July 2012 Archives

Market Myths and Individualism Run Amok


     The mythology of capitalism and the market economy that it has spawned continue to exert a bizarre intellectual stranglehold over many Americans. As every student of political philosophy knows, the central tenets of modern capitalism evolved out of liberal political philosophy. John Locke's insistence that a human beings were by nature motivated by the singular concerns of the self, that utilitarian calculations formed the true basis of moral decision-making, and that the acquisition and protection of property were the primary animators of  human conduct formed its core beliefs.

     David Hume, through his essays about the importance of money and trade, Adam Smith, with his emphasis upon the role of market as self-regulating entities, and David Ricardo, with his concept of comparative advantage, completed the edifice of what is today's liberal economic orthodoxy.  

    The question that needs to be asked about this orthodoxy - as with all other orthodoxies - is, does it, in fact, explain existing social reality? If the markets for goods and services, absent public regulation, naturally seek to move into equilibrium, as advocates of unbridled market economics assert, why then have the annual median incomes of Americans, as of 2010, fallen to the lowest level since 1999?  Why have "fair trade" policies, despite increasing levels of education in the U.S., caused a net migration of millions of U.S. jobs overseas during the past four decades, while the U.S. has continued to accumulate ever increasing balance of payments deficits caused by ever increasing purchases of foreign-made goods that were previously made and still could be made in this country?  

    As Charles Duhigg and Keith Bradsher reported in the New York Times ("How the U.S. Lost out on iPhone Work," January 21, 2012) nearly all of the 70 million iPhones, 30 million iPads and 59 million other assorted products sold by Apple sold last year were manufactured overseas, primarily in China by third-party vendors with whom Apple contracted for services and products. Apple employs only 43,000 people in the United States and 20,000 overseas but,as a result of its exploitation of workers through  third-party vendors, Apple made a profit of $400,000 per each of its actual employees, a sum greater than that made by Goldman Sachs, Exxon Mobil and Google.

      If unregulated market economies are the answer to economic progress, as Mitt Romney and his GOP allies insist, how then do we explain the implosion of Wall Street and the related financial scandals that have destroyed trillions of dollars of wealth possessed by ordinary Americans?   

      Conversely, if government regulation of the economy is the problem, how do we explain the growing economic inequality in the U.S. Why is it that, despite what right-wing libertarians claim is a confiscatory tax code, the wealth of the top 1% continues to grow exponentially?  In October of 2011, the Internal Revenue Service and the Congressional Budget Office released findings which showed that, as of 2009, the 1.4 million who belong to the top 1% made an average of $1 million dollars in 2009. Since 1979, the share of U.S. Income enjoyed by the top 1% has increased from 9.18% to 17.9% as of 2009, or more than the entire bottom half of the U.S. population. Almost simultaneously, Forbes Magazine reported that, as of November, 2011, the four hundred richest Americans enjoyed a combined worth of $1.53 trillion, which figure had increased from $1.37 trillion over the previous year. Their combined wealth was thus approximately equivalent to the GDP of Canada.

        President Obama and Elizabeth Warren, the progressive Democratic candidate for the U.S. Senate in Massachusetts, have been criticized by the Republican noise machine and its right-wing media outlets for stating the obvious: that each of us has depended for our success, to some degree, upon the help, assistance and inspiration that we received from others. Further, they have emphasized the obvious: that public goods - rail, road and airport infrastructure, public education, government support for R&D, public health, food and safety regulation, environmental regulation,  civil rights protection, consumer protection, anti-trust regulation, protection of intellectual property - are essential  prerequisites for economic success. Consider, for example, the rewards reaped today from the government funding and research to create satellite/GPS technology and the internet.
    Market economies are affected by the frailties and foibles of human actors. Many of these actors are motivated by selfish, short-sighted concerns; but the consequences of their actions harm everyone. It is for that reason that regulation in the public interest and investment by the government -as the agent of the people in a democracy - are essential antidotes to the temper the excesses of capitalism and to create the foundations for a truly just society.

    The continued clamor to reduce public regulation and investment is a siren call that is orchestrated by corporations and the wealthy elite who want free reign to continue to game the system. Ordinary citizens need to resist that clamor and to understand that their true, long-term interests have little in common with the interests of the top 1%.  As Nicholas Kristof remarked (New York Times, "Markets And Morals," May 30, 2012) "If you're infatuated with unfettered free markets, just visit Waziristan." 

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The Ghost of John Marshall And The Public Interest

A July 4th meditation

     The narrow 5-4 decision by the Supreme Court that upheld the Patient Protection and Affordable Care Act on the basis of Congress' power to lay and collect taxes under Article I, § 8,  rather than its power to "regulate commerce among the several stares" underscores the reality that the political and legal institutions of this country are ill-equipped to tackle significant social problems because of the pervasive, crippling effects of ideological bias.     
First Floor at the Statute of John Marshall, q...

First Floor at the Statute of John Marshall, quotation from Marbury v. Madison (written by Marshall) engraved into the wall. United States Supreme Court Building. (Photo credit: Wikipedia)

   The U.S. Census Bureau reported that a record 50.7 million Americans--16.7% of the population--were uninsured in 2009. According to the Kaiser Family Foundation's report on Medicaid and the uninsured, in 2004, at which time when 44 million Americans were reported to be uninsured, uncompensated care was estimated to be $40.7 billion. Today that cost has likely doubled. In a remarkable and important book, The Great Risk Shift, Yale University Political Science professor, Jacob S. Hacker, after reviewing longitudinal studies, concluded that "Over a two year period, more than eighty million adults and children - one out of three non-elderly Americans, 85 percent of them working or the kids of working parents -spend some time without the protection against ruinous health costs that insurance offers."
     The cost of medical treatment for the uninsured is borne by all of us, as taxpayers through Medicaid and by additional, pass-through assessments imposed by insurers on the healthcare insurance plans of those of us who have coverage. For that reason, those who are financially able to purchase health insurance, but choose not to, are essentially free loaders who are being allowed to game the system.

    Despite the obvious and indisputable facts, Chief Justice Roberts and the four joint dissenters, Kennedy, Thomas, Scalia, Alito, were preoccupied with a more esoteric and absurd concern: whether imposing a penalty upon younger, healthy individuals who choose not to purchase health insurance was, in fact an attempt by the Congress to regulate economic inactivity?  As Roberts unctuously intoned, "To an economist, perhaps, there is no difference between activity and inactivity. But the distinction between doing something and doing nothing would not have been lost on the framers, who were practical statesmen,'" quoting Industrial Union Dept, AFL-CIO. v. American Petroleum  Institute,  448 U.S. 607, 673 (1980), National Federation Of Independent Business, et al v. Sebelius, 567 U.S. ___(2012), at 24.    

     Based upon that specious logic - an ad hominem attack against empirical evidence and economists - Roberts concluded that the individual mandate could not be justified as a valid exercise of the power given to Congress to regulate "commerce among the several States," nor could it be sustained under the "necessary and proper"clause of Article 1, §, 8 which gives Congress the power "To make all Laws which shall be necessary and proper for carrying into execution  the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United  States..." 

    Although Roberts was careful in his opinion to pay homage to the legacy of Chief Justice John Marshall, his conclusion, absent the pious invocations, had little in common with either the letter or intent of Gibbons v. Ogden, 22 U.S. (9 Wheat.)1 (1824). In that important case,  Marshall ruled that the power of the Congress to regulate "commercial intercourse" extended to all activity having any interstate impact -however indirect - and that this power was plenary and virtually unlimited: "The wisdom and discretion of Congress, their identity with the people, and the influence which their constituents possess at elections are, as in many other instances...the sole restraints...on its abuse." Ibid. at 197.

    The refusal of Roberts and the four joint dissenters to be bound by settled precedent  - the principle of stare decisis  - is exemplified by their pronounced hostility to Wickard v. Filburn, 317 U.S. 111 (1942) and their disingenuous efforts to distinguish that case from the mandate imposed by the Congress under the Affordable Care Act. In Wickard, the Supreme Court,  applying economic analysis rather than "the wisdom of the Framers," held that the Congress could regulate a farmer's cultivation of wheat for his own family's consumption because the cumulative effect of that kind of act by individual farmers would affect the supply and demand for wheat in the interstate commodity markets. 

    Fortunately, Roberts remembered, unlike the other four dissenters, that under the canons of statutory interpretation, "every reasonable construction must be resorted to, in order to save a statute from unconstitutionality," quoting Hooper v. California, 155 U.S. 618 (1895), National Federation Of Independent Business, at 32 . To his credit, Roberts thus eschewed the kind of radical judicial activism urged by his four ideological fellow-travelers, and instead upheld the individual mandate on the theory that it was tax. In so doing, he unwittingly vindicated Justice Oliver Wendell Holmes reminder that, "Taxes are the price we pay for civilization."

    It is important to remind those who insist upon a strict construction and constitutional literalism that there is no language anywhere in the text of the United States Constitution that suggests or permits the Supreme Court of the United States to pass upon the constitutionality of statutes enacted into law by the Congress. Alexander Hamilton in Federalist No.81 suggested that such a power might be a necessary extension of  Supreme Court's jurisdiction given the need for at least one of the three putatively coequal branches of government to determine which actions of the federal government or the states might violate Article VI of the Constitution which expressly provides that "This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all treaties made...... shall be the Supreme Law of the Land; and the Judges in every States shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding."

     John Marshall, as a member of the Federalist Party, shared Hamilton's vision of the need for a strong central government that could create a modern commercial economy. As such, he too, along with Hamilton, rejected the parochial views of Jefferson and Madison. It was they, in an effort to protect their property interests as member of an agrarian, slave-holding Southern aristocracy, who insisted that the powers of the federal government should be construed to be extremely limited and narrow. Not long afer his appointment as chief justice, in Marbury v. Madison, 5 U.S. (1 Cranch) 137 (1803), Marshall crafted a perverse and ingenious decision that was intentionally calculated to handcuff Thomas Jefferson and other advocates of limited judicial power. He held that the Congress, in the waning days of John Adams' administration, had acted unconstitutionally in granting the Court the authority to issue original writs of mandamus.  

    During the next fifty-four years the authority of the Supreme Court to set aside acts of Congress  was not exercised. Sadly, however, in a remarkable and unrestrained burst of judicial intemperance, Chief Justice Taney, who was Marshall's successor, in the case of Dred Scott v. Sandford, 60 U.S. (19 How.) 393 (1857), denied that any black person could be a citizen of the United States and  held that the Missouri Compromise enacted by the Congress was unconstitutional.  His ruling made the Civil War inevitable.
      Sixty years later, in response to the legislation of the Progressive era, the Supreme Court once again sought protect the status-quo by denying to Congress to authority to impose liability upon carriers for injuries to their employees in interstate commerce,The Employers' Liability Cases, 207 U.S. 463 (1908), and to prohibit the federal government from enforcing legislation that  outlawed yellow-dog contracts, Adair v. United States, 208 U.S. 161 (1908).

    Another four decades passed when, at the beginning of the New Deal, Congress and the Executive once more sought to challenge the power of entrenched interests. Once again a majority of a Supreme Court valiantly arose to deny the right of the people, through their elected representatives, to obtain redress for the harms caused by powerful, unregulated interests. See Railroad Retirement Board v. Alton R.R., 295 U.S. 330, Schechter Poultry Corp. V. United States, 295 U.S. 495(1935), and Carter v. Carter Coal Co, 298   U.S. 238 (1936). The efforts of that Court to dismantle the New Deal only ceased after a threat by President Roosevelt to increase the size and composition of the Court

     Since the advent of the Rehnquist Court, an increasingly reactionary Supreme Court has labored to narrow the scope Article I, § 8, which confers upon Congress, without any limiting language, the power "to regulate Commerce with foreign nations; and among the several States, and with the Indian tribes." To do this, they have chosen to breath new life into only prong in the language of Tenth Amendment that reserves certain powers not delegated "to the States respectively, or the people." Thus, for example, in San Antonio v. Lopez, 115 S. Ct. 1624 (1995), by a 5-4 vote, the Supreme Court struck down a gun conviction that occurred within a 100 yards of a school on the grounds that the interstate commerce clause did not apply.

    Absent from this Tenth Amendment, pre-Civil War legal exegesis is any inkling or even a  grudging concession that the other operative term in the amendment "the People" refers to a collectivity in whom all sovereignty, in a democratic society, ultimately resides. The recognition of the existence of that residual sovereignty should, as a matter of constitutional interpretation,  supersede the fictional legal sovereignty accorded to the states: Thirty-seven states, beyond the original thirteen colonies, that were subsequently admitted to the union expressly subject to the rules and conditions imposed by the Congress. 

     After the more recent appointments of Scalia, Alito and Roberts, questions about the Court's independence as an impartial, precedent-observing, judicially- restrained and non-partisan arbiter of the Constitution have become more pronounced. The obvious hostility of these last three appointees, coupled with the reflexive, unabashed and well-documented animus of Clarence Thomas toward Congressional power, and the intellectual and linguistic difficulties with which Justice Kennedy appears to struggle, raise worrisome concerns about the future jurisprudence of the Court.

     The Industrial Revolution transformed the older, agrarian economies in the Western world and created the modern market economies in which labor, the  production and sale of goods, and the availability of credit financed by capital formation now played crucial roles. Investment in public goods and services and infrastructure by the government were and remain essential complements. Modern market economies, given the constant movement of goods, capital and now labor, are dynamic and increasingly interrelated. What affects one, affects all. This proposition is as true for the healthcare market as it is for the labor market and for the financial and banking sector.

      A jurisprudence rooted in John Locke's 17th century notions of individual rights and Adam Smith's economics has shown itself to be profoundly tone deaf and ideologically unable to address pervasive and intractable problems such as high structural high unemployment, wage stagnation, growing economic and political inequality, increasing poverty, collapsing infrastructure, deteriorating school systems across the country and a host of other social problems that have grown worse since the 1980s.

      The doctrine of "original intent" to which Roberts and ideological soul-mates profess a kind of religious fealty represents a kind of constitutional death-wish. If routinely applied it will induce rigor mortis in the country's political institutions and perpetuate the advantages that the advantaged already enjoy. Through the use of "original intent," apologists for the status quo have devised an analytical technique that is designed to emasculate this country's foundational document - but it does not comport with reality. As Justice Ginsberg noted in her dissent, many things were never specified or anticipated by the Framers of the Constitution, including the need to create an Air Force. Hence, the reflexive, unthinking invocation of that doctrine condemns the federal judiciary to play the role of a purely negative, obstructive, unhelpful partisan.

    John Marshall would be appalled. He understood, far better than the current five ideologues who sit on the Court as well as their chorus of corporate enablers with their privately-funded think tanks, that the Constitution must continue to be viewed as a flexible, living document supported by a jurisprudence equal to the task. Marshall would have noted that if the public interest and the needs of citizens cannot be addressed by the very institutions created by the Constitution and that are charged with the responsibility to promote the general welfare, government itself and the rule of law will inevitably become irrelevant.


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