The Conservative Nanny State : A Book Review Part Five : Richly Bankrupt and Terrific Torts

In our penultimate article in the series on Dean Baker’s The Conservative Nanny State, we examine his discussion on bankruptcy, so-called tort reform, and “takings.”

Bankruptcy : A Nanny State Protection for Me But Not You, But Where is Personal Responsibility?

Bankruptcy has long been a feature of Anglo-American law, owing to creditors’ need for a lawful, orderly way of involuntarily dispossessing debtors, all merchants, of properties and freedom in the late sixteenth century.  In the United States, most bankruptcy laws passed within the first half of the nineteenth reflected this philosophy, exhibited in court battles wherein state-directed debt relief remained under debate.  With the ascent of the Whig party in the 1840 elections, the federal government established voluntary bankruptcy protections in an 1841 act; the government repealed the act a mere two years later, but the philosophy clearly was shifting.  By 1867, debts of the confederate states left northern states clamoring for more legislation.  It turns out that the many pushes for changes to bankruptcy laws often follow an economic downturn, generally at the request of large creditors; this ping-pong persisted well into the twentieth century, with repeal efforts following any slight accommodation for debtors.  In 1910, Congress offered corporations voluntary mechanisms for voluntary debt discharge, something fought vehemently by creditors hoping for harsher provisions.  For twenty years, the battle waged on, edging finally into the Great Depression during Herbert Hoover’s administration.  As expected, creditors and debtors alike rushed to the nanny state for new protections in light of unforeseen, devastating economic realities.  By 1938, sufficient support was available to pass the Chandler Act, named for its primary advocate Congressman Walter Chandler, Democrat from Tennessee, reviewed in an article appearing in The Fordham Law Review in 1940.  Though we’ll pass over the technical details, suffice it to say the Chandler Act represented a study-driven overhaul aimed at updating the Nelson Act of 1898.  For forty years, minor changes appeared here and there, until the passage of the Bankruptcy Reform Act of 1978, a culmination of ten years of hearings and studies, replacing the Nelson Act entirely.  In the years to follow, Congress continued adjustments here and there, representative of the dual difficulties in corporations and creditors fighting to further ensnare debtors while often suffering the same fate themselves.  The complete history is quite interesting, and one can find a worthy read in Charles Jordan Tabb’s The History of the Bankruptcy Laws of the United States.

Dr. Baker’s discussion focuses more on the most recent overhaul of bankruptcy law, the constructively-named Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.  Nanny state apologists suggest individuals who file for bankruptcy are irresponsible spend thrifts who deserve to suffer, but shareholders can escape such difficulties through mechanisms described above.  Well understood is that medical bills sit nicely in the plurality of causes, as described in a report in 2013 by CNBC.  Baker frames the issue quite effectively, describing the large jump in total credit card debt from $100 billion in 1980 to $800 billion in 2004, the time of his writing.  Value Penguin reports more recent statistics gathered from the Census Bureau and the Federal Reserve, exhibiting a peak of $900 billion at the time of the financial crisis, a slump, but later exceeding the 2004 level as of 2016.  Baker argues that the explosion of this kind of volatile debt indicates

that the risk of default on these
loans was not a serious obstacle
to credit card lending[.]

Further, according to Jeremy Simon while writing for CreditCards.com , the so-called bankruptcy reform passed in 2005, misleadingly called “Bankruptcy Abuse Prevention and Consumer Protection Act,” increases the deluge of credit offers to recent filers of bankruptcy : the longer waiting period and tighter restrictions for a subsequent filing offers these sharks the opportunity to bathe in the blood of consumers.

Baker attacks the absurd bankruptcy reform from a different perspective : first, true proselytes of the free market should not want government protection for lenders who make bad choices; in a free market, they would naturally default themselves.  Second, this very protection expands conservative nanny state’s role in the economy rather significantly by empowering it further as a debt collector, contravening further the argument that smaller government is a genuine objective.  As suggested above, the leap in national credit card debt in recent years can’t possibly follow the capacity for repayment, so these lending institutions generally need not concern themselves with stated objectives of offering credit; upon failure to collect bad debts, they can, as Noam Chomsky says, “run cap in hand to the nanny state.”  The bankruptcy bill is one such startling example, though the ugliest hypocrisy of all followed with the bank bailout during the financial crisis : banks need the government to help them crush consumers, but when they run aground, they require a big, powerful state to save them.

Any discussion on bankruptcy leads to consideration of the International Monetary Fund (IMF), a financial agency designed to protect financial institutions in international exchanges.  Baker describes some of the history, particularly how the IMF originally regulated exchange rates under the Bretton Woods system until 1973; the IMF thereafter played the role of international debt collector.  We’ve discussed Bretton Woods before, an international framework designed by Harry Dexter White and John Maynard Keynes in 1944 to prevent repeats of the Great Depression.  For nearly thirty years, the United States experienced tremendous economic growth with no recessions.  In 1971, Richard Nixon eliminated the dollar’s status as a commodity currency, or currency based on gold, transmuting our bills into fiat currency, or currency by governmental decree.  With that and other unilateral decisions in what historians call Nixon Shock.  Though a more thorough treatment of the history of Bretton Woods is instructive (see Chomsky’s discussion), suffice it to say that both purposes of the IMF serve at the pleasure of the nanny state, though the latter day purpose as debt collector serves the financial sector more directly.  Free of the Bretton Woods regulatory apparatus, the financial sector has become extremely wealthy with unrestricted flow of capital diminishing regulation.  The IMF, to Baker’s point, imposes harsh austerity (discussed in a previous post) on nations if they refuse to meet terms imposed by creditors; that is, the IMF protects collectively foreign investors, much like that institution we’re taught is so destructive : the union.  Baker says it best, arguing that

[i]n a free market, there is no place
for a supranational institutional
like the IMF to rewrite the rules to
ensure that creditors are protected.

In a more competitive environment, any creditor could loan any nation needed funds, easily undercutting adversary firms with lower interest rates.  Creditors instead unionize through the IMF to drive nations into bankruptcy.  Baker argues that risk is the business of lenders, and they should suffer the consequences for making bad choices.

Fat Lawyers Gave You McDonald’s Coffee Lawsuit

Baker takes up the topic of tort reform, a favorite windmill the quixotic chicken-littles of the nanny state frequently fan in the faces of the public.  We’re told frequently that greedy lawyers and ne’er-do-wells are robbing hardworking industrialists blind, and that the nanny state must artificially curtail the requisite damages paid by these innocent business elites.  It’s most reminiscent of Ronald Reagan’s inane, racist complaint that “welfare queens” are driving “welfare Cadillacs”.  In fact, the conservative nanny state caters to a host of fascinating topics losing the good hard-working conservatives hours of sleep at nightly, including criminal innocence-by-insanity, lazy people loafing off disability benefits, and, most recently, insistence that illegal immigrants are committing vicious, hideous crimes, a blatant and highly destructive lie repeated ad nauseum by Donald Trump.  It turns out, quite expectedly for anyone willing to devote a paltry few minutes to research, that none of these would-be blights on society actually exist to any appreciable extent.  In fact, tax fraud by wealthy elites is a far more pervasive problem than any of the strawmen aforementioned.

And yet these myths leave an indelible imprint on the impressionable minds of the nanny state’s protectors.  Take torts for instance; Baker describes two stories I remember growing up hearing, the black woman who sued McDonald’s for burning her with coffee, and the story of a property owner sued by an intruder who was injured on the owner’s property in the course of a burglary.  Astonishingly powerful is the propaganda surrounding the cases, as we in a poorer segment of society literally would fall over ourselves to defend the honor of McDonald’s and this property owner.

I happened upon the McDonald’s case again during a legal presentation at Southern Methodist University; the legal scholar offered a piece of the case I hadn’t heard in my household : the woman only asked for medical coverage from McDonald’s, as they had received hundreds (more likely thousands) of complaints through the years that coffee served at 180 degrees Fahrenheit is dangerously hot.  Baker points out one more piece of the puzzle : McDonald’s served their coffee at such a high temperature to mask the bad taste of a cheap brew, thereby increasing profits while distributing the cost to burned consumers.  Again, this is reminiscent of the Ford Pinto case we discussed previously.

The Consumer Attorneys of California offer a good read on the McDonald’s case; suffice it to say a 79 year-old woman spilled the coffee on her thighs, burning herself so badly that she required skin grafting.  McDonald’s, putting customers first, refused to help her until a court compelled them to make up for their mistakes.  The case of the burglary really was about a high school student climbing on the roof of a gym on school property, and a skylight, painted over, gave way when he stepped on it.  A court correctly asserted that public facilities ought to have better protections in place.

Both of these cases are rare instances in which a court awards damages for torts, or wrongs leading to civil liability.  It turns out that less than three percent of civil cases ever lead to a jury trial, as most are decided much earlier, generally through settlement.  It’s revealing to consider a favorite of the tort reformists, medical malpractice.  In the last four decades, tort reform aimed at streamlining the malpractice liability system has managed to shift larger and larger profits into the pockets of insurance companies; Kenneth Thorpe, professor at Emory, published an article in Health Affairs discussing trends in states adopting caps on medical damages, finding a statistically significant decrease in premiums but inconclusive on whether the liability system is genuinely deterring substandard care.  Further, it might come as a surprise that few victims of malpractice actually sue; a Harvard study published some years ago found that only one in eight victims ever leverage the court system.  More recent work appearing in Medscape suggests the number is closer to one in twelve, and that doctors have at their disposable proven means of reducing the probability of lawsuits.  Interestingly, members of my family have had opportunities here and there to sue for malpractice, yet they never did, often citing the “litigious” nature of society, a win for propagandists.

Baker continues the discussion with a partial explanation of the more general costs associated with the current legal system, and that standardizing law and removing much arcane procedure could drive down prices.  But he contends, I think correctly, that limiting fees for lawyers’ services contravenes market ideology.  Fighting corporations is nasty business, as anyone who’s ever had to deal with a medical insurance company knows.  And despite what nanny state conservatives may tell us, the deck is very heavily stacked in their favor.

He also points to the importance of punitive damages, in that suing and punishing a corporation for endangering the public is, in fact, a public service.  It’s hard to even quantify the damage done by McDonald’s broiling hot coffee policy, all in the name of profits.  I’m reminded of all the time one waits on hold when trying to reach customer service for any company, be it cell phone providers, internet providers, or, as mentioned before, insurance companies.  In the interest of profits, these companies understaff their departments, using badly recorded music and automated menus to delay customers for several minutes, sometimes hours.  These hidden costs, or externalities, don’t directly figure into their budgets, as someone else pays that price.  Punishing them for bad service seems perfectly in keeping with market ideology.

Takings : Gimme More, Take Less…

Baker ends the chapter with a short discussion on “takings,” or costs exacted by the government in exchange for property confiscation or laws and regulations which reduce the value of property.  That is, so-called property owners, or corporations, might be quite unhappy when the government enforces regulation limiting how much they can pollute on their property, perhaps cutting down profits or lessening the value of owning the property.  And yet, when government intervention substantially increases the value of property through infrastructure and habitat clean-up, property owners happily accept the benefits without a direct repayment to the taxpayer.  For instance, farmland along the major interstate near my hometown, Interstate 35, was not particularly valuable before the interstate was constructed.  Commercial zones along the interstate are quite a boon for landowners, as gas stations become quite important along long stretches of highways.

The major point here is that nanny state conservatives dislike any regulatory action diminishing property value but freely accept every last penny they can bilk from beneficial government action.  Baker nicely suggests that true devotees of market ideology ought to accept freely that lessening of property values due to government intervention is a cost of doing business, and if they were savvier customers, they’d have foreseen it, harkening to the dogma of personal responsibility they hold so dear.

Next time, we’ll conclude this series with a brief summary of Baker’s discussion on small businesses and taxes.

Marking a Solemn Week in A Sea of Solemnity

This week marks the seventy-second anniversary of an event showcasing both the ascent of the human species to the top of the evolutionary ladder and its descent into what could be the darkest and final chapter of our roughly 200,000 year run on this planet : the bombing of Japan by the United States with nuclear weapons.

On August 6, 1945, the United States Air Force deployed the atomic bomb over Hiroshima, incinerating a few thousand acres of densely populated city, killing anywhere from 70,000 to 100,000 people in the blast; perhaps another 70,000 died from exposure.  On August 9, the U.S. continued by dropping a plutonium bomb on Japan over the city of Nagasaki, killing maybe 40,000 instantly and another 40,000 from the aftermath.  American apologists offer that these mass murders were essential in ending the Second World War while minimizing Allied casualties.  Certainly, that’s what I learned growing up, the pertinent question being whether this is true; it wasn’t until I took world history under Dr. Pat Ledbetter, longtime activist, jurist, and professor, that I ever heard the decision to deploy the atom bomb against Japan come into question.

Quite relevant today is Donald Trump’s quite harsh rhetoric toward the nation of North Korea as reported by the New York Times.  His outrageous words,

[t]hey will be met with fire
and fury like the world has
never seen[,]

as usual exhibit the uncensored, grotesque gaffes we’ve come to expect from him.  They also eerily echo similar words by Harry S Truman, president at the conclusion of the Second World War :

[the Japanese can] expect a
rain of ruin from the air,
the like of which has never
been seen on this earth.

The parallel may have been on purpose, as Trump seems to fancy himself the most accomplished president of our time, and Truman, in Americana, is widely regarded to have successfully ended the single most destructive conflict in history.  Trump can rest at ease spiritually, according to “faith leader” Robert Jeffress : contravening Romans chapter twelve’s directive to refrain from repaying evil for evil, he suggests that God’s instructions don’t apply to the government, and thus this same, loving “god” has bestowed upon Trump license to obliterate North Korea.  Certainly some hearts, are indeed, “desperately wicked.”

Though the philosophies of extremist devotees of Trump might not be all that surprising in their rapacity and blood-lust, the the claim that the atomic bombs were necessary to save American lives at the conclusion of the second world war, is, in fact, propaganda.  It turns out that the Japanese had suggested a surrender months before the bombs landed, asking only that they keep their emperor, largely a figure head and cultural symbol.  Washington refused, despite General Eisenhower, among others, urging Truman that

it wasn't necessary to hit them
with that awful thing … to use
the atomic bomb, to kill and 
terrorize civilians, without even 
attempting [negotiations], was a 
double crime[.]

Additionally, Admiral William Leahy, Truman’s chief of staff, apparently argued that

[t]he use of this barbarous weapon…was
of no material assistance in our war
against Japan[;] [m]y own feeling was
that in being the first to use it, 
we had adopted an ethical standard common 
to the barbarians of the Dark Ages [...] 
I was not taught to make wars in that 
fashion, and wars cannot be won by 
destroying women and children.

The Nation suggested in an investigative report released on the seventieth anniversary of the bombings quite accurately that we Americans need to face the ugly truth that the war was ready for a bloodless conclusion before Truman ordered the mass execution of hundreds of thousands of people.  Military head after military head uniformly agreed that the bombing was unnecessary, raising the more serious question of why one would wreak such horrendous havoc unnecessarily on civilians, and why no one exacted a political price for it.

One can easily point to an incredible misinformation campaign demonizing the Japanese as subhuman, feral monsters, documented by Anthony Navarro in A Critical Comparison Between Japanese and American Propaganda during World War II.  He offers a critique of both sides, but the imagery is striking.  Lingering resentment about Pearl Harbor eased propagandizing Americans, despite the attack being retribution for America freezing supply lines in Manchuria and conducting war exercises a few hundred miles off the coast of Japan, facts conveniently missing from the American consciousness.  We Yankees, perhaps, simply didn’t think the Japanese deserved to live.

It’s reminiscent of the euphoria when Barack Obama announced that Osama bin Laden was dead, murdered by a special operation in Pakistan which incidentally risked nuclear war; elite media and governments alike believed murder of a suspect without a trial was a monumental achievement, documented on Wikipedia‘s summary of official statements.  It seemed lost on interested parties that constitutional protections, inherited from Magna Carta, simply don’t matter in certain cases where the state deems them unnecessary.  I myself was stunned at the hysterical outpouring of happiness on Facebook and other social media.  I found myself nearly alone asking whether the dissolution of basic human rights in the case of a defenseless suspect made any sense.  It’s true that if he were actually guilty of masterminding the terrorist attacks on September 11, 2001, his was a vicious, malevolent crime.  But then again, Harry S Truman, Dwight D. Eisenhower, John F. Kennedy, Lyndon B. Johnson, Richard Nixon, Ronald Reagan, George H.W. Bush, and George W. Bush committed atrocities, uncontroversially, so far off the spectrum by comparison that it’s impossible to even imagine, documented by Noam Chomsky.  Standing next in line are Barack Obama with the drone assassination campaign, Bill Clinton in Serbia, and, yes, even dear Jimmy Carter in complicity in the Indonesian invasion of East Timor under Suharto, documented by Joe Nunes.

In any case, historian Hanson Baldwin argued in The Great Mistakes of the War that Washington’s “unconditional surrender” demands needlessly cost lives and lengthened the duration of the war; he wrote

[b]ut, in fact, our only warning
to a Japan already militarily
defeated, and in a hopeless
situation, was the Potsdam demand
for unconditional surrender issued 
on July 26, when we knew Japanese
surrender attempts had started.

Even the conservative Mises Institute editorializes that the bombing was one of the greatest crimes ever committed; John Denson argued in The Hiroshima Myth that the bombing was knowingly unnecessary.  In a more recent article, Ralph Raico continued the critique with a quote from physicist Leo Szilard, one of the originators of the Manhattan project :

[i]f the Germans had dropped atomic
bombs on cities instead of us,
we would have defined the
dropping of atomic bombs on
cities as a war crime, and we
would have sentenced the Germans
who were guilty of this crime to
death at Nuremberg and hanged them.

Dr. Szilard was making the obvious point that what evils others do seem to resonate while our own crimes either languish in the vat of forgotten history or simply cease to be crimes.  I’ve long argued that if Hitler had won the war, we would have eventually either forgotten his crimes or exalted them; after all, isn’t this precisely what we’ve done with Truman and the atomic bombs, Jackson and the Trail of Tears, Washington and the extermination of the Iroquois in the Sullivan expedition, and so on.  At worst, state apologists would argue that these events, like the tragedies of the Vietnam and Iraq Wars, were perhaps strategic blunders rather than the more deserved casting of “fundamentally immoral,” a description with which 52% of Americans surveyed in 1995 by Gallup agreed; that of course requires the events to even remain in public consciousness.

Returning to the atomic bombs dropped in 1945, Japanese historian Tsuyoshi Hasegawa summarized a lengthy search through official Japanese records, communiques, and memoranda in a 2007 article appearing in The Asia Pacific Journal, titled The Atomic Bombs and the Soviet Invasion: What Drove Japan’s Decision to Surrender?“,

what decisively changed the views
of the Japanese ruling elite was
the Soviet entry into the war [...]
[i]t catapulted the Japanese
government into taking immediate
action [...] [f]or the first time,
it forced the government squarely to
confront the issue of whether it
should accept the Potsdam terms.

That is, the overwhelming evidence is that the Japanese military elites acceded to the Potsdam requirements because of fear of Soviet aggression, further undermining the assertion that the nuclear bombs ended the war.  The hideous irony is that the Allied forces permitted Japan’s emperor to remain in place at the time of surrender, the only condition the Japanese leaders required in their earlier attempts.

The historical question is whether the Japanese really would have surrendered; I’ve unfortunately seen monstrous commentary online to this effect, suggesting that hundreds of thousands of lives were easily forfeit next to a demand made by the Allied leadership eventually tossed by the way side.   If there were even a chance for peace by accepting what really was a trivial request by comparison to the massive loss of life to follow, shouldn’t we, as activist David Swanson often suggests, give peace a chance?

Establishing that the dropping of the bombs wasn’t necessary to end the war seems academic; further, we know now the architects of said wanton decision were even aware it was unnecessary.  So why carry out such an action, as we asked earlier?  It turns out that the answer is akin to why a child might pull wings of of butterflies : just to see what happens.  Echoed later by Deputy Chief of Mission Monteagle Stearns in Senate testimony about escalating the bombing of civilians in Laos after Lyndon Johnson ordered a halt on the bombing of North Vietnam in 1968, the rationale boiled down to

[w]ell, we had all those planes
sitting around and couldn’t
just let them stay there with
nothing to do.

Further, Truman felt a display of force was necessary to place the tenuously-held alliance with Moscow on notice, intended to restrict the Soviet sphere of influence once the spoils of the Second World War became available, as Howard Zinn argues with much historical evidence in his final book, The Bomb.

The myopic jingoists over at The National Interest argue otherwise, suggesting the savage butchery of hundreds of thousands was an understandable price to pay :

would even one more Allied
death have been worth not dropping
the bomb, in the minds of the 
president and his advisors, after
six years of the worst fighting
in the history of the human race?

Tom Nichols goes on to argue that Truman would have faced impeachment if he’d revealed the existence of the bomb later to war-weary Americans, and that they would have thirsted for blood if they learned of a more expedient conclusion.  His argument is approximately the same as that from a propaganda piece from The Atlantic published in 1946, seventy years earlier : physicist Karl Compton argued, seriously if you can believe it, that the Japanese wouldn’t have ever surrendered, as a “well-informed Japanese officer” told him

[w]e would have kept on fighting
until all Japanese were killed,
but we would not have been
defeated[.]

Both arguments are absurd, as Americans can easily learn that a more expedient, less destructive conclusion was available as of May 1945, and yet only a few of us in the margins believe Truman should have faced a war crimes tribunal.  In a similar vein, the Taliban in Afghanistan offered to hand over Osama bin Laden, provided we offered him a fair trial and not continue to bomb their country.  Would they have?  We’ll never know, as Bush scoffed in his repulsive drawl, “We know he’s guilty.”  But then again, what is a couple hundred thousand Afghans, or 200,000 Japanese lives to America-first chauvinists, a question now coming to haunt us with Trump’s incisive, menacing rhetoric?

As we’ve discussed previously, nuclear war is one of two existential threats looming over human civilization, both of which the Republican party has committed to accelerating : escalate both ecological catastrophe and the growing atomic maelstrom.  Trump’s threats toward a small nation with whom we can genuinely pursue peace imperils millions of lives and risks war with both China and Russia.  Our series on Cuba aims to demonstrate that harsh sanctions, imperialism, and aggression universally backfire, as one can see with one example after another in our history, and to further expose the many near-misses the nuclear age has wrought on a hapless species, many of which appear in The Bulletin of Atomic Scientists, gatekeepers of the Doomsday Clock.

So during this solemn week, let’s remember that history can repeat itself if we allow it.  We Americans can stop Trump and the warmongering political elites, if only we organize and resist.  Some decent references on getting involved to move us to a nuclear-free world are Waging Peace, the Campaign for Nuclear Disarmament, and the Simon’s Foundation.

We’ll close with words from the only officially recognized survivor of both nuclear blasts, Tsutomu Yamaguchi :

[t]he only people who should
be allowed to govern countries
with nuclear weapons are mothers,
those who are still breast-feeding
their babies.

 

The Conservative Nanny State : A Book Review Part Four : Demonized Unions and Glorified Patents

Continuing our series analyzing Dean Baker’s The Conservative Nanny State, we’ll touch on a few key features quite effective in funneling wealth upward with no obvious systemic advantage : undercutting of collective bargaining and bestowal of monopoly status for intellectual property.  Baker argues, astutely, that neither of these features really make sense in a free market system, as collective bargaining is a market-based strategy for assuring at least a living wage for tradespersons vying for limited jobs, and government-conferred monopolies are illogical when producing, say a life-saving drug, is incredibly cheap.

Repeat After Me : Unions are Evil, Unions are Evil…

Baker touches briefly on elite hostility to organized labor for mid-to-lower income tradespersons, arguing that it’s an important feature of the conservative nanny state.  It’s certainly easy to see why, as trade unions, as we’ve discussed previously, generated most of the benefits we derive from employment, including paid holidays, vacation, healthcare, weekends off, and the like.  Yet the prevailing sentiment is often quite negative, as documented by Gallup since 1936.  Even in my own work experience have I witnessed the effects of this propaganda.  In working for the aforementioned defense contractor, I remember a strike executed by union members when the parent company chose to slash benefits.  Coworkers scoffed at and mocked the picketers, bemusing of the scabs and the internal contortions to cover the labor loss.  I heard internally that an upper level manager actually physically assaulted one of the picketers after a heated exchange.  The strike failed, the union workers sustained a more undesirable benefits package than had been offered previously, a remarkable victory for anti-unionists among the elites.

My own personal experiences in corporate America offer further revealing data regarding elite hostility toward unionization : both in working for corporate Uber and Amazon, I encountered many of the low wage employees (dubiously mislabeled as free contractors) among the drivers, cabbies in the case of Uber and delivery drivers in the case of Amazon.  I met probably seventy drivers while working for Uber, as the company would spring for free Uber rides home if I remained in the office past ten o’clock at night.  Though the drivers were understandably reticent to discuss with me, a corporate employee at the time, their opinions on Uber’s downward pressure on their wages, I generally could ease them into opening up after I shared the long labor history of America with them.  The picture was universally bleak : living, breathing people trying to survive sharp increases in the cost-of-living in San Francisco found themselves in a harsh, highly competitive trade with a quite hostile corporate sponsor.  Uber routinely would fire drivers with little or no warning, all based on a very arbitrary rating system with very little means of disputing a bogus negative rating.  Uber also sharply cut wages on these drivers.  The picture among Amazon drivers was very similar : no benefits and fast firings were the law of the jungle, true even in more liberal democracies such as the United Kingdom.  I informed virtually all of these drivers I met that the only proven means of driving wages upward is collective bargaining through unionization, something the drivers tell me Uber harshly demonizes; see The Verge for a discussion on Seattle’s efforts to protect Uber drivers.

America’s sordidly violent labor history features an unusually sharp hostility toward trade unions for semi-to-unskilled labor, as they are harmful to profits.  A rather salient piece to the puzzle is the National Labor Relations Act (or Wagner Act) of 1935, conferring the right of private sector employees to organize unions and participate in collective bargaining; the National Labor Relations Board received special attention during my Uber employee orientation, as one of the chief legal officers lambasted the committee as desperate bureaucrats hell-bent on squeezing money out of the innocent drivers.  In remarkably effective legalese rhetoric, she argued that the NLRB is out-of-touch and irrelevant in a world where Uber drivers can nab a fortune in driving, thus, it’s a charity to classify drivers as contractors.  Though she aptly described the experience some of the earlier “contractors” enjoyed, an unnervingly large fraction of latter-day drivers never managed to attain this golden driver’s seat.  Certainly, Uber represents something of a revolution in ride-sharing, but why not support one’s workforce?

Returning more to the historical context, the Taft-Hartley Act of 1947 outlawed secondary strikes, strikes instigated by workers of one trade expressed in solidarity with another trade’s ongoing strike.  You read that correctly : a painter’s union cannot legally strike in solidarity with carpenters participating in a union strike.  Though there is much to discuss on the topic of organized labor (and we’ll touch briefly on a few of Baker’s further points momentarily), suffice it to say the corporate nanny state mythology somehow manages to convince highly-compensated workers that not only is labor solidarity unnecessary (the market argument), but that they themselves derive no protectionism from said nanny state or any other well-to-do analog of the trade union, the former of which is a remarkable feat of propaganda, the latter of which Baker quite powerfully decimates as we discussed earlier.

Patent Trolls and Copyright Cows : The Geese Laying Golden Eggs

Baker turns attention to two extremely powerful, state granted protections for individuals and corporations : patents and copyrights.  Again, conservative nanny state apologists might consider these instruments to be laws of nature, naturally forming optimal strategies in the fantasy land of free markets.  By contrast, Baker aptly describes them correctly as “government-granted monopol[ies].”  That is, an agency, be it individual, government, non-profit, or corporation, can apply for patent or copyright protection on an invention, idea, artistic expression, and so on, ensuring that agency time-limited monopolistic control over usage and sales.  The argument in favor of these anti-market practices is that they encourage innovation and creativity, generally socially positive notions.  In fact, the power derives directly from the U.S. Constitution : under Article I, Section 8, we have that Congress has the power

[t]o promote the Progress of Science and
useful Arts, by securing for limited 
Times to Authors and Inventors the 
exclusive Right to their respective 
Writings and Discoveries.

This power owes to the guild and apprentice system from the Middle Ages, Baker explains, as a means of increasing innovation and scientific discovery.  Yet, are these the most optimal means of doing so?  Certainly, executives of Merck, Pfizer, Apple, Google, Amazon, and a lengthy list of other companies are quite wealthy.  But do these state-guaranteed monopolies efficiently generate innovation?  My own background includes an understanding of the evolution of software development, and the open source standard (free and open to the public) has grown tremendously in popularity in recent years.  Well-known to software developers is the superior reliability in Unix-based operating systems relative to that of proprietary models.  It’s reasonably understood history that the biggest software firms in large part owe their success to IBM’s PC open architecture strategy, suggesting an open OS standard could have created a proliferation of competitive products in both basic kernel (OS) space operations and those in the user space.  Though we have many advances now in personal computing, much of the game-changing advancement has occurred either in the state sector (discussed in previous posts) or in highly competitive, less monopolistic settings.

Baker describes an interesting economic parallel : dead-weight loss is the difference between patent-protected and market-based prices, though he scoffs that his fellow economists find no fault with this loss with respect to pharmaceutical prices, despite their hostility toward the same loss incurred in tariffs.  Technical economics aside, Baker poses the critical question : are patents and copyrights the most optimal instruments of their kind for encouraging and rewarding innovation?

To answer the question, Baker points to a highly controversial beneficiary of the patent system : the drug research lobby.  If we are to believe conservative nanny state apologists, he argues, the patent system should be the most capable protection in assuring innovation in medical advances and lifesaving technology.  Patents account for a factor four multiplier in drug costs, meaning if a generic costs one dollar, the corresponding brand-name drug costs four dollars, according to the final Statistical Abstract of the United States, the 2012 edition.  (We could discuss the highly politicized, stupid decision to discontinue this long running report published by the U.S. Census Bureau, but we’ll defer for now.)  As of the publishing date of the book, the factor was three, meaning the divide has grown by thirty-three percent.  Pharmaceutical companies offer exactly the argument as described above, despite large fractions of profits wasted on marketing and executive salaries.  Overall, Baker reports $220 billion in drug sales in 2004, confirmed by the aforementioned report.  By 2010, this number grew to nearly $270 billion.

Because patent protection ensures higher drug prices than could otherwise be paid, literally millions of Americans each year skip medications to save money.  Harvard Health Publications reported in 2015 cites a survey by researchers Robin Cohen and Maria Villarroel that eight percent of all Americans fail to take medications as directed because of lack of money.  As expected, older and less well-insured Americans missed dosages in higher numbers, but astonishingly, six percent of Americans with private insurance skimped on their medications.  That is to say, the private insurance system, adored by conservative nanny state apologists, forces Americans further into poverty and costs too much.  A report in 2012 by The Huffington Post indicates that these pharmaceutical companies spend nineteen times as much on marketing as they do on research, suggesting that the huge windfall of patent protection isn’t really going to good use.

Baker points to an even more serious consequence of artificially ballooning prices : black market drugs.  A strategy comparable to “medical tourism,” discussed earlier, leads Americans to order potentially dangerous drugs from foreign countries.  This steady flow of both illegally and legally obtained medicines is completely expected under a system in which these millions of Americans self-report failing to take drugs for lack of money, a failure of the patent system.

Perhaps most damning is Baker’s argument with regard to copycat drugs, or drugs designed to mimic the behavior of a patented, available drug.  Pharmaceutical companies have discovered that hitching themselves onto bandwagons of popular, patent-protected drugs of high import (such as allergy, diarrhea, and heartburn medications) is extremely lucrative.  That is, rather than invest money and energy on new lifesaving drugs and technologies, they try to replicate something in the mainstream by tweaking a few formulas.  As of 2004, two-thirds of all newly approved drugs in America were copycats, according to the Food and Drug Administration.  That leads to a startling number with regard to where the research money goes : sixty percent of research dollars goes to such wasteful creations.  So sixty percent of medical dollars, private and public, do not promote innovation at all, because of the patent system.  Other inefficiencies of said system appear in a 2015 report by BBC : for instance, many drug companies employee “floors of lawyers” to fight in court for patent extensions, a strategy interestingly called evergreening.  Dr. Marcia Angell, former editor for The England Journal of Medicine, discussed in The Canadian Medical Association Journal drug companies copying their own drugs for patent extensions, an example being Nexium and Prilosec developed by AstraZeneca : the drug company hiked the price on the outgoing to migrate patients onto the incoming, hoping to retain marketshare once the patent expired on the outgoing.

The aforementioned pair of drugs are examples of enantiomers, or drug molecules equivalent in structure and form, one a mirror image of the other.  These arise naturally in the course of development, often with very similar physiological interactions; thus, the practice of patenting both separately is rather suspect.  In “Enantiomer Patents: Innovative or Obvious?” appearing in the Pharmaceutical Law & Industry Report, Brian Sodikoff, et al. discusses the legal standards in doing so, suggesting the patent system overly caters to the corporations.  A few other examples of double-dipping are Lexapro and Celexa, and Ritalin and Focalin.

It turns out that drug companies leverage several tricks in the spirit of the foregoing to stretch the lifetimes of patents, including

  • rebranding mixtures of existing drugs, such as Prozac and Zyprexa to obtain Symbiax,
  • morphing generic drugs into new drugs by adjusting dosages, such as Doxepin into Silenor,
  • repackaging an existing drug as is for a new purpose, such as Wellbutrin and Zyban, and Prozac and Sarafem,
  • creation of extended release variants of existing drugs by established mechanisms, such as Ambien and Ambien CR, and Wellbutrin and Wellbutrin XL,
  • changes of delivery mechanisms, such as Ritalin as a pill and Daytrana as a topical patch,

among others.  In each of these cases, big pharma manages to hike the price substantially, even when cheaper generics are available with adjustable dosages.  These corporations argue they should receive full patent protection as though they devoted the same amount of resources for researching the copycat as they did for developing a brand-new therapy from scratch, a preposterous claim. What’s worse, drug reps, or prettified agents armed with high discretionary credit routinely accost physicians, offering expensive samples and lavish luncheons for free; NPR reported earlier this year that the drug rep interaction significantly increases the number of costly prescriptions written by doctors.  Though we could discuss these inefficiencies and contradictions more, we’ll leave it at that.

By the previous arguments, we certainly can begin to believe that patents and copyrights probably aren’t the most efficient means of promoting innovation, as Baker correctly asserts.  So how does one promote innovation?  Baker suggests raising government investment in research, establishing a grant and prize system aimed at spurring innovation.  Researchers would strive toward successful development of lifesaving medical technology, competing jointly for grants to fund their work.  Upon successful innovation, they could receive prize money commensurate with the societal benefit.  Upon acceptance and approval, their contributions would become public domain, so drug manufacturers could compete on the open market for the cheapest way to produce the drugs, much like application developers could leverage IBM’s open architecture.  As Baker observes, this isn’t the only approach, but it certainly is worth trying, considering the current system is so remarkably wasteful.  Since the government confers the patents and copyrights for the public good, the government could ostensibly leverage other instruments to promote “the Progress of Science and Art.”

Next time, we’ll consider Baker’s arguments on bankruptcy, torts, and takes.

Shyam Kirti Gupta and Shyam Kelly Gupta contributed to this article. 

The Conservative Nanny State : A Book Review Part Three : Myths of Corporations and Truths of the Federal Reserve

Continuing our series of analysis on Dean Baker’s The Conservative Nanny State, we attempt to disrobe the corporation as the nanny state fraud it has become, and demystify the role of the Federal Reserve in profoundly affecting the livelihoods of low income earners.

In the Beginning, God Created the Corporation…

Baker offers quite a thoughtful analysis around the mythology surrounding corporations, a key feature of the conservative nanny state.  The typical argument is that corporations, free and independent, would follow the market harmoniously but for unnecessary, inefficient government interference; this laughable, demonstrably false assertion is an astonishing feat of propaganda, given even a slight historical context.

Helpful in this discussion is a few notes on the definition and history of what is this assumed-to-be essential feature of a market system : in Anglo-American law, a corporation, historically, was an organization created by a state-issued charter to raise capital for advancing some good-will state objective, such as building a bridge or paving roads.  Incorporation was a temporary status, as corporations generally (with a few notable examples, such as in those managing railroads, trade, and shipping) dissolved upon completion of the state’s tasks appearing explicitly in said charter; corporate charters of increasingly long duration appeared as machine of war industry raged feverishly during America’s conflict with Britain 1812, as discussed more thoroughly in Mansel Blackford’s The Rise of Modern Business in Great Britain, the United States, and Japan.

So if the corporate charter generally is traceable to some set of state goals, why even bother asking the government for articles of incorporation for other business endeavors?  After all, businessmen were free to form partnerships to accomplish whatever financial objectives they chose.  It turns out that articles of incorporation offer something that private partnerships do not : limited liability, or the legally conferred immunity for shareholders from both civil and criminal penalties, as well as a guarantee that personal losses cannot exceed the value of one’s investment in said corporation.  That is to say, I can invest, say, $100 in a corporation.  If the corporation commits any and all manner of illegality, I cannot to a large extent suffer any legal charge or punishment, unless I were actually complicit in the crimes.  Further, if my $100 becomes $1000, I get to keep the $900 profit.  But if the company files for bankruptcy with colossal debts say proportionate to thousands or millions with respect to my original investment, I can only lose my $100, and nothing more; lenders to the corporation eat the cost.  Sounds like a fantasy, doesn’t it?

This happens to be an example of what Baker terms takes, or one-sided exchanges offered by the nanny state to individuals.  In data science and statistics, we have another term for this phenomenon : a capped loss function, a loss being a penalty we incur given some random event.  A curious, yet substantial boon for shareholders is that of capped, left-skewed loss function; that is, they take a risk in investing their money, but they can lose no more than that, even if a company, such as Lehman Brothers, defrauds millions with overly risky speculative financial instruments, as in the financial crisis of 2007, or the Enron bankruptcy in 2001, costing thousands their retirements.

It shouldn’t be a surprise that now the government forges charters of indefinite duration.   And the masters of these corporations want more than just the perks listed above : they claim these tyrannies are, in fact, flesh-and-blood persons.  For instance, we can point to the infamous Citizens United decision in the U.S. Supreme Court in 2010 declaring that corporations can contribute vast sums to political causes under the guise of first amendment protection.  More recently, a 2014 decision in Burwell v. Hobby Lobby Stores, Inc. asserted freedom of religion for corporations by exempting them from the mandate to provide contraceptive care under the Affordable Care Act.   Though these decision receive deservedly bad press about being turning points in corporate take-over of our democratic institutions, it’s worth remembering that corporations have enjoyed the rights of personhood for quite a long time.  In 1886, the Supreme Court declared that corporations should receive equal protection under the Fourteenth Amendment of the Constitution in Santa Clara County v. Southern Pacific Railroad Co., despite the intent of the amendment being protection for emancipated slaves.  For more on the history of the corporate personhood dogma, see a report by the Brennan Center for Justice.

So Baker is quite correct in asserting that such a Big Rock Candy Mountain experience wouldn’t be imaginable without a powerful nanny state to guarantee its advantages.  Further, he argues quite pointedly that

...a serious discussion must begin with a
basic truth : the corporation does not
exist in a free market[,]

meaning the free market ideology wouldn’t bear risk of the magnitude corporations routinely undertake.  A familiar theme by now should be that the fantasy begins and ends with government intervention.  Another amenity Baker raises is shareholder anonymity : if I want to invest in a company which participates in child labor exploitation where it’s legal, I can do so without much concern about being discovered.

As it turns out, this is increasingly unavoidable with creation of multinationals, or conglomerates of varied businesses who deal across continents where legal protections for citizens vary.  It might not come as a surprise that these multinationals tend to farm out factory and dangerous work to countries where they need not observe ethical labor practices; Amnesty International has long documented such practices in Indonesia, including slave and child labor on palm oil plantations.  Other examples include Apple’s use of child labor through the manufacturing giant Foxconn and Walmart profiting from prison labor, though we can point to countless other examples of labor abuse, human trafficking, and complicity in organized crime, documented in various media reports and by the International Consortium of Investigative Journalists.

And as it turns out, the story gets worse : what should be a state tool designed to improve the general welfare has enjoyed ever-diminishing oversight while a narrowing of focus : in 1919 the Supreme Court ruled that profits are the lone objective of incorporated companies in the decision Dodge v. Ford.  That is, not only are they a shield from prosecution for shareholders and a safety net against personal financial liability, they must pursue profits, placing any other priorities as secondary.  Everything else is public relations, something to which we’ll return later.  Sounds rather destructive, doesn’t it?

 We can actually point to a much more comprehensive list of corporate atrocities in the name of profit-seeking, such as

  • vicious atrocities in Central America (described somewhat in earlier posts) perpetrated by the United Fruit Company, as described in Big Fruit,
  • business decisions to intentionally continue production of the ill-fated Ford Pinto, discussed in Mother Jonesdespite critiques of the hype of the article, the central thesis remains : Ford executives decided killing customers was the right business decision,
  • the deliberate contamination of Hinkley groundwater by Pacific Gas and Electric, the subject of the film Erin Brokovich,
  • the deliberate cover-up and falsification of research linking sugar consumption to heart disease and obesity by the Great Western Sugar Company, carefully documented in the film Sugar Coated,
  • the falsification of research by tobacco firms, documented in the thriller The Insider,
  • the burying of significant scientific research on climate change for forty years by Exxon Mobile, documented by Exxon Knew,

and so on.  In each of the cases, shareholders could lose no more than the value of their investment, despite their money financing criminal actions.  This is an extremely important point, worth belaboring.  If I personally hired someone to poison my community’s water supply, I could face capital murder.  But if I pay a corporation to do it as a shareholder, I’m in the clear.  Certainly we can argue about fine legal points such as intent, but the metaphor is apt with respect to outcomes.  So Baker suggests conservatives and market ideologues whining about the minimal government oversight of these tyrannies remember that they can always go into business together through private contracts, surrendering this limited liability.  In any case, they don’t want markets nor personal responsibility, often repeated ideals of the conservative nanny state; rather, they want a welfare safety net for themselves.

Baker nicely summarizes with the following :

[i]t takes a conservative nanny
state to create an institution...
that allows investors to cause
harm and not be held accountable.

Baker continues with more highly elucidating discussion on corporate perks, all worth reading, but I’ll move on after addressing one point I find rather important which will come up again later : the corporate income tax.  Donald Trump’s incessant shrieking that the corporate income tax being too high echoes repeated mantras from conservative pundits and think tanks (like U.S Chamber of Commerce and the ultra-conservative Heritage Foundation), complaining of crushing of entrepreneurial initiative and unfair “double taxation.”  And yet these purveyors of the nanny state fail to mention that many of the largest corporations for whom they serve as mouthpieces never pay a penny through this tax, as documented by the Institute on Taxation and Economic Policy.  Further, even if we suspend belief to partake of the melodrama, this is a very, very small price to pay for the aforementioned incredible legal protection.  So Baker correctly points out that this is a voluntary tax, meaning individuals need not incorporate to do business; the tax is a fee for the overwhelming advantage of limited liability, among other amenities conferred by government-issued charters.  If entrepreneurs don’t want to pay the fee, they can assume the risk.

So what is a reasonable, market-based alternative?  As discussed earlier, Western European countries offer some interesting possibilities.  Further, worker-owned corporations (documented earlier by the National Center for Employment Ownership), limits on charter issuance, and requirements within the charters for leadership to be liable to stakeholders rather than just shareholders would be a good start.  If all else fails, traditional contracts and partnerships are perfectly suitable approaches.

Even beyond charter issuance, most large corporations owe their beginnings to extreme government investment and intervention, something Baker calls takes, to which we’ll return later.  In that vein, how about a return-on-investment for taxpayers?  Walmart wouldn’t have been possible without the Interstate Highway System; Amazon wouldn’t be possible without the internet; where’s the taxpayer’s return?

Among the objections to the aforementioned, corporatists like to claim that “stakeholders” are customers, and that they vote with their dollars, leading to a perverse propaganda that corporations actually aren’t tyrannies.  Even if we are to believe such a preposterous framework, one must have a dollar to vote under said theory, marginalizing the poor and the disinterested customers immediately.  More still, this framework is even more preposterous when we consider externalities, or effects of transactions not taken into account.  For instance, Walmart may decide to build a supercenter near me, multiplying traffic by a factor of twenty and causing awful pollution, yet, they don’t simply vanish just because I don’t patronize their stores.  Further, even high school students learn about oligopolies and the aforementioned U.S. Chamber of Commerce, examples of special interest collectivism designed to diminish the well-known destructive effect of markets on profits; with a twist of irony, they also hate collectivism when leveraged by working people (code-named unions), to which we’ll return later.  In any case, these purveyors of the nanny state may decry these possible reforms as “government meddling in the economy”, but the corporation is  by definition precisely that.  Another objection is that progress slows without the risk protection conferred by the nanny state, as investors won’t want to take chances with their savings.  Considering that we’re decimating the ecology around us, perhaps some forms of “progress” ought to slow down.  In any case, requiring these corporatists to accept personal responsibility in making careful, conservative, thoughtful investments is better aligned with the demands they make of poor people everyday.

In summary, conservative nanny state mythology demands we accept as a law of nature that corporations are an essential feature of the most optimal economic strategy, a proposition easily debunked with elementary analysis.  Again, corporations would not survive in a true market-based system.  Alternatives are appearing throughout the economic landscape, as we’ve mentioned earlier.

What is the Federal Reserve?

Baker continues his discussion of the nanny state by unveiling the purpose of the Federal Reserve; its chairperson, a position previously held by appallingly lauded Alan Greenspan, wields perhaps the greatest power over the economy of any individual.  By shifting the so-called federal funds rate, or the short-term rate for lending between banks, this chairperson can adjust the speed of the economy; cutting rates increases lending, borrowing, and job production, while hiking them has the opposite effect.

Perhaps the dirtiest secret of this process is a preplanned unemployment rate, meaning that in order to ensure downward pressure on wages in large segments of the economy, a steady, large supply of unemployed workers must remain available.  Ironic as it seems, this heavy-handed intervention in the economy seems perfectly natural to free market ideologues, as they generally are among the beneficiaries of such policies.  Baker discusses the Beige Book, a report published by the Federal Reserve eight times a year; during periods of low unemployment, particularly 1997 to 2000, employers lamented the increased benefits and wages necessary to entice employees from other companies, even in trades traditionally plagued with low income in the neoliberal period.  As vicious and malevolent as this form of social planning might seem, elites claim it is necessary to ensure inflation remains stable.  The human cost seems less important, as employers enjoy more access to the Federal Reserve board members, and competing on the open market for employees is something they’d prefer not to do.  Baker further discusses how Greenspan disproved conventional thinking by economists of the day that low unemployment would accelerate inflation in the late nineties, undercutting the very rationale for retaining a buffer of unemployment.  Likely, precluding inflation is a convenient cover for pressing a large swathe of the population into stagnation.  Baker describes a bit of the makeup of the agency itself, referring the reader to the official website for more detailed explanations.

Suffice it to say, the governing bankers and economists vary greatly in policy design regarding inflation and unemployment, and Baker very correctly points out that a one or two percent rise in unemployment matters significantly less to well-compensated bankers than to autoworkers or other tradespersons of mid-to-low income.  Conversely, said bankers likely will balk at even meager increases in inflation, considering this undercuts the value of existing loans.  Baker’s point is that the very people running the Federal Reserve carry a heavy bias toward policy hostile to most of the working class, something rather obvious when one considers the matter seriously.  He further remarks that the most recent three chairmen, Paul Volcker, Alan Greenspan, and Benjamin Bernanke enjoy fanciful reputations as “inflation fighters,” generally with little-to-no acknowledgement of the overwhelming sacrifices demanded of working class people who lose their jobs when these fighters hike interest rates to stem inflation. In fact, Baker, Andrew Glyn, David Howell, and John Schmitt discuss remarkable alternatives to controlling inflation with unemployment in Unemployment and Labor Market Institutions: The Failure of the Empirical Case for Deregulation; they discuss substantive case studies in collective labor bargaining with employers in Sweden, Ireland, and other western democracies, finding that when workers’ associations assess wage change on the economy at large, both inflation and unemployment remain lower than those in the United States.  Unfortunately, the vicious assault on collective bargaining here in the states has shriveled union participation to less than ten percent of workers; by contrast, a large majority of working class people in the aforementioned democracies are card-carrying union members.  And it benefits them greatly.

Next time, we’ll discuss unions more thoroughly, along with special nanny state provisions which contravene markets.

The Conservative Nanny State : A Book Review Part Two : Job Protectionism and Differing Sets of Rules

Continuing our discussion of Dean Baker’s The Conservative Nanny State, we’ll address a powerful function of the nanny state : job protectionism.  Conventional wisdom among the elite and intellectual sector is that though lower income earners face harsh competition because of a heightened labor supply (read : too many people vying for the same job), we in the higher income brackets don’t face competition because we were sufficiently lucky or prudent to seek work for which little labor supply exists.  It turns out that this self-congratulation is a bit premature.

Poor People Should Compete with Foreign Workers, But I Don’t Have To… I Shouldn’t Have ToHelp Me Nanny State!

Baker begins with discussing a rather well-known feature of the neoliberal program : the offshoring of labor and the import of foreign labor which pits low-to-mid income earning tradespersons in the United States against very cheap labor in the third world.  Thus, despite close to a doubling of the economy and worker output since 1980, these income earners’ wages have quite predictably stagnated.  Despite this, those of us in the top five percent have experienced great wealth gains in the same period, also a rather well-known but perhaps harder to explain phenomenon.  Baker suggests that the stock answer to why this is the case tickles the ears of the purveyors of the conservative nanny state, as highly compensated persons in the aforementioned bracket are important in maintaining the mythology : go to school, work hard, then make big bucks; those who ignore this advice deserve poverty.  In fact, highly educated acquaintances of mine from across the political spectrum often happily claim that the sum total of their income is due to their substantial, innate value after heeding the mythology, yet poor people either should get off their lazy asses (the conservative version) or utilize government incentives for vocational training (the so-called liberal version), a dichotomy Baker coincidentally references almost verbatim.   So what is the truth?  Baker offers a rather astonishing observation : the U.S. immigration policy, discussed in Eric Freeman’s Barriers to Foreign Professionals Working in the United States, along with protective licensing agencies and diffuse, indeterminate standards, ensures that fewer highly skilled professionals are available than are needed.  A few years ago, both the New York Times and The Atlantic offered a discussion of the difficulties facing foreign doctors in obtaining licenses to practice medicine in the U.S., describing the labyrinthine procedural hurtles depriving these competent, well-trained, desperately needed professionals of a career here in the States.  The New York Times reported in 1997 that the U.S. government actually paid hospitals in New York not to train foreign doctors.  Imagine if the U.S. government actually paid an automotive firm not to offshore manufacturing?  Baker continues by spelling out the cost of this protectionism, coinciding nicely with its very justification :

[i]f free trade in physicians brought doctors'
salaries down to European levels, the savings
would be close to $100,000 per doctor,
approximately $80 billion a year... [ten]
times as large as standard estimates of the
gains from NAFTA.

It’s worth remembering that the absurdly mislabeled “free trade agreements” NAFTA and CAFTA have virtually nothing to do with higher-compensated trades such as doctors, lawyers, and technocrats.  After all, it wouldn’t do to compete with every competent Chinese or Indian doctor, even if the healthcare savings conferred to the weary working class would be immense.  Yet anecdotally, doctors tell me that skyrocketing tuition, malpractice insurance, and the cost-of-living require much higher salaries.  Baker doesn’t address tuition and rising costs-of-living directly in this book, though I speculate he’d attribute at least the former if not both to the conservative nanny state.  Noam Chomsky has speculated that tuition hikes are a mechanism for control of young college students rather than an economic necessity in sustaining the university system.  Baker’s point here is that the protectionist barriers for doctors, lawyers, and technocrats have absolutely nothing to do with market principles, as none of us could compete in an absolutely free and open market with the wages we receive today.  The incredibly high cost of the American medical system drives hundreds of thousands of people into bankruptcy each year, roughly sixty percent of the 1.5 million people who file each year, according to The Huffington Post in 2015, no doubt partially explaining a phenomenon known as medical tourism, or Americans traveling abroad to receive medical treatment.  CNN reports that the increasingly growing industry grants Americans access to world-class healthcare at maybe thirty to forty percent the cost of the same care here.

Yet another device of protection for physicians is the American Medical Association, an organization of physicians with substantial political clout, largely responsible for ensuring tough immigration standards and difficult standards.  It turns out we have another label for this : a trade union.  “Union” has become a terribly dirty word in Americana, as what should be a revered, indispensable public institution has largely succumbed to a massive, unremitting campaign of propaganda; we’ll return to this topic shortly.

So is this really happening?  Baker suggests that denialism is the most widely cited defense against these allegations.  He refers to hilarious anecdotes such as “my doctor is Pakistani” as the defense mounted by those who stand the most to lose by acknowledging this protectionism.  I could make the same observation that I’ve worked with many foreigners over the course of my career in technology, so even my initial knee jerk response was disbelief.  Baker retorts that citing a Mexican avocado in an American grocery store as proof that the U.S. government doesn’t restrict agricultural trade would receive unbridled derision and heart laughter right out of the economics profession.  Per Baker, we should treat this denialism in kind.  He argues, rather poignantly, that

[t] truth is that the "free traders" don't
want free trade--they want cheap nannies--
but "free trade" sounds much more noble.

So what can we do?  First, we recognize the protectionism extant in our own fields; next, we recognize the solidarity we should share with those less fortunate tradespersons not conferred the enormous benefits of said protectionism.  Finally, we fight for a better path forward.  Baker’s proposal, which he by no means claims is the only means of improvement, is to enact true free trade agreements which establish international standards meeting or exceeding our own in each industry.  Further, highly-skilled professionals migrating to America could pay a percentage of their incomes back to their home nation for the purpose of training other professionals; many repatriates send money home to their families in any case, generating demand in third world nations, an obviously desirable feature if we’re to speak of serious market application.

Baker ends this section with an important point about a more egalitarian market-based approach reducing salaries for highly compensated earners : if the cost of doing business falls because of an increased pool of workers, the cost transfers to the population at large.  This, in turn, tends to reduce the cost of living for everyone.  None of these changes would happen immediately, but it’s nonetheless worth remembering that reductions in healthcare costs means more money for wages for everyone, including those of us in the technocracy.

The other point worth making here is that protectionism, if applied at all, ought to apply equally.  Factory workers, welders, and janitors ought to receive equal protection for their livelihood.  As we’ve suggested before, the rise of Trump easily follows from a highly disenchanted working class marginalized by globalization and a hostile overclass enemy; these are issues not just critical to good citizenship, but now perhaps for the very survival of our species.

Never Make a CEO Compete…

Before moving on, I feel it’s important to address thoroughly one point Baker omits in his discussion on protectionism for the well-to-do (though he picks up the general topic later in the book) : the most highly-compensated sliver of the economy, particularly CEOs.  I’ve worked in technology companies for over a decade, some of whom are in the Fortune 500, and an (admittedly) anecdotally pervasive theme is the frustration with, disapproval of, and devaluing of each respective executive leadership team.  Generally the sentiment is that chief executive officers (CEOs) and their directs are pampered, overpaid, egotists whose positive contribution dwindles as the machine grows : by the time corporation reaches a slow stage of monolithic decay, say as in a defense contractor, the CEO doesn’t seem to serve any function except to drain resources from the remaining parts of the business.  My first job, stated before, was in precisely such a company, and we referred to the executives collectively as “mahogany row,” owing to the rather beautifully polished paneling in their luxury, separate-but-not-equal building complete with covered parking (fellow Texans understand that perk, considering heat and hailstorms).  Our offices, by contrast, reminded me of my elementary school : seemingly ancient construction with doubtless asbestos-filled flooring and lowered ceilings to conceal the cigarette smoke stains, an artifact of the smoke-filled days of yesteryear.  In any case, my thinking is somewhat more elementary : whatever skills an executive requires to perform his duties no doubt exist elsewhere.

Considering the well-documented, exorbitant increase in CEO pay with no obvious, market-based cause, we might suspect they somehow are gaming the system.  Baker describes CEO pay later in the book, referencing L. Mishel, et al.’s The State of Working America, an exposition on the stunning explosion of the CEO-to-average worker pay factor, roughly forty in the 1970s, obscene three hundred in late 1990s, then back to still obscene two hundred as of the mid 2000s.   He also points to The Growth of Executive Pay by Lucian Bebchuk and Yaniv Grinstein, a discussion measuring pay of the top five executives in each of 1500 corporations over 1993 to 2003; they conclude that CEO pay jumped at least twice as quickly as could be explained by a number of success metrics, including company profits, industry mix (concentration by region of business types), and market capitalization (the total value of the corporation).  That is to say, scarcity and demand of a business, value of the business, and profitability of the business fail to explain skyrocketing executive pay over the period studied.  Continuing with Mishel’s analysis, Baker explains that CEO pay in the United States is two-and-a-half to five times larger than that of CEOs in Canada, France, and Japan, despite industry leaders in these nations wresting substantial market share from their American competitors, meaning the American system somehow rewards incompetence with skyrocketing wages.  Worse yet, American executives often enjoy zany contract clauses conferring the so-called golden parachute, a severance package so exorbitant that ordinary Americans could easily retire on it.  Imagine living in a world where taking a job is win-win; even if you find yourself fired for aforementioned incompetence by the board of trustees, you’ll depart with barrels of cash.  Aside from the astonishingly anti-market nature of this practice in principle, there are many measurable, deleterious effects in action as well, documented in Bebchuk et al.‘s “Golden Parachutes and the Wealth of Shareholders” appearing in the Journal of Corporate Finance.  In any case, the practice persists : what a country club indeed.

So what explains stratospheric CEO pay?  It seems rather elementary, as American CEOs can raise their own wages by appointing friends to his corporate board, the body responsible for setting his wages.  He, in turn, serves on their respective boards, returning the favor in a spectacularly golden tsunami of quid pro quo, unaccountable to shareholders because of the difficulties of organizing them and the many shenanigans encoded in the corporation’s charter, such as stock proxying; that is, if the shareholders hold a vote on replacing the current CEO, any shareholder who fails to vote by default votes for the CEO to remain.  Imagine if that were common practice in our government elections : the incumbents would be virtually unbeatable!  Baker concludes his chapter on CEO pay with suggestions on how to improve the system, including tying executive pay not to profits only (such as what happens when the cost of oil skyrockets), but relative performance to the industry, and more Congressional oversight.  He cites the Private Securities Litigation Reform Act, passed by Newt Gingrich’s Congress in 1995 over Bill Clinton’s veto to further diminish shareholders’ access to the courts when executives manipulate stock prices, as an example of the power Congress can exercise, though this was in a destructive direction.  As usual, empowering the super-rich and undercutting everyone else somehow receives the lyrical moniker “reform”, a staple of the conservative nanny state’s propaganda.

It turns out there’s more to the story on how CEOs siphon vast cash reserves from corporate profits above and beyond what first-order effects can explain : anecdotal discussions with corporate insiders reveal a rather odd practice of organizing compensation committees intent on basing CEO pay on some arbitrary percentile, say the seventy-fifth, of market pay.  Any astute data scientist understands such implications : a steady-state solution requires CEO pay to grow until all resources deplete.  That is, if a CEO joins a company, the committee decides his pay should target the 75th percentile.  By increasing the rate of pay of a single CEO, the 75th percentile gradually eases upward independent of other market metrics.  Recent scholarship by the Economic Policy Institute lends credence to rather dodgy practice, apparently owing to what economists call “rents”, or excessive increases in market cost for whatever purpose. Aside from the silly, baseless justifications for this practice, why not let CEOs compete on the open market?  Again, to one of Baker’s central theses, markets simply aren’t the desired mechanism for these folks.

So how can we make these folks compete?  We’ll touch on corporations in an upcoming part of the series, but suffice it to say there are many examples of worker owned businesses, documented by the National Center for Employee Ownership in 2016, designed often so that if employees want management changes, they fire their leadership.  Imagine if an incoming CEO recognized fully that he is accountable to the employees?  It turns out that employee-owned companies could be a means of requiring the shareholders and the stakeholders to be more closely aligned.  Another key question is to what extent an organization of employees needs a CEO : decentralized autonomous organizations represent one extreme possibility, in which leadership largely follows computer-encoded rules; some of these organizations exist as of the time of this writing.  Certainly, a robot CEO wouldn’t ask for extreme pay.  In any case, it seems as though more democratic control within the organization could ensure that unnecessary leadership overhead vanishes, and where leadership is required, greater control would rest with the employees; perhaps employees could take turns playing the CEO.  In the world of start-ups and technology, businesses could operate more easily in this mold, adopting as part of their charter a constitution, if you will, fostering a more egalitarian, democratic operating principle.  As Baker points out, and we’ll discuss it more thoroughly later, the classic corporation framework isn’t necessarily the optimal solution (and we have pretty good evidence to the contrary), nor is it a law of nature.

We’ll continue in the next discussion with trade unions, and Baker’s definition of the Federal Reserve.

The Conservative Nanny State : A Book Review Part One : An Introduction

In a series of posts, we’ll be analyzing and reviewing Dean Baker’s The Conservative Nanny State, an excellent discussion of the mythology of conservatives with respect to the government, corporations, and economics.  Instructive is how this mythology can apply in recent events, a review of which follows.  Donald Trump may serve an ideology of nothing more than “me first,” but behind the scenes, the nanny state machine continues to perpetuate a heavily propagandized mythology of markets, capitalism, and government..

All in a Day’s Work : Conservative Market Mythology

Donald Trump’s recent tantrums around the Republican failure to “repeal and replace” the Affordable Care Act adorn the craven, viciously insipid strategy of the Paul Ryan / Mitch McConnell crowd : for eight years, they’ve vowed incessantly to supplant Obamacare with a better version upon gaining both majority power in Congress and a rubber stamp in the White House, yet in those eight years, they’ve managed to formulate absolutely nothing in the way of a cogent substitute.  This bears repeating : despite more time than is necessary to complete a doctorate in the most abstract, difficult theoretical fields in mathematics, the devout acolyte of Ayn Rand that is the vapid Paul Ryan has formulated absolutely no solution to our healthcare quagmire, aside from the tired, intellectually bankrupt admonishments of impotency about poor people being lazy and workers not trying hard enough.  Subject to the market fanaticism they worship so completely, they should be fired immediately for such astonishingly blatant incompetence.  Trump, by slight contrast, seems to care nothing for the details, wanting only to piss all over every last accomplishment of Obama; never mind all the campaign promises of universal healthcare.  He prefers to destroy Obamacare now, perhaps unaware of the malevolence and cruelty in destabilizing the exchange and kicking off coverage at least twenty to thirty million people, a estimate reported by NPR.  He’s apparently too busy

and so on.  His character assassination of Sessions for attention seems to be the last straw among a mountain of bundles, drawing ire from his shrieking media base of support (documented in The Atlantic) since Sessions is an alternative right folk hero.  Noteworthy is a quote from an arch-conservative writer for The American Conservative, Rod Deher, who didn’t support Trump but bears rather preposterous ideas :

I believe the Democratic Party today wants to
do as much damage as it possibly can to social
and religious conservatism. I believe the
Democratic Party would empower some of the worst
people in America. But at least you know what
they’re going to do. Trump really is an unstable
lunatic whose word means nothing, and who sees no
higher obligation than serving himself.

Certainly, the fact-free fantasy land of the conservative establishment is nothing new, ranging from the Powell memorandum discussed in earlier posts, to Reagan’s supply-side blather denounced even by George H.W. Bush as “voodoo economics”, to Trump’s mind-numbingly stupid insistence of widespread voter fraud by illegals, to Mike Pence’s insistence that smoking isn’t harmful,  to Pat Robertson’s claims that Trump represents God’s will, and the list continues.  Supply-side economics, like the young earth hypothesis, seems immortally immune to the colossal three-decade record of failures, long documented by the Center for American Progress.  Take the recent shenanigans in Mississippi and Kansas : both state governments slashed taxes with the promise of economic boosts, and both states have subsequently slashed services, some with disastrous import, such as curtailing of medical school faculty salaries.  Astoundingly, the party of so-called “fiscal conservatism” seems not to understand why less water flows when one turns the faucet down.

Big Government and the Poor : Supervillains

Conservatives and so-called new Democrats have long argued that so-called “big government” is universally a bad thing, indicative of avaricious largesse at best and vicious totalitarianism at worst; from my early life, I’ve heard conservatives in my home state of Texas bemoan the overwhelming burden of government regulation and taxation asphyxiating an otherwise highly efficient, wealth-and-job-creating small businesses. They argue further that welfare, otherwise known as Temporary Assistance for Needy Families (TANF) poisons the resolve of potential workers and feeds a lazy, repulsive underclass always in the market for cheating hard-working business owners out of their hard-earned profits.  So deep was the racism and disdain for welfare recipients that we greatly feared the marginalized black community in my hometown, despite having been on the welfare rolls ourselves soon after my mother and father divorced back in 1987, the irony being that we as poor whites had more in common with the poor blacks than we did upper middle class Texans.  Despite my college curriculum lifting partly the veil of ignorance, at least with regard to history, I nonetheless took my first “big-boy” job at a defense contractor believing, rather naively, that the conservatives there really were serious about eliminating government waste and pursuing honest efficiency to benefit the organization.  Imagine my surprise to discover that almost the exact opposite is the case : with some notable exceptions (see my LinkedIn connections), the organization was rife with effete, wasteful protectionists, all-too-willing to bend contractual obligations with the U.S. government to butter their own bread and conceal their incompetence.  Supplanting genuine concern for the government customer was a sneering cynicism at even their most sacred public institution of all : the military.  They held contempt even for arch-conservative Dick Cheney himself, as he had a long history of opposing the Osprey V-22 program in the first Bush administration.  In the more religious pockets of my social sphere of those days, welfare recipients were the target of ire, with the lobotomous justification that “the heart is desperately wicked… who can know it?”  That is, the innate wickedness of the human creature discussed in the Bible suggests that helping a poor person ever is a mistake contravening the will of the Most High; only the filthy rich deserve a second thought.  Then again, local faith leaders in my home community offered social commentary on a vast array of topics, including dubious claims that Santa Claus, in fact, is a woman masquerading as a jolly old man (Santa somehow sounded female), that Rudolph the Red Nose Reindeer, is in fact an alcoholic (owing to a condition known as telangiectasia), and perhaps most intriguing, that devotees of Catholicism are, believe it or not, addicted to cats.  Serious analysis aside, ahem, Pat Robertson would no doubt explode with pride, as wealth is godliness in his refined estimation; after all, why else would Operation : Blessing feature more return shipments of diamonds from than food shipments to impoverished Zaire?  His cozy relationship with bloodthirsty Mobutu Sese Seko clearly paid dividends.  All of this seems underscores a profoundly destructive paradigm in which we measure a person’s worth, exclusively, by her capacity to generate capital.  Whether the means by which she raises the capital is good for society is largely irrelevant, but if she fails to generate said capital, she’s discounted.  The industrial revolution heralded this cruel dogma; Noam Chomsky suggests that though feudalism and slavery were horrendous, brutal tyrannies, the intrinsic value of a person in each caste at least wasn’t taken for granted; the caste values were viciously low,  but the value wasn’t questioned.  Post-industrial revolution and with the abolition of slavery, industry leaders discovered more profit in shrinking compensation for workers below that of a living wage.  Though the natural knee-jerk response to such a statement is understandable, one must bear in mind the effects of our state capitalist system on the global population, not just those in our own country.  Also bear in mind this is in no way an endorsement of either of the aforementioned antiquated, monstrous frameworks, but it’s worth noting the shift in values and its origins, something we’ll discuss later in this series.

Enter Dean Baker, Economist

It turns out that laissez-faire market ideology and small government are, in fact, grand hoaxes, the former of which we’ve discussed in a little depth previously as we referenced American-flavor state capitalism.  Quite instructive on the latter topic is The Conservative Nanny State : How the Wealthy Use the Government to Stay Rich and Get Richer, written by Dean Baker, economist and co-founder of the Center for Economic Policy and Research.   Weighing in at just over one hundred pages, the book is a treasure trove of powerful evidence-based arguments targeted at refuting the myths surrounding what he calls the conservative nanny state, an apt and resonant depiction of big government in support of the overclass.

He discusses in awesome detail

  • the sly yet devastatingly powerful protectionism for upper-income earners such as doctors, lawyers, and technocrats accompanying the better-known globalization and immigration policies leading to downward wage pressure on lower-income earners,
  • the union-busting governmental muscles flexed to diminish collective bargaining in America,
  • the skyrocketing CEO pay in the United States stemming from the corporation, a legal fiction conferred enormous power by the government,
  • the government supplied monopolies on inventions and creative work through patents and copyrights,
  • the government punishment of debtors down on their luck accompanying happy-go-lucky freedom from debt corporations enjoy, both a product of a thing dubiously labeled “bankruptcy reform,”
  • the government crackdown on individual’s capacity to sue run-away corporations and the decidedly one-sided nature of the two-way street of eminent domain and government investment,
  • the government protections for small businesses which are actually quite harmful to the economy and the environment,
  • the government coddling of high-dollar tax evaders while systematically demonizing recipients of the safety net,

among many others.  In this series of posts, we’ll analyze his arguments, addressing additional points and more recent evidence.

The Spanish Pearl Part Five : Eisenhower and the Push-Pull of Intelligence

We’re spending a good deal of time in the pivotal space of Cuba’s revolution of 1959 and the early days of Castro with good reason : the shallow villainy of Castro in Americana has persisted for the many decades spanning his autocratic rule, and though we shouldn’t condone violence and immorality by anyone, let alone a dictator, it’s crucial to understanding the American role in said history, if one is to divine ethical policy decisions today with respect to Cuba, or any other foreign body.

Previously, we discussed the turmoil in Cuba generated by the corrupt Batista dictatorship and American dominance and negligent nonchalance in Cuban politics and economics.  Despite internal concerns about the red inclinations of Castro, members within the intelligence community, notably Alfred Cox, head of one of the paramilitary divisions of the State Department, suggested

A practical way to protect United
States interests in this matter would
be to make secret contact with Castro,
assure him of the United States sympathy
with some of his objectives, and
to offer him support. The individual
chosen to make the contact should be
of such background that[ ]it is clear
that he speaks with the authority of
the United States Government.
Obviously, the support must be given
covertly so as not to endanger United
States relations with Batista. The most
effective means of help to Castro would
be arms and ammunition. Air dropping of
this equipment might be dangerous from
the security aspect. Allowing a shipload
of equipment manned by a Cuban
crew to evade our Coast Guard would
probably be a better method. The most
secure means of help would be giving
the money to Castro, who could then
purchase his own arms. A combination
of arms and money would probably be
best[,]

according to official historical record of the Bay of Pigs invasion released in 1998 under the Freedom of Information Act.  That same document details how the Eisenhower administration attempted in December 1958 to curry favor among Cubans opposed to both Castro and Batista, hoping to appease the growing anti-Batista sentiment while curtailing pro-Castro forces.

These same documents indicate Washington monitored Cuba carefully, expecting Castro’s government to collapse quickly.   Four months after the January 1959 overthrow of Batista, Castro visited the United States to meet with press clubs, American citizens, and any willing government officials; intelligence experts expected the trip to differentiate success from failure for Castro, though some experts refused to admit a possible thawing of Castro’s anti-Americanism boosting his popularity in Latin America :

[i]t would be unwise to assume from the
minor indications to date that Fidel has
undergone a serious change of heart as a
result of his visit to the United States.

Aside from the previously discussed misrepresentation by Nixon and snub by Eisenhower, Castro’s visit was a public relations success.  Castro returned to turmoil at home, his anti-communist statements in America (requested by Nixon) fomenting difficulties as communist and anti-communist members of the Cuban government vied for prominence.  Castro’s government instituted early reforms, included

  • mass school construction,
  • laws empowering women and providing greater equality for African Cubans,
  • land reforms providing allotments and coops for poorer Cubans,
  • programs to improve literacy and education availability,

among others.  Far from a perfect picture, Castro organized the Committees for the Defense of the Revolution (CDRs), agencies of local informants aimed at isolating “counter-revolutionaries,” apparently including homosexuals.

Eisenhower’s administration remained involved in Castro’s government, dispatching diplomats and carefully weighing options, as the internal documents mentioned above demonstrate.  Some elements, notably in a Related Mission Directive (RMD) dated December 1959, admonished temperance, suggesting

[f]or the moment, CIA operations should
be carried out on the assumption that the
revolutionary government is basically non-Communist,
with legitimate reform goals
that deserve US respect and support. Covert
operations should support overt efforts
to arrive at a rapprochement with the present
government and to eliminate the conditions
described above without resorting
to forceful means.

Further, the aforementioned report writes,

[a]s 1959 drew to a close, a final Special National
Intelligence Estimate, "The Situation in the Caribbean
through 1960," indicated that Castro was in to stay,
despite internal difficulties. The SNIE saw no serious
threat to Castro's continued rule, and it pointed out
that if there was direct US intervention, "Most Cubans
including the military, would react violently [emphasis mine]."

Along similar lines, General C.P. Cabell, among others, maintained Castro’s non-communist position, though he conceded that communists could overcome Castro with some effort.

Another program underway in Eisenhower’s administration was overthrow : J.C. King, chief of the western hemisphere (WH) division of the CIA, wrote in a December 11, 1959 memorandum :

[t]he overthrow of Castro within
one year, and his replacement by a junta friendly to
the United States which will call for elections 6
months after assumption of office,

an obvious reversal of course.  Determining where Washington’s passivity ended and sudden hysteria began naively can be a challenge, as public statements of the day spoke of communist containment and democratic empowerment.  Perhaps instructive is a diplomatic missive to Washington from Havana dated May 26, 1959 in which American officials bared the ugly truth :

These demonstrations obviously welcome,
but possibly most significant aspect is
demonstration once again, enormous power
Castro, who with few words made anti-Communism
popular position. By same
token he could reverse trend at any time,
and skeptics speculating that current
stand is sop intended to make it more
difficult for u.s. interests to protest
effectively against stringent agrarian
reform law [emphasis mine].

That is to say, Castro very well could intend genuine reform, not be a communist, and represent a boon for Cubans, but his charisma and capacity to shift public opinion represented a perhaps intolerable threat to American foreign policy : the unabated, free access to plunder resources at the expense of those living there.

King continues with a strategy of propaganda no doubt capable of winning even Nazi strategists over :

1. Clandestine radio attacks on Cuba,
from liberal Caribbean countries.
2. Intrusion operations against Castro's
TV and radio, to be mounted from within Cuba.
3. Formation of pro-US opposition groups
to establish by force a controlled area
within Cuba.

Finally, he suggests outright assassination, tempered by a hand-written edit by CIA director Allen Dulles :

Thorough consideration be given to the
elimination [removal from Cuba] of Fidel Castro. None of those
close to Fidel, such as his brother Raul
or his companion Che Guevarra [sic] \ have
the same mesmeric appeal to the masses.
Many informed people believe that the
disappearance of Fidel would greatly accelerate
the fall of the present government.

Most noteworthy in all of this is a clear lack of desire to work with a popular figure capable of smoothing relations : why not give peace a chance?  Batista was despised by his own people, and so unpopular globally that John F. Kennedy pegged Eisenhower’s support of him as complicity in war crimes during his 1960 bid for the presidency against Vice President Nixon :

Fulgencio Batista murdered 20,000 Cubans in seven years...
and he turned Democratic Cuba into a complete police
state—destroying every individual liberty. Yet our aid to
his regime, and the ineptness of our policies, enabled
Batista to invoke the name of the United States in support
of his reign of terror. Administration spokesmen publicly
praised Batista—hailed him as a staunch ally and a good
friend—at a time when Batista was murdering thousands,
destroying the last vestiges of freedom, and stealing
hundreds of millions of dollars from the Cuban people,
and we failed to press for free elections.

Even suggesting a “working with” exposes the faulty framework from which we often discuss foreign policy : why should Cubans work with us to support mostly American companies?  What threat did Castro really represent in 1959? Even if one is imbecilic enough to believe Soviets represented a threat here, by our own intelligence, there was no connection.  Yet within a year, Eisenhower’s intelligence wonks were steeling for a fight.  The rub is simple : Castro represented defiance demonstrated in various other Latin American countries against American business interests, just as the memo described above suggests.  We’ll examine Kennedy’s take next time.