Hatch Act there for a reason

This is a letter to the editor that I just sent to the local paper in Logan, Utah. Though more political than economic in nature, it does deal with underlying legislative conditions that need to be in place to design and implement appropriate policies.

Dear Editor

Ed Redd showed a rare level of insight and integrity when he recused himself from a public, professional assignment due to his political campaign for the state legislature, citing the Hatch Act. Though that Act most likely only applies directly to federal employment and political activity, the principle involved certainly applies to state politics. The point is, conflict of interest by those who governmental and legislative powers, given intertwining budgetary and administrative controls, opens the door to private malfeasance in public places. On the surface, it allows for a perverse kind of reciprocity. "You approve my budget and I will approve yours" can cover a multitude of sins. That is why the Hatch Act exists in the first place.

Of course, in our day and age, ethical protocol would call for a declaration of conflict of interest. In the case of state employees voting in the state legislature, much if most of what occurs would involve such conflicts and set up a bargaining regime among state-employed legislators and the instruments of government that could leave the interests of the people well off the table. How would reform take place in an environment where reformers and reformees are one and the same? Of course, this is the common practice, as the spirit of the Hatch Act has been quietly ignored in Utah for some time, particularly in higher education.

Richard Morris in his excellent 1973 book, Seven Who Shaped Our Destiny, points out a profound irony. The tiny colonial culture of early America produced a cadre of political and economic reformers that changed the world for the good in enduring ways, while we suffer in our times without equivalent leadership. So the Hatch Act Modernization bill, would undo yet another protective instrument with little debate or public outcry. The bill is presented in the name of modernization, which is, of course, an unassailable objective in our stilted mindset. I am surprised that it would not be called the Hatch Act Reform bill, because it would serve to reform one of our primary instruments of reform by eliminating it. This is how we think and act in our day. This is why we suffer from economic and political crises of our own making.

Beaver dams and the fiscal cliff

We are of this earth, but we pretend we are not. I know, there is the religious argument that we are apart from the animals, which allows us to "dominate" them while we "tame" the earth. True. Ok, although many are not, I am a believing man in such matters. The divine directive I know about does not say that we are licensed to pillage and pollute while we are here; on the contrary. We are here as stewards. We are to be responsible.

I have all of the credentials of a conservative and a capitalist, but I must say that we need to be far more responsible from an environmental standpoint. I hear all the time from people around me that they believe that nature is so vast and the planet has such inexhaustible resources that we couldn't possibly be doing much meaningful harm to the environment. I find it hard to comprehend such a statement. How could anything be more wrong? I am reading the synthesis of the Millennium Ecosystem Assessment. There are a lot of smart, committed people working on the problem that are way off base.

Even if they are not, the logic escapes me. This is like saying that it isn't important to clean your house because it will not fall down if you do not. Furthermore, by being reckless, we are likely to stumble into serious problems at a micro level. Fracking, for example, is so fundamentally invasive that it surely should be applied only as a last resort. I read last week that fracking companies in the rush to obtain oil are pushing chemicals with known carcinogenic properties underground, near groundwater sources.

There is another important reason to keep environmentally aware, apart from avoiding pollution and environmental degradation. We can learn much from nature in the cycle of life. [Please, don't roll your eyes. There will be no background music here.] In all things, there are periods of growth, maturity, and decline. This is a fundamental tenet of capitalism, of course, but we forget the last of the three stages from an economic perspective, an oversight with enormous negative consequences. Poor economic policy with regard to large-scale enterprises with declining revenues has a direct impact on the famous "fiscal cliff" facing U.S. politics in this, the last month of 2012. It is a major contributor to the perilous economic conditions which we face currently.

The growth process is cool, right? This is the domain of entrepreneurs, new ideas, and raw competition for better things and better ways. Such a sanguine assessment is ill-suited. Unfortunately, as was pointed out recently in the congressional debate over trademark laws, future companies have negligible constituencies. Fighting for their rights involves abstract concepts and coherent policies. Politics "in the raw" typically ignores such niceties in lieu of porkbarrel bills and special favors. The growth sector and its needs go woefully ignored.

The mature sector is where we all live, or hope to. This is the world of good jobs, consistent government revenues, and social justice. Oh, that we could all always live in this world, characterized by white picket fences and dinner at five each evening. The problem is, prosperity does not last forever. Tastes change. The new can undermine the old. Even longstanding success can slowly fade. Sometimes success can fade quickly, as the makers of sliderules -- Keuffel and Esser -- found out in the early 1970s when inexpensive calculators were introduced into the market.

Dealing with the declining sector is where we fail the most. Nature naturally accommodates such change. My favorite example in such matters is the beaver. Don't ask me why. Beavers represent rationality to me. What do they do when their dams, their homes  and workplaces, no longer are viable? Beavers evaluate such situations, given their excellent engineering minds, and move to build new ones.

What do we do under such circumstances? Not always that. Well, in a sense, we do, at least in smaller cases. Mainstreet business, for example, are defined by their cash flows. If they don't get ongoing business, they can't be in business. Hometown bankers famously only loan money where it is not needed. Well, that was up until the Banking Act of 1980. Since then, the banking system has been progressively corrupted, first giving credit cards to people that shouldn't have them, then mortgages to people that wouldn't be able to meet associated payments, then lending money to no one in particular in a fancy set of transactions based on "derivatives", highly complex models of economic relationships. I write about this in my book "It's the Necronomy, Stupid", a book that has successfully avoided notice from its perch on Amazon.com.

It can be said that we have ceased to be as smart as beaver. To be fully truthful, that is exactly what I am saying. We have embraced the "too big to fail" phenomenon, to be sure. The issue runs deeper than this, however. Remember my statement earlier about the lack of basis for political support for the growth sector? The companies of the growth sector do not yet exist or they are cash-poor and preoccupied. Thus, they have no grounds for political power. Companies, particularly big ones, present the opposite. As their revenues fade due to sagging market demand, such organizations tend to turn up their pressure on Washington. They hire more lobbyists. They hire more attorneys, more expensive ones, the kind with political access. They investigate ways to influence politicians. They work hard to find ways to "tilt the table" in their favor.

This process is far easier than it was meant to be. Think about it, they only have to get some proportion of 536 people on their side, at least for legislative purposes. You know of the mystery of politically-derived wealth. I will use Lyndon B. Johnson as an example. He gained office as a poor young man. By the time he retired, decades later, he was a multimillionaire, with a communications empire, substantial land holdings, and associated perquisites. This in spite of the fact that he was in office all of the intervening time. On the surface, you can make the case that he was an astute time manager and entrepreneur during the recess periods. Surely he was. However, the numbers do not really add up.

Am I accusing him of being dishonest? Of misuse of public funds or embezzlement? Of illegal behavior? No. I have no idea of the details of his history -- though I have some books somewhere should I decide I need to know. I am sure that there is no public record of "tit-for-tat" deals or of obvious distortion, if that is what you might mean. There were likely situations involving "winks" and "mutual understandings" and amazing coincidences. It was probably easy for him to close the deals that resulted in his wealth.

The point is, the decline sector is rife with such situations, particularly with regard to the politics of power. With rule changes or legislative mandates originating in Washington or in other political venues, markets can be redefined, entrepreneurs can be wiped away, and valid new opportunities can be converted to hopeless causes.

Let me provide an anecdotal example, trivial, really. This weekend, I spent time with an old friend. We are both in our sixties. When he was a little boy, he got a toy car that was solar powered. It was a pretty large, powerful toy. He had it for years and years. It was very durable. It ran and ran and ran; didn't need a battery as long as there was sunlight. The toy car still worked when he went off to college in 1969. In 1970, he went to Central America on a mission. He was sure that when he returned in 1972 that there would have been a massive conversion to similar full-sized cars by the time he got back.

Instead, the early 1970s brought gas shortages, rationing, and generalized crisis, a condition that has repeated itself on occasion, bringing with it fear and concern on the part of the populace. We could make the case that the gasoline-powered personal transportation vehicle is in a state of decline but by means of tactics as outlined earlier the market is not allowed to "die". As I often remind readers, Ford Motor Company did indicate in 2007 that the company had an archive of ideas and innovations dating to the 1940s that they could use to turn the company around. We might ask about such ideas. Could some of them possibly help to alleviate pressures brought on by the widespread use of fossil fuels?

I will not belabor the point. There are many industries about which similar comparisons can be made, not just in finance and gasoline-powered vehicles. Such industries develop strong lobbies. They gain substantial expertise in such matters in Washington and in the political capitols of the world. Such organizations have had a good deal of time to prepare their case. Without question, such conditions have political implications. Surely, such relationships will tend to bend, if not break, notions of democracy in our society.

There are a number of techniques that can be considered as ways of "bending" democracy, techniques that can be employed by corporate and political schemers. My favorite is the two-party system itself. I have long held that our main weakness as a society is our love of a scuffle. We relish fights. If we do not engage in them, we love to watch them. Such interest in hostility is played out in several ways. Perhaps it fulfills a need to work through aggression and is a result of several millenia of competition for resources. My observation is that the liberal vs. conservative political dialog as it plays out in its many ways provides a great distraction for individuals and organizations who have the objective of "bending" the system to avert market decline. While we play out our worries about what the "right" says about the "left" or visa-versa in the press and in the media, backroom deals are surely being arranged to meet the needs of specific petitioners with specific requests that will serve their needs, often to avert open market conditions that would favor new ideas and make opportunities available for new innovators. We have fallen for the magician's trick of averting the eye.

As we consider the ecological underpinnings of our success, the demands of growth when compared to maturity and ultimate death are undeniable. There are limits to how far we can "bend" such things. Do I have a problem with the idea that there is an elite? No. I think that such a thing is a part of human nature. Do I have a problem with the fact that they work to have more than their typical share of political influence? Similarly, this has always been the case. All political systems and in all forms of society and government share such behavior. Such efforts to avert the natural order of things must be judged as a matter of degree. We are steering ourselves close to the edge with regard to consolidation of power and wealth to be sure. This should be a matter of concern for all, particularly for the elites should the balance of political power shift to favor democracy.

What I criticize here is the overt attempt to manipulate markets and forestall innovation beyond reason as we can currently observe. In energy, for example. Would it really hurt to truly usher in a new, more rational age of energy? Couldn't you establish legitimate financial instruments to reward the few entrepreneurs who can put viable plans together? There is some risk in this, but you have a good deal of capital. Buck up and drink the Kool Aid. Spend more time with young engineers and enterprising MBAs and less time with attorneys. It isn't going to hurt your prospects to usher in this new age.

I know of the story of J.P. Morgan and Nicola Tesla. It may be apocryphal, but I mention it to make a point. Tesla showed Morgan how the earth's energy could be tapped with a few rods placed into the ground. Morgan asked where "meters" could be placed to measure usage and charge for the energy. Tesla indicated that they wouldn't be needed, as the energy generation was automatic and natural. He offered his opinion that the resulting electricity should be free. The story goes that Morgan thus decided to freeze Tesla out. He slowly cut back on Tesla's funding while promoting the plans of Thomas Edison to good commercial effect. It worked. The resulting company is General Electric.

Is the story true? Is economic prosperity dependent on having usage meters on everything, forcing payments for things that may be somewhat arbitrary? Is this why obviously improved approaches to personal transportation, medicine, nutrition, etc., do not present themselves? Is artificial scarcity necessary? Perhaps it is, but couldn't we maintain currency with science and arrange business according to facts within decades of when such innovations become known? While that would result perhaps in more distribution of income and wealth, there would be many improvements to society in the process, not the least of which being stability.

Finally, we have a current view of a critical tactic of "decline sector" or, more descriptively, "anti-decline" people. They like to arrange for crises. Such conditions allow for diversions and sleight-of-hand. The fiscal cliff, is it indicative of a real crisis, or is it an artificial device to draw our attention away from something else? We would be well-advised to watch "both hands" as events play out. What may be under way to preserve prospects that have otherwise passed their natural life cycles? How can such acts be averted in favor of new and improved innovations that will have the added benefit of spreading wealth around and stimulating still more innovation? We need to be busy little beavers to ensure ongoing reestablishment of economic prospects.