratic model of power and political economy (see the article, "Restructuring the Elements of Power" at griffithlighton.blogspot.com).

We see, then, the contradiction to be reconciled, or to be practically applied into what central bankers call "a process of resolution." While the public dollar is imparted less value than the private sector dollar, arbitration of the value is by public authority. The absolute value of public authority is substituted for the efficiency value of free-market economics, and the subsidy (and the sub-optimization) occurs.

The distribution, or retributing, of the accumulated value (the subsidy) is a necessary condition for economic recovery and growth. Without retributing the value, the means of accumulating the value (the subsidy) is not possible. It is a necessary condition of the capital, and the more value retributed without depreciating the value of the dollar (by recapitalizing from the accumulated benefit rather than monetizing the debt with a regressive tax burden--a subsidized valuation), the more profitable firms can be and the more economic expansion that can occur.

Punitive Taxation

The tax policy discussion surrounding the use of tax money and assessing the value of executive compensation schedules of TARP recipients is a micro case study in the theory of retributive value described in several articles at griffithlighton.blogspot.com.

The value assessed by the public sector to be retributed to the taxpayer for the use of public financing, at this point, is 90 to 100 percent of the value assessed by the private sector with the "punitive" tax rate assessed proportionate to total income (a progressive tax rate).

Progression of this punitive rate is sensitive to the measure of fairness to retribute the value as discussed in the previous article, "Your Tax Money at Work," but it took a punctuated micro event for a progressive tax rate to gain serious credibility beyond mere rhetoric for a practical macro application. It indicates that the will to employ the best measure for recovery is to be a populist gaming event to be utilized at the micro level. It is political gaming that will continue to slow implementation of policy that will quickly and most effectively achieve economic recovery and reinvestment.

Notice that neither the executive or the legislature is expressing the efficacy of quickly progressing the tax code to most efficiently achieve the fairness the taxpayer is demanding, or to most efficiently retribute the value. While the president expresses the need to progress the tax code, the commitment appears to fade into the tactical designs and maneuvers of the legislative leadership to win a game. The needed measure and its full effect will be likely compromised.

A rapid recovery will most effectively occur from the bottom up facilitated by a progressive tax code, giving value to the currency now suffering depreciation (inflation) from the Fed's newly announced trillion dollar, Keynesian measure to finance the recovery from the top down by buying treasury bonds and expanding the debt obligation.

The latest Federal Reserve measure to give liquidity to the credit market expands the money supply. The expansion is not only anti-deflationary by making credit easier to increase purchasing power, but to give liquidity to the previously overleveraged assets to be trickled down, or what does not verifiably work.

It has been critical to quickly move forward with a progressive tax policy to avoid the Keynesian measures that will take us right from a deflationary to an inflationary trend. That will, in turn, sustain the recession as prices increase with no growth, regressing back into the stagflationary phase of the cycle. Not exactly progress.

It is not that economic policy is being poorly managed. It is being managed to fit the Hamiltonian model with economic recovery (expansion) being dependant on borrowing the capital from a small class of economic elits--the upper class (the accumulation phase of the macro cycle), to be paid largely by the non-elite (the distribution phase of the macro cycle).

The Fed's trillion dollar expansion of the money supply in the form of buying treasury bonds renders economic expansion dependant on a debt to be paid to the creditor from the wealth trickled down. Economic expansion is, then, a way to pay the debt, and not an economic recovery per se. Nor can the recovery be considered economic expansion since what is gained has to be repaid. It is the means to service the debt without the debtors suffering enough detriment to demand immediate and full retribution of the value (what is classically called the subsistence wage; neo-classically, Keynesian economics allows the retributive threshold to be mainatined at a much higher level without sacrificing the accumulation of value, expressed as the public debt instead of people starving in the streets).

The bonds the Fed is buying represent borrowed money, a debt, that has to be repaid to the people that have the money to lend--the upper class. The cycle is completed into recovery and is ready to be repeated. The cyclical change will not be the change We The People need, just the status-quo, cyclical trend in progress that will be argued as change.

Yes, we are smarter than that.

The first step to change the operational model in which technocrats are to confirmably operate to execute "the change We need" is to legislate a progressive tax code post haste!

Conservatives want a progressive tax code to be considered "punitive" like the taxation being levied on the executive compensation of TARP recipients to suggest it is a temporary change. Otherwise, it is the means for switching to a more pluralistic operational model of power, or the change we need. Both parties are part and parcel to preventing this change with a false pluralism of competing ideologies and practices. At this pint in our political-economic history, partisan politics is not fooling very many people very much of the time.

Understanding Liquidity Crisis and the Measures to Correct for It

February 21, 2009

The current state of our economy is liquidity crisis. The capital has been allowed to become so accumulated, consolidated, that the economy can neither be sustained or expanded. The result is negative growth, massive unemployment and the declining rate of profit (falling prices following the stagflationary phase of the post-monetarist, Keynesian business cycle).

The profit (the pricing) that creates capital can no longer be sustained (the deflationary phase of the cycle) because that value has been accumulated and not pluralistically, systematically, redistributed by economic means of a free and unconsolidated marketplace. In order to return to profitability (for your 401k to gain rather than lose value to the accumulation of capital into the private property, the ownership, of a few plutocrats) the capital must be redistributed--recycled.

The lack of pluralism, the lack of a free-market economics, is the systemic economic risk, or instability, we are experiencing that comes with the accumulation of wealth and, therefore, power.

In order for the economy to move out of liquidity crisis (the deflationary phase of the business cycle), redistribution of the capital (the distribution phase of the business cycle) MUST occur. It is a necessary condition. Nothing else will suffice.

This description has been the "economics" of our current crisis.

The "political" description of the crisis is entirely a function of who owns, and therefore controls, the capital and the ability, the means and measures, to correct for liquidity crisis. For the plutocrats, this is a function of how much the non-elite are willing to suffer, or sacrifice, for the accumulation of the capital into the ownership, the controlling hands, the command, of the elite. The more the elite can make the non-elite suffer without retribution (loss of the value accumulated) measures the amount of political power and the amount of value that must be retributed in order to minimize the systemic risk-to-value obtained, or the retributive value.

The trick, the political process, is to go through the distribution phase of the business cycle without giving up ownership of the capital to the non-elite, or minimizing the retributive value. This is accomplished mainly by arguing that government--the means of retributing ownership of the capital--is the problem and not the solution so that the distribution phase of the cycle does not become an event of economic re-distribution that eliminates the reoccurrence of liquidity crisis.

Retributing the value at the distribution phase very simply minimizes the probability (the risk) of the massive liquidity crisis, the systemic risk, we are now experiencing. It forms the basis for pluralizing the economy so that it is not dependant on any one economic entity that holds us ransome to gargantuant bailout values (the amount of value to be retributed) like we have now.

Fully retributing the value obviates all the other complex political means and measures we are now engaging to preserve the current system, the ratio, of risk-to-reward.

Keynesian measures preserve the current risk/reward ratio. It is a political measure, not an economic one. That's why there is a general sense of dissatisfaction with the current mode of stimulus measures: it serves to redistribute value politically rather than retribute it economically for a fair-and-equitable exchange of value that makes for economic stability or low-to-no systemic risk.