Revolutionary justice in the Mortgage Market.

TKO - watch it on the video!

Via Eschaton, LI went to this astonishing site, the Irving Housing blog. The writer uses public information to profile the use of multiple loans on houses to extract money on the “appreciation” of the house’s value – and, of course, that money was not exactly invested in the organs of production in these here states. More like vacations and private schools and the lot. The rhetoric on the site is reminiscent of the charivaris and jacqueries of the Old Country, when communities would come down upon the those who threatened the social order. At the same time, there is a distinct whiff of real estate porno about the whole thing – the comments about the condition of the houses pictured, down to the year and model of the stove in the kitchen, are … amazing. Rather like YouTube comments about whether some stripper/singer in some video is fat or not.

The resentments definitely are going to be spilling out this year. I was happy to see, on the NYT Opinion page last week, the loathsome opinions of that all around toad, Steven Landsburg – the oh so contrarian economist who contributes to everybody’s favorite white supremicist mag, Slate. (a, but they are contrarian KKK-ers there, as we all know – secretly liberal to the core!). It was a Timon of Athens happy feeling - the feeling of confronting something rotten in its purest aspect. Landsburg starts out dumb and gets dumber, paragraph by paragraph. His point is that free trade is good! mmm good! Welfare is bad! We don’t owe anybody nothing, people unemployed as manufacturing goes down, ha ha sucker. Landsburg, who is supposedly defending a thesis about international trade, defends it by cavalierly identifying it with trade per se:

“I doubt there’s a human being on earth who hasn’t benefited from the opportunity to trade freely with his neighbors. Imagine what your life would be like if you had to grow your own food, make your own clothes and rely on your grandmother’s home remedies for health care. Access to a trained physician might reduce the demand for grandma’s home remedies, but — especially at her age — she’s still got plenty of reason to be thankful for having a doctor.”

How to put one’s brain around this fatuousness? Suppose I defended a law making it illegal not to speak French in the U.S. by writing – I doubt there’s a human being on earth who hasn’t benefited from language.”

Landsburg’s idea is that the destruction of the U.S.’s manufacturing base is made up for by the lower prices on goods we get from abroad:

“All economists know that when American jobs are outsourced, Americans as a group are net winners. What we lose through lower wages is more than offset by what we gain through lower prices. In other words, the winners can more than afford to compensate the losers. Does that mean they ought to? Does it create a moral mandate for the taxpayer-subsidized retraining programs proposed by Mr. McCain and Mr. Romney?
Um, no. Even if you’ve just lost your job, there’s something fundamentally churlish about blaming the very phenomenon that’s elevated you above the subsistence level since the day you were born. If the world owes you compensation for enduring the downside of trade, what do you owe the world for enjoying the upside?”

This is a nice argument. It calmly ignores the fact that the era of free trade has coincided with the era of trade deficits. Of course, if you just conceptually abolish the difference between trading in a nation and trading between nations – which is the point of Landsburg’s idiotic paen to trade – then there’s no problemo. The globe itself doesn’t have a trading deficit. But if you actually live on some point in that globe – say, the U.S. – then there is a big problem. If we pay for the lower prices through lower wages and greater and greater amounts of national debt, we are eventually going to be constrained in very nasty ways – or I should say, the bulk of the American population. Landsburg’s notion of we is confined to the five percent of the exploiters who have, through various unscrupulous and predatory means that are unwinding as I write this, engrossed the great benefit from destroying the bargaining power of labor.

These thoughts, I must confess, came to me only after I read a very sharp commentary on Landsburg’s column by my new favorite economics blogger, Peter Dorman. My first reaction to Landsburg is that he is using a measure that excludes intangible goods – in other words, he is tallying up the lower prices of first order consumer goods and ignoring social costs, which are evident whenever you go to Rust belt areas or industrial areas and start poking around. They are multipliers of crime and decreased well being. But, as Dorman points out, Landsburg is also bullshitting on the macro-economic level – like most of the radical free traders.

“Ordinary people in many parts of the world, and not just in the US, worry about trade because they are afraid that jobs lost to imports will not be counterbalanced by jobs gained through exports. They worry that there will be fewer economic opportunities for them and their children. They worry that their wages or working conditions will be pushed downward through competition with even more vulnerable, desperate workers in other countries. They are right to worry about these things. Such miseries are not destined to happen, but they cannot be ruled out either.

Except in standard economic models which begin with the assumption that increases in imports automatically call forth equally valued increases in exports. If trade balances on the margin we live in the happy world of comparative advantage, and it is indeed true, as Landsburg says, that “when American jobs are outsourced, Americans as a group are net winners.” But the assumption that trade balances at the margin is simply a modeling convenience, something that enables Landsburg to regale his students with blackboards full of elegant diagrams and equations. It is not grounded in real experience, and especially not the experience of the US economy since the 1970s.”

LI has some respect for the libertarian view of limiting the state’s right over one’s lifestyle choices. But we have zero respect, in general, for the libertarian view of the state. It is childish nonsense, and its motives are simply to paper over the unhinged system of mass inequality and increased exploitation in which we live with spurious justifications sprung from defective economic models. And, of course, the more spurious it is, the smugger the tone. I think libertarians have captured a certain tonal range of smug that you rarely hear, outside of successful high school debate teams. Ah, the soul in the tone of voice! There's the unctuous "I know best" voice of PC lefties hairsplitting identities and vying for the victim brand; and then there is the adenoidal, bowtied smugness of libertarians. I can take the former, but barely. The latter is the kind of thing that you just want to punch in the face.

Freedom vs. Happiness in the world series of Love

On March 13, 1848, this is how the revolution came to Vienna:

“On this day – recounted an eyewitness – already rather early, I observed in Herrenstrasse, on which there were State office buildings, individual workers were standing around, and a giant man, with a jacket, which was covered with patches, that was obviously neither his size nor made for him, moved in the direction of the buildings, with his dirty cap pressed boldly down over his eyes, with balled up fists, flashing glances and a backwards bent posture, all ready for blows, as if going into battle, with giant steps, whilst keeping suspiciously to the middle of the street. In his rear pockets he must have carried a mass of stones as ammunition, because his jacket was stiff on his back, and visibly he had to force himself not to be pulled backwards by the weight of his pockets. At his side hurriedly humped along, in order to keep up with his steps, a small, weighed down, dirty and rather aged man with a long open coat with long arms. He was loaded, each pocket stood out, and the hind coat pockets almost hit his calves…” (Ernest Victor Zenker, 112).

As the riot commenced in Herrenstrasse, the factories went up in Mariahilf (a linen factory in which a financial agent – presumably an accountant – was tossed into the flames); in Sechshaus, the police station and government building, plus a cotton factory, was stormed; by evening smoke was drifting into Vienna from the suburbs.

And this is how the revolution came to Krähwinkel:

Krähwinkler citizens, among whom are the Night watchman, Pemperl and Schabenfellner sit around a big table and drink)
…

“Klaus(coming to the middle of the stage). Good evening, my fellow citizens.

Nightwatchman (whispers to Pemperl). And here comes my very point!

Pemperl (to the nightwatchman). He’s a little round to be a point.

Klaus. I want just a little drinky, but you all don’t mind me – drink up!

Night watchman. Well, we are free to do so.

Klaus. Free? You should not use such brutal expressions. I am from the state office, and we don’t like it, that men are free.

Pemperl(to the group), Let’s go out in the garden – it is pleasanter in the free air.

Klaus. If only it wasn’t so free, that air – I’m staying here.

Pemperl. Primo, then we won’t have you breathing down our necks. (To the Night watchman) Come on, Mister!”

Nestroy plays with ‘freedom’ and its galvanic effect on the state officials who compose the respectable strata of Krähwinkel throughout the play. Freedom has the same horrifying sense for the respectable state employees as the invisible power of St. Petersburg has for the respectable strata of Russian officials in Gogol’s The Inspector General.

Which brings me to an issue that I haven’t even mentioned, in all of my posts so far. The liberal opposition – the protest against the hedonistic tendency of bourgeois society made by bourgeois intellectuals – was made, time and time again, in the name of freedom. That opposition informed, say, the cold war liberalism of Isaiah Berlin. Here’s a typical passage from his 1955 essay, Herzen and Bakunin on Liberty:

“It is a singular irony of history that Herzen, who wanted individual liberty more than happiness, or efficiency, or justice, who denounced organized planning, economic centralization, governmental authority, because it might curtail the individual’s capacity for the free play of fantasy, for unlimited depth and variety of personal life within a wide, rich, ‘open’ social milieu, who hated the Germans (and in particular the ‘Russian’ Germans and German Russians0 of St. Petersburg because their slavery was not (as in Russia or Italy) arithmetical, that is, reluctant submission to the numerically superior forces of reaction, but algebraical, that is, part of their ‘inner formula’ – the essence of their being – that Herzen, in virtue of a casual phrase patronizingly dropped by Lenin, should today find himself in the holy of holies of the Soviet pantheon, placed there by a government the genesis of which he understood better and feared more deeply than Dostoevsky, and whose words and acts are a continuous insult to all that he believed and was.” (Russian Thinkers, 104)

This paragraph stands out in Berlin’s essay for its overwhelming flow – the commas, here, that barely organize the sentence, signal that the rush of something – some feeling? some oratorical impulse? – has overwhelmed the analysis of 'Herzen on Liberty'. And that flood of feeling is directed towards a capture, or an envoûtement – one justified by a previous envoûtement, the capture of Herzen by the Soviets, who have put him in an (imaginary) pantheon. Although the motives of the Soviets become a little hazy – is it really because of some ‘casual’ word dropped by Lenin? In any case, the reason this is a kidnapping rather than an alignment of the interests of Herzen’s ghosts with the ghastly Soviets is because Herzen was defending the individual’s liberty. Interestingly, that liberty is connected to a decentralized economy – although Herzen was clearly a socialist throughout his life, and towards the end of it was recommending peasant communes, which, although decentralized in one way, surely bear upon the economic liberty of its members in ways quite other than that one would expect from Berlin’s Hayek-Popper language.

But whether Berlin is right or wrong about Herzen, surely his instinct – that liberty is opposed to schemes for social happiness – picks up on the tradition LI has been examining. Our question is about whether some further kidnapping hasn’t shaped this history – whether it is the socialist leaning working class or the bourgeois intellectual protecting liberty, proclaiming the worth of freedom, in 1848. This is not only a question of what Herzen believed – it is a question of what was being said by, say, the workers in Herrenstrasse. And this is where Nestroy’s play, written in 1848 (astonishingly, I can’t seem to find an English translation. Hard to believe this play hasn’t been translated) becomes really interesting. Nestroy was, like Moliere, an actor, and he did not exactly rank high among his socially snobby Austrian fellow writers of the time – Hebbel compared Nestroy to some poisonous flower whose stink corrupted the smeller.

As always, one must correct for the astonishingly persistent and stupid idea that the Masses were silent, that the writers were all mirrors of the bourgeoisie, and that we had to wait around until a buncha nervous intellectuals, Marxists all, gave ‘voice’ to the working class. One of the sources I am using to understand the 1848 effect is, for instance, a journalist whose writings were highly respected by Karl Kraus and a sentence from whom serves as the epigraph to, I believe, Wittgenstein’s Philosophical Investigations – Ferdinand Kürnberger. Kürnberger was the son of a lamplighter, and his enthusiasm for freedom, his exile from Austria, his return and his success as a journalist – as, indeed, the greatest journalistic essayist of the later half of the 19th century in Vienna – are all of a piece with being of the people. If one looks around at where the writers come from, the journalists, the pamphleteers, you will soon enough dispel the idea that all the writers came from out of the perfumed pocket of a furlined overcoat in some salon. Nor did their origins predict their predilections – aesthetes came from coal heavers. LI is playing around with the notion that one of the themes that emerges in the investigation of happiness triumphant is the third life – how it was constructed, how it operated, how it collided with the happiness culture in which it recognized something of its own, a sort of child to which it had given birth, but which it could no longer control.

1979 - a flashback

One thing LI loves about libertarians is their “never say die” attitude to reality. If reality blows up your ideology – why, then reality just needs a bigger dose of ideology! If we have a financial system which used the “magic of the market place” to take a financial sector that has the dull task of providing money for investment and turned it into the exciting task of betting on betting on betting on The Wheel of Fortune, the fault lies not in the financial market – but in the remaining structure of regulation. We never de-regulate enough, you see.

In fact, of course, we need a lot of re-regulation. We need re-regulation out the bungus. We need to regulate the financial markets to make it very, very difficult to maintain a hedge fund. We need to rein in derivatives, and we need to make sure that the excuse that is usually given for not regulating derivatives – that the market is played only by millionaires who can afford it – is roundly shown up as the lie that it is. In reality, the financial markets are tied in one with another – as how could they not be, since the whole point of deregulation was to make them interpenetrate each other and ‘speed up’ the transfer of capital – and so the millionaire’s misfortune quickly becomes everybody’s social misfortune.

We are really living in some kind of John Law virtual world. Surely, we are creatures in his dying dream. That brilliant little Scotsman’s vision is our reality. The American government – followed by the U.K. – chose to outsource countercyclical policies to the financial sector. This might actually be the only course open to a society that wants to preserve an increasing inequality of wealth – impoverishing the middle class from an absolute standpoint – while preserving the relative wealth of that stretch between the 80 percentile and the 30 percentile on the income scale.

The article people should be reading at the moment is THE SQUEEZE ON THE MIDDLE CLASS by William Kowinski in the New York Times Magazine. The New York Times Magazine, that is, of 13 July 1980. The pre-deluge days.

Kowinski starts out with the Newmans – a couple who are, for that time, doing very well:

“Now David and his wife, Bonnie, who works as a librarian in a suburban school, have a combined income of $60,000 a year. ''It's astounding that we have this much money,'' he says. ''And it's astounding that it doesn't buy anything.''

''Anything'' is, of course, an overstatement. The Newmans are not a family trying to stretch $15,000 and shocked to find no room for a daughter's prom dress or even, suddenly, next month's fuel bill. But that even they are concerned shows how pervasive the effects of inflation are. The inflated dollar's loss of buying power is only one change the Newmans have noticed in their everyday lives. There are other nagging reminders of inflation's effects - for example, quality seems to have declined as producers trim costs, while prices still go up. ''An item I might have bought a year ago for $30 would have been a quality item,'' Bonnie Newman says. ''Now it's inferior, and I won't buy it.''

''Whatever we're doing these days doesn't seem worth the money,'' David agrees. ''You spend $50 on dinner and it's not all that terrific.''

But economic expressions like loss of buying power or declining quality don't adequately convey the feelings of dismay and confusion that accumulate when inflation and recession change the value of money and all that money means, culturally and psychologically; when the assumptions of several generations about America's expertise and leadership and this country's pre-eminent place in the world are jumbled and wounded; when values are distorted and called into question by economic conditions that affect, in different ways, every class in society. Within the middle class in particular, there lurks the suspicion that their dream - the American dream - is endangered.”

Now, what is funny about the Newmans is that their complaints, that tiny addition to the collective roar in 1980 that brought Reagan into office, are based on economic conditions that were created for them by the mixed economic policies of the past. And those mixed economic policies were actually working pretty well for the Middle Class. That is, of course, one of the funnier ironies of the Reagan revolution. The Middle Class drove it, and thereby cut their own throats, systematically destroying the system that had favored them against the wealthy and the poor. A long quote here:

''Before, it seemed possible to look forward to a time when things would be O.K.,'' Bonnie said. ''Now I don't feel there will be an easy time when things are O.K. I feel it's always going to be like this. The whole situation is frightening and I don't know where it will end.'' At first glance, it might seem ridiculous that a young couple starting out with a $60,000 income should be worried about money, but the Newmans' worries aren't groundless. They live in Manhattan, for one thing, where costs and tastes make $60,000 less than the abundant income it might be in many other parts of the country, where taxes and the price of housing in particular are lower. And even with two paychecks (about half of the wage-earning families in America have at least two incomes), the fight against inflation is a losing one. Last year, median income for couples rose 8 percent, which was 5 percent less than the rate of inflation. From March 1979 to March 1980, despite a record increase in private, nonfarm wages, the real earnings of two-income households, adjusted for inflation, fell 4 percent. The only solace for them might be that single-income families did even worse.

On the other hand, the Newmans aren't suffering like many members of the lower middle class who have seen inflation deplete savings and dangerously erode buying power, or like those forced by the combination of inflation and recession to join food-stamp and unemployment and welfare lines. Even inflation alone, which attacks more directly than recession the professional middle class's buying power, liquidity and sense of security, does not hit the Newmans harder than anyone else. In fact, the Brookings Institution's Joseph Minarik, who has studied the situation in detail, says flatly, ''On almost every account, the average middle-class family is in a very good position in regard to inflation. They are the winners in inflation, in relation to both those above and below.''

Many people would find this a startling statement. Much of the clamor to control inflation arose because the middle class felt that it was inflation's primary victim, that in the rush to assist the poor and provide loopholes for the rich, the Government had forgotten the middle-class majority. But, according to Minarik, the poor have lost ground because welfare and other aid programs have not kept up with the rate of inflation, and the rich have lost ground because the investments that make up the bulk of their income have generally done badly. Only the middle class, because salaries have climbed, has held its ground - especially if a mortgage is the major debt, because homes have increased in value faster than prices through the worst of inflation.

''But the middle class doesn't see it this way,'' Minarik admits. ''Their homes are appreciating in value, but they don't see it. It doesn't put cash in their hands. Instead, they see prices rising. They don't see that the raises they are getting are inflated. Usually a raise of 2 percent would be considered good, but, because of inflation, they have to get 8 percent. But the inflation rate is higher than that, so what they see is inflation robbing them of all that extra money.'' Minarik's analysis of the middle-class position may be right, but it brings little comfort to David and Bonnie Newman. And it does little to allay the fears of middle-class families that their expectations will not be met.

Despite the changes in these expectations during the last couple of generations, the key ingredient in the middle-class formula for upward mobility is still higher education. So it isn't surprising that one of the middle class's primary concerns is the high cost of education.

It begins with a feeling of injustice, expressed this way by a former teacher: ''The thing that got me,'' she said, ''was when a bright, interested middle-class student didn't get a scholarship to college, but another student did just because he was from a lowerincome family.'' It is a variation on a middle-class theme: The middle class is denied financial help, especially from the Federal Government. Thus the middle-class student is excluded from college and that crucial step on the ladder to success, while the rich can afford tuition and the poor are given a free ride. There are two interesting facts about this variation: first, that the middle class has done something about it; and second, that the premise doesn't seem to be true.

The middle class has done better than the lower class - and even the upper class - in keeping up with the price of higher education. College costs have indeed risen over the last decade or two, but not, according to the Congressional Budget Office, as fast as the incomes of middle-class families with college-age children. The after-taxes income of upper-middle-class households, for instance, rose 106 percent between between 1967 and 1978, while education expenses increased 67 percent at public universities and 77 percent at private colleges. Between 1967 and 1976, the percentage of income both lower- and upper-middle-class families spent on education actually declined.

Despite studies consistently showing that middle-class students reach college, graduate and go on to earn advanced degrees far more often than lower-income students, formidable political pressure has been exerted to increase scholarship aid for middle-class students. It resulted in the 1978 Middle Income Student Assistance Act, which provides grants for middle-class students. A Capitol Hill aide who worked on the legislative package said, ''There was a feeling here that this was something that the middle class really wanted, so why not give it to them?'' According to Senator Daniel Patrick Moynihan of New York, whether the middle class had in fact lost ground relative to the lower class was not as important as its perception that it had. ''It has to do with the transfer of their status onto their children,'' Moynihan said.

''And, by God, they want it.''

Such perceptions, and their economic consequences, may be rooted in changes in attitudes brought on by the quick prosperity experienced by the middle class in the last couple of generations. Some families are pressed, for example, because they are trying to send two or three children through college simultaneously, whereas their own parents might have attempted to send only one at a time. With their standard of living based more on credit these days, families also may not have the savings in the bank that traditionally financed a college education.”

Ah, the factors are all there for the inversion – the middle class was on the brink of much easier credit, and much worse salary increases; it was on the brink of seeing social goods –education and health – skyrocket; it was on the brink of seeing the wealthy gain, first, an enormous tax advantage, and second, due to the de-regulatory impulse that has gone through thirty years, now, of governance, the advantage that comes from offloading costs of production onto third parties; and of course the breaking of what Moynihan called ‘middle class altruism’ – the willingness to spend taxes on helping the lowest income group. Because the latter factor outraged the narcissism of the middle class, it had to be accompanied by a myth that the lowest income group was, magically, so in charge of the State that it was directing all kinds of advantages its way. Why, the poor, in contradiction to every social law known to man, were living like kings! Getting that affirmative action; all those welfare payments; and all that terrible anti-discrimination law – it was so good bein’ poor in America that it was a wonder the middle class didn’t migrate en masse to the lower reaches. But, being virtuous and hard workin’ folks, they didn’t. That, of course, is the sour, reeking hypocritical attitude that colors one’s genuine affection for the poor old middle class. It is hard not to think at least sometimes: fuck em! Let the rich skin their fat asses! After all, they have voted all too often to get themselves into situations in which only aggressive fantasies – such as those feeding into the GWOT – offer them any escape. And that has been hard on the rest of the world. So far, no counter view has achieved any mass in the U.S. since 1979. We’ll see how much worse things have to get before such a view emerges again. Interestingly, the Middle Class has definitely become aware, since 1979, of the appreciation in the value of their houses. They seemed dimly aware that this was inflation, but since inflation was seemingly to their advantage, it drowned out the noise from other inflations. Now that this is not happening, it will be interesting to see how sensitive people get to the currents in the price system. They might just get very sensitive, indeed.

smash goes the clown

“Doubt everything at least once”, as Lichtenberg once encouraged himself , “even if it concerns the proposition two times two equals four.” The doubt, according to Lichtenberg’s belief, set autonomous thought in motion, and autonomous thought sets aside the veils that cover the world. Once these have finally disappeared for good, the true will prevail over the false everywhere, and the world will at last become better. Thought produces clever people. In a better world, however, humans are happier, and who says that the clever people won’t finally win their share in this happiness?

Nestroy, the contemporary of Schopenhauer, puts an end to this legend out of the siècle des lumières, bold and confident of the future. He goes through with the whole thing: he uses his understanding, he emerges from intellectual immaturity, he doubts. He rips apart the veils that cover the world and what does he see? The dummies win. They are the happy ones. They earn the big money. In another monolog from the wings of the stage he recounts how some have even called him a dumb lug and continues, “if only that were a prediction, then I would still have, at the end, some hope of happiness.” We doesn’t overhear the deep bitterness that hides in this nimble joke!” - Wenzeslaw Konstantinow

As Konstantinow points out in his article, ‘clown’ is a word derived from colonnus, to cultivate the soil. Clowns were originally from the country – and, as in Shakespeare, are funny because they had brought the savage’s manners – Europe’s Indians - into the court, or into the city. I want to do a couple of posts that zig zag along one of the crucial breaks in my narrative of happiness triumphant – that is, 1848. That means going from Nestroy, who hardly anybody in the English speaking world has heard of, to Alexander Herzen, who more people have, I hope, heard of. I’ve been immersing myself in Herzen lately. Luckily for all of us, the greatest introduction in English to Herzen is on-line – Isaiah Berlin’s famous essay, published in the New York Review of Books, The Great Amateur. This was published in 1968 – and, as Anthony Grafton points out in a recent essay in the same mag, Berlin by this time was ready to admit that Herzen died a revolutionary socialist, which he had rather marginalized in his earlier, 50s essays on Herzen, written for the CIA’s favorite intellectual front, Encounter magazine. Grafton’s essay is not on Herzen per se, but the Herzen who appears as the hero in

Tom Stoppard’s trilogy, the Coast of Utopia”

“As Stoppard himself has made clear, he drew this interpretation of Herzen—like much of the material with which he supports it—from the writings of Isaiah Berlin. In a series of articles, four of which appeared in the journal Encounter—a magazine created in 1953, as is well known, in part for political ends, to give Western intellectuals a stage on which to dramatize the powers of the free mind—Berlin portrayed the origins of the Russian intelligentsia.[4] His brilliant, colorful essays combined analysis of texts with dazzling sketches of characters and situations. They provide the model for Stoppard's effort to combine the portrayal of these men and women's world with an analysis of their thought.

Berlin insisted on the vitality and originality of these Russian thinkers, who, he argued, had invented a new kind of social criticism. He laid special weight on what Herzen and Turgenev had accomplished. These two, Berlin argued, had seen through what Orwell once called "the smelly little orthodoxies"; they had rejected the idea that any thinker had access to absolute truths. Herzen with his portraits of radicalism and its discontents, Turgenev with his all-seeing fictions that laid open the hearts of conservatives as ably as those of liberals, offered a powerful model of tolerant liberalism—one highly appropriate for exposition in a journal that existed to showcase the vitality of the free world.

The history that Stoppard offers here is somewhat one-sided—rather more so, I think, than Berlin's history, as it developed over time. In the mid-1950s, Berlin emphasized Herzen's moderation, his discovery that absolutes could do absolute damage. In 1968, however, when he published his introduction to the vast and protean text that is My Life and Thoughts, he acknowledged that no single formula could accurately describe the multiple changes and colors of Herzen's thought. He also made clearer than he had before that Herzen's radicalism was a deep part of his thought and being—not just a political program that he swore to as a boy and an early, deceptive passion, but a thread that appeared again and again, at the center of the fabric of his mind“

Herzen was one of those figures around whom, in the cold war era, the anti-communist liberals and social democrats wove a certain dream play. In this dream play, Lenin plays the part of the monster who destroyed the beautiful onward tendency to a worldwide U.S.A., one with a bit stronger of a New Deal – more social insurance from the government. So, in the preface to the last translation of From the Other Shore, which was, I think, done in the seventies, the translator dismisses the idea that Lenin could even have read Herzen, much less have learned anything from him. This had to be said because, in fact, Lenin wrote a preface to the reissue of Herzen’s philosophical works, and said kindly words. Anybody who reads From the Other Shore – and all should read it! will find plenty that Lenin absorbed. For instance, Lenin’s famous doctrine of encouraging the contradictions within a capitalist society so that they achieve a critical mass is certainly foreshadowed by a dialog concerning 1848, in which one of the figures (usually identified with Herzen, a totally stupid misreading of why one choses the dialogic form) says this, analyzing the reaction that was bringing an end to the 1848 revolutions:

"I repeat, desire and love of mankind are not enough to take an active part in the world that surrounds us. These are merely vague will-o'-the-wisps. What is love of mankind? What is mankind itself? To me, this smacks of the old Christian virtues rehashed in a philosophical oven-. People love their country, men. This is natural. But the love which embraces everything that has ceased to be a monkey, from Eskimo and Hottentot to Dalai Lama and the Pope, is something I cannot understand, it is too broad. If it is the love with which we love nature, the
planets and the universe, I do not believe it can be especially active. It is either the instinct or an understanding of the environment which leads to activity. You have lost your instinct. Now lose your abstract knowledge and manfully face the truth. Understand it, and you will see what sort of activity is needed and what sort is not. Do you desire political activity in the present scheme of society? Then become a Marrast or an Odilon Barrot and you will have it. You do not want this? You feel that every decent man should be a complete stranger to all
political issues -and must not seriously worry as to whether the republic needs a president or not, or whether the Assembly may or may not sentence people to hard labour without trial; or, better still should he vote for Cavaignac or for Louis Bonaparte. Which of the two is the better? You may think for a month, for -a year: and you will not be able to decide because, as children are fond of answering: "both are worse." All that is left to a man who respects himself is not to vote at all. Have a good look at the other questions a I'ordre du jour they are
quite the same: they are ready to give up the ghost and past praying for. What does a priest do when summoned to the bed of a dying man? He neither cures him nor attempts to cope with his ravings, but gives absolution. Grant absolution, pronounce the death sentence which must be carried out not in a matter of days but of hours. Convince yourself once and for all that not
a single one of the doomed will escape the hangman: neither the autocracy of the Tsar in St. Petersburg nor the freedom of the philistine republic; and pity neither the one nor the other. Better try to convince the superficial, light-minded people who applaud the fall of the Austrian Empire and pale over the destiny of the semi-republic, that the fall of the latter is as great a step towards the liberation of the people and of thought as the fall of the Austrian dynasty, that no exception and no mercy is needed, that the time of compassion has not yet come. Say
it in the words of the reactionary liberals: "'amnesty belongs to the future." And instead of love of mankind demand hatred for everything that impedes its progress. It is time to bind all enemies of freedom and progress with one rope, as they bind their convicts, and to lead them through the streets for everyone
to see that the French Code and the Russian Ukase, Radetzky and Cavaignac, are equally responsible. That would be a great lesson. He who will not be sobered after these shattering world events, never will be, and will die a Knight Toggenburg of liberalism, like Lafayette. The terror beheaded the
people but our task is easier: we are called upon to execute institutions, to destroy beliefs, to deprive the people of old hopes, to break down prejudices, to lay hands upon everything sacred, without mercy or reservations. We should smile upon and welcome only that which is rising, the dawn alone. And if we are unable to hasten its hour, we at least can indicate its nearness to those
who cannot see."
"Just like the old man on the Place de Vendome, who in the
evenings offers his telescope to the passers-by so that they can
admire the stars?"
"Your comparison is apt; that's just what you must do: show every man who passes how the rising waves of retribution are approaching nearer and nearer. Show him, too, the white sail of the ark barely visible on the horizon. Here is your work. When everything has gone down, when all that is superfluous has been dissolved in the brine, when the tide subsides and the ark of salvation comes safely to earth, then people will have something else to do, a great deal to do. But not now!"

LI can't resist the temptation to connect this to the news of the last week – the smash of the financial swindle that is such a perfect reflection of the neo-liberal regime is going on quite independent of any demonstration, any hand lifted against it, and as the machine eats itself it sucks in billions and billions that the hyperaggressive hyperpower can ill afford. One couldn’t have planned a ruin this immense from the outside. But, of course, unlike in the days of Lenin, or even Herzen, there is no party to take advantage of the opportune moment – the parties have long ago been absorbed in various third way isms, or have turned their ‘leftist critiques’ to high and mightily fighting each other through thickets of theory, or have reproduced Madison Avenue, shilling and thrilling to each bump and grind of the entertainment industry. There is no left left. And liberals like myself, the New Clowns, are on the very outskirts of the commentariat, in the slum. So we can just watch the disaster as a disaster. No creative destruction here.

News Flash!

We live in a time of few issues. Everything is going great. But underneath, people are thinking, do we really live in paradise? Isn’t there some issue we should be concerned about somewhere? Or is it just gonna be the cabana boys and ice cream from now on out?

Oh, how the West doth sleep! The answer is here, and it is grim: the Russkies are at it again! You remember when they used to wave their missiles at us. Now those bastards are trying to connect Extra terrestrial carnivores, no doubt to gain allies and wipe us out!

In the old days, we would have found this out from Weekly World News. Sadly, our only source for the secret information that we all need has gone bust – although with this news about the Russkies, I think we know now who was behind closing down our only unbiased source of news! Luckily, the Guardian is filling the gap.

“ET stay home
We should resist the efforts of Russian scientists to contact aliens who could threaten our very existence”

Says ever frowning David Cox.

“… a very different exercise has been undertaken by the Russian Academy of Sciences in Moscow. It depends not on listening for signs of life from outside, but on transmitting powerful radio signals deep into space in the hope that these will be recognised and decoded by alien lifeforms. People have toyed with this idea (now known as "active Seti") since the 19th century, and messages were once sent to supposed inhabitants of the moon. Now, however, Alexander Zaitsev, the chief scientist at the Moscow academy's institute of radio engineering, has been using a 70m-wide radiotelescope at the Evpatoria Deep Space Centre in the Ukraine to project state-of-the-art active-Seti messages to nearby star systems.

The problem is obvious. If we discover alien life ourselves, we can decide what, if anything, to do about it. If, on the other hand, we alert aliens to our own existence, we'll be at their mercy. There's no reason to suppose they'd be friendly. On the contrary, Independence Day may provide us with a more useful model than Close Encounters.”

The bastards! The fucking bastards! Luckily, with the Guardian in on this caper, diplomatic efforts will be used – before, that is, we invade Russia – in order to stop this heinous conspiracy. Never have I felt so grateful to a newspaper ‘of the left’ for publishing one neo con after another in its comments section, for if we had not been told about this, a couple years from now we’d be having to deal with giant jellyfish in flying saucers.

“So far, there's no reason to suppose that, if the Russians manage to discover any alien life, they'll be seeking to marshal its firepower in the new cold war against the west. All the same, there's clearly a danger that they might inadvertently prompt intergalactic annihilation. This may not be as pressing a matter as the perils being faced in Russia by the British Council's plucky staffers. Yet perhaps our formidable foreign secretary should none the less add active Seti to his growing list of concerns.

Many astronomers believe that any active Seti activity should have to be authorised in advance by the world's assembled governments. Isn't it time for Mr Miliband to tell President Putin in no uncertain terms that HMG will accept nothing less? Thereafter, we could all sleep safe in our beds once more.”

Unfortunately, Cox wasn’t able to penetrate the message the nefarious –Vitches of the Moscow Cosmological and Cosmetic center are sending. Luckily, LI’s far flung correspondents have broken through the corridors of sinister silence at great expense, as well as casualties that amount to four secret agents down and ten NKVD/FSB officers. This is the message they are sending! Jeepers, I don’t think the world has been threatened this much since Penguin escaped from prison that last time and threatened to set off the doomsday machine! But as I remember, we called on "Mission Accomplished" Bush - David Cox's favorite superhero - to fix that problem, and man, did he! We might need him again. How the wheel, as Cox might say, doth turn.

the vulnerable self

Two blogs have commented on LI’s latest posts. My so called Midlife Crisis writes:

“… LI looks at the reason/emotion split (aka mind/body dualism) through the lens of an essay by William Hazlitt, and finds it wanting. LI interprets Hazlitt to posit that imagination is implicated in decisions and consciousness as much as reason (mind) and emotion (body), and teases out the following moral implication: [quoting me talking about Hazlitt]…

This account of "imagination" leaves it a metaphysical entity (although I don't know if Hazlitt's idea of reason devolved upon a metaphysical mind or the physical brain) and as it is not a satisfactory one for modern science. Still, the analysis of imagination as being neither reason nor emotion and its necessity for decision and action indicates a problems with mind/body dualism.”

Praxis asks some questions, in a longer post, about my whole project and its relationship to Freud. Specifically, how does psychoanalysis, with its use of the pleasure principle, fit in to the rise of a happiness ethic, conditioned by a political economy that justifies itself in terms of a pleasure calculus?

“On the one hand psychoanalysis (by which I basically mean Freud, I’m afraid) is totally aligned with utilitarianism. Just as much as Bentham, or Mill, Freud sees the human mind as a mechanism for maximising pleasure. Arguably the most basic principle of psychoanalysis is the dominance of the pleasure principle – at least until we get to the watershed moment of ‘Beyond the Pleasure Principle’, and even that classic text does not straightforwardly reject this doctrine. One way to understand Freud’s project (probably not the best way, but one way) is as an attempt to appropriate for happiness culture even human behaviours that seem, at first glance, the most obvious counterexamples to the idea of pleasure-maximising individuals. So you think we maximise utility? What about masochists? What about depressives? Ah – well –they may not appear to maximise utility; but if we have a sufficiently complex and involuted theory of the emotions, even these self-destructive behaviours can be understood in terms of the dominance of the pleasure principle…

But of course there’s another side to Freud’s work. By seeing masochism, hysteria, obsession, and so on, as products of the same forces that generate even ‘normal’ mental functioning, Freud changes our understanding of normal mental functioning. The pathologies Freud analyses come to be seen as implicated in almost every element of mental life. Morality is analysed in terms of the conflict between the superego and the unconscious; but since the superego is a product of the very desires it represses, psychoanalysis makes it impossible to separate the rational mental functioning of the ethical individual from the irrational animal forces the individual suppresses and rejects. And this in turn is connected to one of the strangest and most productive difficulties in Freud. Having decided that pleasure-maximisation is the basic principle of our psychic life, Freud then gives such weight to apparent deviations from this pleasure-maximisation, that the deviations come to be inseparable from his understanding of pleasure-maximisation itself. This is why Freud starts developing doctrines like ‘primary masochism’ and the ‘death drive’. As Freud goes ever further into his speculative introspective studies, he asks the questions ‘what is pleasure?’, ‘what is it to maximise pleasure?’. And he finds that the maximisation of pleasure is guided by the very forces that appear to destroy pleasure.”

LI of course wrote some comments on their sites, but the comments, which appeared to me, as they were streaming out of the keyboards, to be exemplars of clarity and good sense, appeared, upon a colder reading, to be farragoes of obscurity.

So, here’s a comment on those comments, although it will be a bit oblique. Both comments are about the self. This may explain a little more what I am doing with Hazlitt. If I’ve been obscure, it may be because I haven’t made clear what it is I take Hazlitt’s central insight to be. It is, this insight, that utilitarianism both exposes and empties the self. I am using Hazlitt as symptomatic of a romantic protest against the most advanced ideological formulation of the system of production that was being put in place in England, and, to a lesser extent, in Europe and the U.S. This exposure and emptying is the white magic of capitalism, the shell game played over and over in all its vaults. Exposed as a single unit thrust out of nature and society, and emptied, at the same time, of all determinants except that of calculating pleasure, the self becomes a roll of the pleasure/pain dice; and even here we have not finished our reducing work, since pleasure is much to big a thing to be enrolled in the calculus as it is, in all its phenomenological splendor – rather, it becomes something much simpler: the aggrandizement function. Pleasure is simply more. Already, Kant had spotted the problems with this idea in his essay on Negative values – as I’ve pointed out – since firstly, to assign negative and positive values to pain and pleasure doesn’t orient us when we deal with feelings in which those two poles are intrinsically mixed, and – dynamically – it doesn’t work to state the course or feeling of the overall sensorium – I may have pain doing x amount of work, and receive money for it that gives me y amount of pleasure, but the ys are never going to abolish or in any way combine with the pains – and more than that, the quantities here don’t track any real genesis – the pain, in other words, doesn’t give birth to the pleasure. The utilitarians saved themselves from Kantian strictures by way of vagueness and analogy. We do, after all, make some calculations – is it worth going out to the car and going to the store tonight to buy milk? Do I want to expend so much effort, x, to achieve some objective, y? We, in other words, have a calculative like feeling about the future. Since we negotiate those feelings and perform those actions, decreeing that we are actually calculating hedonically might seem uncontroversial, even though we are calculating over non-discrete units.

Now, Hazlitt’s vision of hell was that legitimacy – the aristocratic/great bourgeois power that ruled Britain and Europe following the downfall of Napoleon – and utilitarianism, which insisted on this algorithmic sense of the self, would combine. This hell prefigures the radical critiques of the 1848 generation, like Marx and Herzen. As I pointed out earlier, I’m interested in the fact that there were roughly three class defined oppositional stances to the happiness ethic that was coming into being in the nineteenth century, and that they, sharing this oppositional attitude, produced tropes, ideas and examples that, in a sense, communicated with each other.
One further note, re Hazlitt’s larger point: the utilitarian self that he feared was defined in its surrender to pleasure, but the pleasure principle here, being defined simply in terms of more created a paradox Hazlitt plays against, but does not find the key to: the strange contempt of the utilitarians for mere pleasure. This pleasure, pleasure with a content – volupte – the sweetness of life – they scorned as useless. In fact, it made them angry – and that anger has branched out and lives in multiple niches in the happiness culture.

Double Indemnity

"Anonymous: I am a new respondent but have read the column for a long time. I believe that you are a natural born teacher turned columnist. Would you please explain at greater length and in more detail the last three paragraphs of today's column. The nest shoe to drop you call credit default swaps but I would like a more detail understanding and how they could trigger a financial chain reaction.

Steven Pearlstein: This is a hard one, and I worked long and hard on those three paragraphs last night. Let's just say there is this huge financial market you don't even know about where banks and hedge funds and big investors make bets with each other, in the form of contracts: A pays B $100 to "insure" that $10,000 worth of junk bonds at Company C don't default. If they do default, then B pays A $10,000. Now what makes this interesting is that A doesn't actually have to hold the junk bond (or the CDO, or the syndicated bank loan, or the municipal bond, all of which can be the subject of credit default swaps). It can buy the insurance, or place the bet, whether it owns it or not. Which is why the market is so big, because there can be, theoretically, an infinite number of insurance policies on every bond or loan."

NEFF
Office memorandum, Walter Neff to
Barton Keyes, Claims Manager. Los
Angeles, July 16th, 1938. Dear Keyes:
I suppose you'll call this a
confession when you hear it. I don't
like the word confession. I just
want to set you right about one thing
you couldn't see, because it was
smack up against your nose. You think
you're such a hot potato as a claims
manager, such a wolf on a phoney
claim. Well, maybe you are, Keyes,
but let's take a look at this
Dietrichson claim, Accident and Double
Indemnity. You were pretty good in
there for a while, all right. You
said it wasn't an accident. Check.
You said it wasn't suicide. Check.
You said it was murder. Check and
double check. You thought you had it
cold, all wrapped up in tissue paper,
with pink ribbons around it. It was
perfect, except that it wasn't,
because you made a mistake, just one
tiny little mistake. When it came to
picking the killer, you picked the
wrong guy, if you know what I mean.
Want to know who killed Dietrichson?
Hold tight to that cheap cigar of
yours, Keyes. I killed Dietrichson.
Me, Walter Neff, insurance agent, 35
years old, unmarried, no visible
scars --
(He glances down at
his wounded shoulder)
Until a little while ago, that is.

After bond fund giant Pimco's Bill Gross gave a back-of-the-envelope estimate of a possible $250 billion in losses resulting from the impact of deteriorating corporate credit and bond defaults on the $45 trillion (notional amount) credit default swaps market, other commentators have been making improved (but still quick and dirty) calculations.

It began last May. About the end of May, it was. I had to run out to
Glendale to deliver a policy on some
dairy trucks. On the way back I
remembered this auto renewal on Los
Feliz. So I decided to run over there.
It was one of those Calif. Spanish
houses everyone was nuts about 10 or
15 years ago. This one must have
cost somebody about 30,000 bucks --
that is, if he ever finished paying
for it.

"Monolines write insurance on debt. But here is the trick. Entities with a worse credit rating than the monoline company can get their bonds insured so that they can have the same rating as the insurance company itself (mostly AAA). So relatively poor-quality debt becomes investment-quality debt because the monoline will pay the interest and principal if the borrower defaults.

This business model is self-limiting, some might say self-destructing! The monolines’ balance sheets fill up with poor-quality debt as the monoline insures only the risk of debt with a worse financial quality than itself. As long as the ratings agencies maintain the monolines’ AAA rating, the trick can work.

But eventually, the market may decide that the poor quality of the debt the monoline insures has irreparably eroded the quality of its own balance sheet. Once that happens, the monolines’ guarantees are worthless and the debt it insures will be downgraded ...

If the monoline guarantees on bonds and credit derivatives were to be removed, the rule of thumb is that every 1 per cent decline in the price of insured bonds would give rise to $10bn of losses on bond portfolios elsewhere in the system. We estimate bond portfolio losses of $150bn-200bn were this to happen ...

Much of this pain (loss) would have to be absorbed through the CDS markets as additional losses to the cost of defaults. Also, the decline in credit quality would also hit CDS prices to the tune of about $40bn-$50bn. In total, we estimate that global losses in CDS markets and the underlying credits they insure would be $365bn-$425bn."

NEFF
For instance, we're writing a new
kind of fifty percent retention
feature in the collision coverage.

Phyllis stops in her walk.

PHYLLIS
You're a smart insurance man, aren't
you, Mr. Neff?

NEFF
I've had eleven years of it.

PHYLLIS
Doing pretty well?

NEFF
It's a living.

PHYLLIS
You handle just automobile insurance,
or all kinds?

She sits down again, in the same position as before.

NEFF
All kinds. Fire, earthquake, theft,
public liability, group insurance,
industrial stuff and so on right
down the line.

PHYLLIS
Accident insurance?

NEFF
Accident insurance? Sure, Mrs.
Dietrichson.

His eyes fall on the anklet again.

NEFF
I wish you'd tell me what's engraved
on that anklet.

PHYLLIS
Just my name.

NEFF
As for instance?

PHYLLIS
Phyllis.

NEFF
Phyllis. I think I like that.

PHYLLIS
But you're not sure?

NEFF
I'd have to drive it around the block
a couple of times.

PHYLLIS
(Standing up again)
Mr. Neff, why don't you drop by
tomorrow evening about eight-thirty.
He'll be in then.

NEFF
Who?

PHYLLIS
My husband. You were anxious to talk
to him weren't you?

NEFF
Sure, only I'm getting over it a
little. If you know what I mean.

PHYLLIS
There's a speed limit in this state,
Mr. Neff. Forty-five miles an hour.

NEFF
How fast was I going, officer?

PHYLLIS
I'd say about ninety.

So far, the banking industry has revealed about $65 billion in writedowns for the fourth quarter -- a figure that could climb higher as more results pour in over the next couple weeks. That's more than Bill Gates is worth, higher than the gross domestic product of Bangladesh, and equivalent to nearly 3 percent of the entire U.S. housing market.

PHYLLIS
I want to ask you something, Mr.
Neff. Could I get an accident policy
for him -- without bothering him at
all?

NEFF
How's that again.

PHYLLIS
That would make it easier for you,
too. You wouldn't even have to talk
to him. I have a little allowance of
my own. I could pay for it and he
needn't know anything about it.

NEFF
Wait a minute. Why shouldn't he know?

PHYLLIS
Because I know he doesn't want
accident insurance. He's superstitious
about it.

NEFF
A lot of people are. Funny, isn't
it?

PHYLLIS
If there was a way to get it like
that, all the worry would be over.
You see what I mean, Walter?

NEFF
Sure. I've got good eyesight. You
want him to have the policy without
him knowing it. And that means without
the insurance company knowing that
he doesn't know. That's the set-up,
isn't it?

PHYLLIS
Is there anything wrong with it?

...

PHYLLIS
What's the matter?

NEFF
Look, baby, you can't get away with
it.

PHYLLIS
Get away with what?

NEFF
You want to knock him off, don't
you, baby.

PHYLLIS
That's a horrible thing to say!

NEFF
Who'd you think I was, anyway? A guy
that walks into a good-looking dame's
front parlor and says "Good afternoon,
I sell accident insurance on husbands.
You got one that's been around too
long? Somebody you'd like to turn
into a little hard cash? Just give
me a smile and I'll help you collect."
Boy, what a dope I must look to you!

PHYLLIS
I think you're rotten.

NEFF
I think you're swell. So long as I'm
not your husband.

PHYLLIS
Get out of here.

... NEFF'S VOICE
(Over scene)
So I let her have it, straight between
the eyes. She didn't fool me for a
minute, not this time. I knew I had
hold of a redhot poker and the time
to drop it was before it burned my
hand off. I stopped at a drive-in
for a bottle of beer, the one I had
wanted all along, only I wanted it
worse now, to get rid of the sour
taste of her iced tea, and everything
that went with it. I didn't want to
go back to the office, so I dropped
by a bowling alley at Third and
Western and rolled a few lines to
get my mind thinking about something
else for a while.

A-41 DRIVE-IN RESTAURANT - (DAY)

Shooting past Neff sitting behind the wheel of his car The
car hop hangs a tray on the door and serves him a bottle of
beer.

DISSOLVE TO:

A-42 INT. BOWLING ALLEY

Neff bowling. He rolls the ball with an effort at
concentration, but his mind is not really on the game.

DISSOLVE TO:

A-43 EXT. APARTMENT HOUSE - (DUSK)

It is late afternoon. The apartment house is called the LOS
OLIVOS APARTMENTS. It is a six-story building in the Normandie-
Wilshire district, with a basement garage. THE CAMERA PANS
UP the front of the building to the top floor windows, as a
little rain starts to fall.

DISSOLVE TO:

NEFF'S VOICE
(Continuing)
I didn't feel like eating dinner
when I left, and I didn't feel like
a show, so I drove home, put the car
away and went up to my apartment.

...
NEFF'S VOICE
(Continuing)
It had begun to rain outside and I
watched it get dark and didn't even
turn on the light. That didn't help
me either. I was all twisted up
inside, and I was still holding on
to that red-hot poker. And right
then it came over me that I hadn't
walked out on anything at all, that
the hook was too strong, that this
wasn't the end between her and me.
It was only the beginning.

The doorbell rings.

NEFF'S VOICE
(Continuing)
So at eight o'clock the bell would
ring and I would know who it was
without even having to think, as if
it was the most natural thing in the
world.

Neff goes to the door and opens it.

PHYLLIS
Hello.

Neff just looks at her.

PHYLLIS
You forgot your hat this afternoon.

She has nothing in her hands but her bag.