Weaknesses in the fabric of our republic: Infrastructure investment vs finance-wizard parasites

Nothing typifies the American right's nosedive more than the War on Infrastructure. Lawrence Summers, past president of Harvard and former treasury secretary, writes here about this growing consensus, even among more sober conservative thinkers. “The case for infrastructure investment has been strong for a long time, but it gets stronger with each passing year, as government borrowing costs decline and ongoing neglect (of decaying roads and bridges) raises the return on incremental spending increases.”

Read the Summers article, about what should be the simplest matter for consensus, if our Congress contained pragmatic patriots instead of raving dogmatists. Summers lays our various tradeoffs in paying for such a program, which would also inject high velocity cash into our sluggish economic bloodstream. 

It turns out that every approach pays for itself! Making this a no-brainer. Which confirms the Congressfolk who have been blocking an infrastructure bill for 20 years to be brainless.

But this is not about just our roads and bridges. Especially savaged in recent decades have been the glory of an advanced civilization - our universities. Those red states that actually invested in their universities - Virginia, North Carolina, Georgia, Texas - thereby succeeded in reducing the brain drain of their brightest kids departing after high school. Only now, those in-state graduates create blue islands like Austin and Raleigh, that then have to be tortuously gerrymandered lest  those smart and knowledgable citizens then elect (shudder) democrats.

Hence the GOP's solution – torch universities nationwide. Saddle students with the costs and debt. And as a side benefit this helps also to wage war on science. See: The right's war on college: destroying America's great public universities. 

Those states – both blue and red - which have resisted the trend and kept investing are reaping fantastically better actual outcomes.  

 == Why the skyrocketing wealth disparities? ==

The Evonomics site is on a roll, aiming at one “emperor” after another, pointing out the lack of clothes. Moreover, these brave iconoclasts are mostly economists who really want capitalism to work well! But they are smart enough to know a rationalization for parasitism when they see it. 

In this article by Lynn Stout - Distinguished Professor of Corporate and Business Law at Cornell Law School – demonstrates that the emperor’s been naked for a very long time: 

“Bank executives frequently proclaim that Wall Street is vital to the nation’s economy and performs socially valuable services by raising capital, providing liquidity to investors, and ensuring that securities are priced accurately so that money flows to where it will be most productive. There’s just one problem: no part of this Wall Street mantra is true.” These three “services” are false – or mostly false – because the capital-raising, liquidity and money flow services are mere add-ons to a gambling casino where the house takes a huge cut out of every bet.  

For example: “In 2010, corporations issued only $131 billion in new stock. That same year,  more than $15 trillion in stocks were traded – more than the nation’s GDP. So, what benefit does society get from all this secondary market trading, besides very rich and self-satisfied bankers like (Goldman-Sachs chair Lloyd) Blankfein?”

So much for raising capital. As for the liquidity argument: Dr. Stout points out that the average human investor “could get by with much less trading—and in fact, they did get by, quite happily. In 1976, when the transactions costs associated with buying and selling securities were much higher, fewer than 20 percent of equity shares changed hands every year. Yet no one was complaining in 1976 about any supposed lack of liquidity. Today we have nearly 10 times more trading, without any apparent benefit for anyone (other than Wall Street bankers and traders) from all that “liquidity.”

I might add that she leaves out HFT or High Frequency Trading by computers, which offer up a vast array of problems and dangers that I list here.  

But the craziest incantation used to justify finance-parasitism is price discovery, the weirdly passionate and utterly evidence-free catechism that Wall Street trading helps allocate society’s resources more efficiently by ensuring securities are ‘priced accurately.’ Stout demolishes this in economist’s terms…

…but I have an even better argument, based on both biology and thermodynamics, the branch of physics that is more reliably true than quantum mechanics or even relativity. In that same essay about HFT, I go on to show that living creatures thrive by finding a steep gradient of usable energy, in much the same way that energy converting machines do. The argument is a little involved. But when these slopes or gradients get too shallow, plants and herbivores and carnivores all get sickly and die! 

And the thing that usually makes this shallowness?

Parasites. 

Make the parallel. It will astonish and appall you, and ultimately enrage you. This is not a simile or a metaphor but an exact diagnosis of how the financial industry has ruined growth rates and sucked life out of the economy.  It’s not mystical or even economics.  It’s physics. It is thermodynamics and the basis of all living ecosystems. 

To be clear... leftists are wrong to blame ‘capitalism’ or competitive enterprise for this mess!

Capitalism… truly competitive and productive market enterprise… is a principal victim of these parasites.

== Technology doubters ==

Uber-techno-grouch Nicholas Carr (author of The Shallows: What the Internet is Doing to Our Brains) is at it again, railing that: “Technology promised to set us free. Instead it has trained us to withdraw from the world into distraction and dependency.” 

Oh, my, get ready for a choice rant.  From his new book, Uptopia is Creepy and Other Provocations, here’s a good one: 

“The greatest of the United States’ homegrown religions – greater than Jehovah’s Witnesses, greater than the Church of Jesus Christ of Latter-Day Saints, greater even than Scientology – is the religion of technology.” And: By spreading a utopian view of technology, a view that defines progress as essentially technological, they’ve encouraged people to switch off their critical faculties and give Silicon Valley entrepreneurs and financiers free rein in remaking culture to fit their commercial interests.” (excerpted from Aeon).

As years pass, I am increasingly impatient with the smug superiority of grouches, whose disdain for their neighbors and fellow citizens drips from every missive… while they fail utterly to put our problems and progress into comparison against 6000 years of failed experiments in the only known alternative – hierarchies of feudal-inheritance and privilege. 

Sure there are new addictions to deal with.  But the fraction of the population that breaks away to think deep thoughts – as you the reader are doing right now – has never been higher.

Grouches are very useful for pointing out things to discuss.  But when you start believing them… that is the road to hell.

== The Big Kneel ==

Oh all right.  I give in.... What do I think about second string  49ers quarterback Colin Kaepernick refusing to stand for the US national anthem? (And the subsequent wave of players kneeling as it’s played?) 

First… I don’t… think about him, that is. For one thing, I'm a baseball guy - a better sport for dozens of reasons. For another, we got bigger issues. But heck. If forced to express an opinion, I’ll defer to my FB friend, Jim Wright, who writes to veterans, as a veteran, a very moving missive suggesting that: Real respect can not be compelled, bought, inherited. Read that instead of my screeds. 

Have I an opinion, though? No. I have five at least. First, that we only move forward by applying moral pressure on our faults as a nation, as my father did, when he marched with ML King and as the Black Lives Matter activists are doing now, in the streets.

Second: that the pressure-appliers don’t always have to be personally admirable! 

Many are! Others are – as individuals – sanctimonious bullies, whose preening may be much more about grandstanding than true, moral leadership. And to a large degree that does not matter! What counts is the *direction* in which we are moving. And that we move with purposeful determination. And it is (mostly) irrelevant whether Colin Kaepernick is a showboating prima donna-ingrate who ignores how very far we’ve come. (And he may be none of those things! I truly do not know.)

No, what matters is that America - and the Great Experiment that America leads - have always benefited from critics and criticism. No matter how good we are, we can get *even better*. Always. Lots better. Hence, our reflex should be to give benefit of the doubt to critics. 

And not to those who reflexively shout for them to shut up.