The View From 1776

Moscow Update: Russia Resurgent, Robust, or About to Go Bust?
By Robert W. Stapler

Three things have recently brought Russia into sharp focus.  First is the rising price of oil and Russia’s growing importance in the supply chain, second is Time Magazine proclaiming Putin ‘Person of the Year’, and third (for me personally, and most intriguing) is an oil-investment company alleging Russia is deliberately driving up the cost of oil.  Few of us give much thought to Russia these days, so my initial reaction to this last item was ‘these guys have got to be exaggerating to push a sale’.  Russian market manipulation can’t be as much a factor as dwindling OPEC production, hurricane damage, and that Chavéz clown.  But, what if it’s even partly true, I thought.  This aroused me to revisit our old adversary; wondering what new tricks (or old) they may be up to.  To evaluate Russia and Russians (and why they drive us so crazy) requires an understanding in five parts: Russian character (culture), politics, global & local economics, foreign-relations, and military capacity.  These are significantly interlocked, making analysis of one dependent on the others.

Aspects of Russian Culture

Key to understanding where any one participant may lead is how willing their base is apt to follow.  The most effective leader, in any country, is one who takes his people exactly where they wish to go.  In the case of Russians, this is clouded by conflicting political desires and tensions.  Mainly this tension is between Russians demanding Westernization as against a spiritualized variant of nationalism.  We westerners have always been critical of our leaders, and second guessing them has become our national sport.  In Russia, criticism remains far more veiled (both from long habit and governmental discouragement), excepting Russians are free to agree and rally behind their leaders.  This results in top-down policies with all the appearance of grassroots support (does have enough support to be sustainable for long periods), despite setting goals that are often unrealistic, xenophobic, nationalistic, contradictory, and/or renegade.

Whereas rule of law and reciprocal dealings are articles of faith with us, in Russia (where rules abound, and everything is subject to bureaucratic interference), rule-of-law is held in contempt while highly fluid ethical codes are deemed a matter of justice.  Russians are conditioned (through centuries of absolutism) to look after themselves and immediate circle first, leaving it to others to look after themselves (despite long touted collectivist rhetoric and ideals to the contrary).  These explain how, in the 1990s, during the breakdown of order, so many ordinary Russians readily adopted Mafiaesque behaviors.  This is the same national characteristic we saw in the Soviet Union’s earlier dealings with us; and remains a trait in Russia’s dealings with other nations.  Not that we (Westerners) don’t share these traits; only our society is more relaxed, conditioned by a long tradition of liberty.

Andrew Kuchins at CSIS describes the political culture thus: “Russia today is a hybrid regime that might best be termed “illiberal internationalism,” … From being a weakly institutionalized, fragile and … distorted proto-democracy in the 1990s, Russia under Vladimir Putin has moved back in the direction of a highly centralized authoritarianism, which has characterized the state for most of its 1,000-year history. But it is an authoritarian state where the consent of the governed is essential. Given the experience of the 1990s and the Kremlin’s propaganda emphasizing this period as one of chaos, economic collapse, and international humiliation, the Russian people have no great enthusiasm for democracy and remain politically apathetic in light of the extraordinary economic recovery and improvement in lifestyles for so many over the last eight years. The emergent, highly centralized government, combined with a weak and submissive society, is the hallmark of traditional Russian paternalism.”

It is natural to think all that was oppressive in Russia under the Soviet Union was an expression only of communism, and that its modes of thinking would be swept away without it.  But, what if that is only partly true and a good deal of what we perceive as behaviors ascribable to an ideology was, in fact, part and parcel of the Russian psyche, impressed on Russians through millennial conditioning.  Perhaps we have it backwards, and Russia co-opted communism as an ideology already conformable to Russian notions of governance.  If so, we must go farther back to learn how Russians perceive us, changes to their way of life, and likely reactions.

http://www.und.edu/dept/lang/russian/162/culture.html
http://www.russian-victories.ru/ - example of Russian chauvinism
http://englishrussia.com/?p=1137 – versus more realistic portrait of Russians

History

Russian history, outside oral traditions, is not as old as the rest of Europe and consists mainly in standing in the path of invasions, competing with neighbors for resources, and struggling to maintain cohesion.  Russia has been successively invaded by Huns, Goths, Moslems, Vikings, Cossacks, Mongols, Poles, Tatars, Lithuanians, Turks, Germans, French, and Nazis.  Russia lacks easily defended or well defined borders, and is surrounded by historically hostile neighbors.  It is not the most invaded nation, but it is the most invaded nation aspiring to super-power status.  This background is critical in shaping Russian thinking, with the obvious conclusion Russians, whenever able, will seek to extend their borders, assert their identity, and increase their reach.

Politics, Policy, and a Return to Party Domination

Heritage Foundation’s take (Dec-07) is Russia is moving away from constitutional democracy and the rule of law and is increasingly anti-American; and, there appears to be considerable agreement between both conservatives and liberals this is the case.  The current elections are a sham with a controlled outcome that leaves Putin in charge beyond his legitimate term.  Russia’s heir apparent, Medvedev, is a hand picked Putin crony, with no independent base from which to operate, who must remain loyal on Putin.  Additionally, Medvedev, may remain Gazprom’s chairman, perpetuating the corruption Putin builds on.  Other indicators of this shift include a number of politically motivated beatings and murders, surge in ‘nationalist’ groups, breaking-off arms talks, threats to U.S. allies regarding defensive weapons, new restrictions on the press and sources of information, and changes in election laws that make a mockery of representation. 

Russian democracy enthusiasts generally view the shift with disapproval, but little real concern.

Lack of dialog with the West may partly be our distraction with terrorist, but is also deliberate policy by the Kremlin signaling a sea change in our relations.  For its part, Russia blames us for the breakdown in talks over of our unwillingness to sacrifice space-based and anti-missile defense systems on the alter of arms-negotiation, a capability Moscow still regards as a threat despite access to the same technology and manifest inability of these devices to more than rouse a devastating response.  This is the same complaint made by the USSR in the late 1980s and has no greater validity today.

United Russia Party, with Putin at its head, has taken the lion’s share of representation and is the second most strongly socialist party in Russia.  It is packed with corrupt former Communist-Party operatives, who have made fortunes since the breakup, and now wish to consolidate their positions. Despite the strong association with communism, United Russia’s elite might be better compared to pre-Nazi Germany’s Industrial Junkers.  Hereafter, Duma deputies (representatives) will be chosen from party lists in proportion to votes cast rather than individually elected as before.  Many smaller parties and all independent candidates are excluded from running by exclusionary restrictions and state-run vote-fixing.  This not only invalidates the purpose of voting by denying direct representation, it ultimately undermines legitimacy through reduced voter involvement.  Soon (and this is the point of the policy changes), the small parties will be absorbed or disbanded until there is once again one party rule.  It is not fueled by the old ideology, but it is the same tendency to state-rule.

Russian Economy Too Dependent on Oil & Gas

The Economist reports a mixed picture for Russia. 

Russia, Kazakhstan and Turkmenistan have agreed on construction of a gas pipeline intended to circumvent the EU’s efforts to diversify its energy sources.  In a bid to reinvigorate investment, bidding of oil and gas fields may be opened back up to foreigners, but Putin’s recent track record is still discouraging many from taking the plunge without sufficient safeguards.  Foreign investment since 2004 has significantly declined from a combination of shrinking return on investment, heavy taxation of production, and asset seizures.  Growth in domestic demand remained strong in the 4th-Qtr 2007, despite tighter liquidity, probably due to strong private consumption slowing the decline in investment.  Real GDP growth has slowed to just over 6% per year, an indication the Russian boom is peaking and growing imports (with only moderate export growth) are likely to reduce current-account surplus to 2.6% of GDP by 2009.  Inflation is at 10% and increasing; with high energy prices, strong capital inflows and fiscal loosening fueling the inflationary pressure.  Industrial output growth has slowed to 4.7% year on the year in November 2007 while Consumer prices increased by 1.1% in December, pushing up end-2007 annual inflation to 11.9%—a significant increase on inflation of 9% at the end of 2006.  Public spending is at its highest in 18 years. Russian businesses have generally become less competitive, probably a result of Kremlin influence.  Economic relations with the West have also deteriorated as a byproduct of Russian foreign policy and military ventures. The global credit squeeze is also having some impact on Russia.

Energy accounts for 25% of Russia’s GDP, with 4/5ths representing exports and a positive trade balance.  This makes Russia extremely dependent on oil and gas for economic viability.  While the oil and gas last, Russia can act the tiger, but what will happen once production wanes and ordinary Russians see a return to scarcity?  Already there are indications Russia has been over-producing and cannot sustain present levels.  Moreover, the Kremlin is making claims to Arctic oil beneath international waters in what may be a desperate bid to stave off crisis.

Russia and Its Neighbors

Belarus, Ukraine, Georgia and Turmenistan ( http://www.cfr.org/publication/12327/russias_energy_disputes.html ) have all been subjected to strong-arm tactics (election interference, military maneuvers, assassinations, and gas disruptions in a Kremlin controlled maneuver to squeeze higher energy revenues out of its trading partners.  All four countries have been forced to restructure existing contracts, doubling the previous price of natural gas they receive and cutting the prices they charge Russia for gas transmission.  Belarus is now paying $100/1,000 cubic meters of gas following a Russia threat to cut off its mid-winter gas supply, much as it did to Ukraine last January.  This tactic has elicited some international protests, but does little to thwart Russian economic aggression.  Belarus did threaten Gazprom’s use of its pipelines in retailiaton (20 percent of Russian natural-gas flows through them to Western Europe), leading Russia to temper its demands.  Additionally, Belarus has conceded a 50-percent share in its state-controlled pipeline network to Gazprom.  Ukraine conceded a 5-year contract for gas at $95/1,000 cubic meters.  Much of the gas delivered to Ukraine originates in Turkmenistan, which is cheaper but is transited through Gazprom controlled pipelines.  Russia accused Ukraine of siphoning off its Europe-bound gas and succeeded in wresting guarantees from Ukraine against future siphoning.  Turkmenistan has some the world’s largest reserves of natural gas.  Russia and Turkmenistan have just signed a three-year deal to continue Turkmen gas deliveries via Russia, but Moscow worries a new Turkmen regime may diversify its energy routes other than through Russia (e.g. Iran, China), weakening a virtual Russian monopoly.  Georgia had a price dispute with Russia wherein Gazprom threatened to cut off its supplies, but reached a settlement of $235/1,000 cubic meters. Other incidents include the arrests of four Russians for spying and a Russian boycott of Georgian spirits.  Gazprom’s price hikes have prompted both Ukraine and Georgia to seek alternative gas suppliers.

Russian activity
in the Middle East is, once again, becoming a concern for the U.S.  Russian arms sales to Iran and Syria and its efforts to legitimize Hamas made U.S. efforts to broker an Israeli-Palestinian settlement more difficult.  Russia’s delay in supplying Iran with nuclear materials and its willingness to consider sanctions against Iran can be read either as U.S.-Russian common interests or a gesture to Arab states unhappy with a nuclear-Iran.  Russian-Israeli relations are at their lowest since the mid-1980s as a result of Putin policies, including arms sales to Syria (much of them used by Hizbollah in its 2006 war against Israel), supplying a nuclear reactor and SAM’s to Iran, and support for Hamas (an organization dedicated to Israel’s destruction).  There has been a drop-off in Arab support of Chechen rebels that can only be a result of Russia’s support against Israel and in keeping the U.S. off balance.  Putin has put considerable effort toward strengthening commercial ties, including securing Arab investment, with a number of Middle-Eastern countries.

Russia’s economic integration with the EU has stalled and is frustrating Russian big-role aspirations.  Russia has been encouraging its former republics to drop out of NATO agreements and is intimidating former European satellites to drop their defense plans it views as a threat.  The EU has become heavily dependent on Russian oil and gas, but is understandably reluctant to trust a humiliated but still unabashedly aggressive Russia.  Some, however, are more concerned how Europe may react than how far Russia may push the envelope.

Russian Military and Weaponry

Military estimates:
http://www.globalsecurity.org/military/world/russia/intro.htm, http://www.nti.org/e_research/profiles/Russia/index_5148.html http://www.nti.org/db/nisprofs/russia/weapons/gendevs.htm

Russia has significantly increased defense spending since 2002,
http://www.globalsecurity.org/military/world/russia/mo-budget.htm

and has begun asserting itself within its old spheres of influence.  Both its former internal and external clients are under pressure from Moscow to give way to Russian interests and demands.  Russia, as a fraction of former Soviet Union, may now have as much spending capacity as in 1990, the year prior to economic collapse.  Military spending has jumped 600% since 2002.  While this is far from the SU spending levels of the mid-1980s, it is more sustainable as a percent of Russian GDP.  So, the question becomes, is Russia rebuilding its military and to what purpose?  Not all are convinced this is enormously significant; including some who believe Putin is on the way out.

Even so, all recognize Russia is pushing for a larger role.

In ‘Russia steps up bomber exercises near Alaska’, ‘Is Russia back to Cold War mind-set?’ Military Times notes an increasing number of challenges by Russian aircraft reminiscent of the cold war, and in ‘Russian Navy Turns Up Heat’ NewMax describes combined naval/air exercises with the principle objective of demonstrating Russian capabilities and reestablishing Russian presence in the North Atlantic (also see Russian bombers to Test-fire Missiles in Atlantic). http://www.reuters.com/article/worldNews/idUSL2235954320080122?feedType=RSS&feedName=worldNews

Moreover, Russia is developing a new generation of smart-missiles with the stated purpose of evading American anti-missile defenses; as well as some new mobile strategic ballistic missile systems. 

A little saber rattling may not mean much.  However, the Kremlin has been increasingly belligerent regarding the placement of anti-missile defense systems among its former clients, and has threatened to take military action against them.  Just how far they’ll push this is yet to be seen, but it has already caused the Czech Republic to have second thoughts.  Since the mid-1990s, Russian doctrine has been to use nuclear weapons only in self-defense.  Putin has now reinterpreted this doctrine suspiciously similar to Soviet doctrine wherein nukes were to be used extraterritorially, preemptively, and defending allies or interests.  The question then arise, against whom and why now?  If this not just about the missiles in Poland and Czech Republic (entirely defensive and no threat to Russia), then what is the objective?  The way Russia will interpret this doctrine is very different than we’d prefer it interpreted; including a right to intimidate former clients into granting concessions as it has done in Georgia, Ukraine, and Belarus.

– Bob Stapler (rstapler@aceweb.com)

Alternate and Outdated Analyses – But Well Worth Reading

Putin’s Decline and America’s Response, Aslund Jan-05
http://www.cdi.org/russia/johnson/9010-2.cfm Jan-05
http://www.cdi.org/russia/johnson/9229-18.cfm Aug-05
http://www.cdi.org/russia/johnson/9227-23.cfm Aug-05
http://www.cdi.org/russia/johnson/2007-224-23.cfm Oct-07
http://www.cdi.org/russia/johnson/2007-261-5.cfm 20 Dec-07
http://www.cdi.org/russia/johnson/2007-264-33.cfm 26 Dec-07
http://www.cdi.org/russia/johnson/2007-264-34.cfm 27 Dec-07
Russian Resurgence, Mar-07
Russian Parties are Inching Forward, Jan-03
Russia the constant colonizer – call by a Russian to ‘recolonize’ lost territories
Assessment Russia is assertive, manipulative, and actively undermining American security, though not a direct threat, 1Qtr 07
Russia’s near future can be no worse than under Czar Nicholas I - opinion Putin has been both lucky and inept; assessment, Nov-07

Additional Readings and Background Information

Dec-2000 - Russian demographic trends

Russia Watcher - numerous articles

Putin policies are killing investment

Jan-08 – Russian News Agency, reprint of Daily Telegraph analysis discussing Russian military policy

Jul-07 where Russia may be heading

Politics_of_Russia & Russian_politics

List of recent political murders, attempted murders, and suspicious deaths:
Andrei Kozlov, Alexander_Litvinenko, Anna_Politkovskaya, Roman_Tsepov, Boris_Berezovsky, Altynbek_Sarsenbayev, Anatoly_Trofimov, Paul_Klebnikov, Aleksey_Pichugin, Sergei_Yushenkov, Yuri_Shchekochikhin, Ivan_Safronov, and Three Whales Corruption Scandal (possible victims).
Recent Assassinations Shake Confidence in Putin’s System

Comments on what motivates Russian culture/politics (by a Russian)

Soviet writer worldview, 1927

Read That ‘70s Show, a Wall Street Journal op-ed essay by Allan H. Meltzer.

The writer is a distinguished economics professor at Carnegie-Mellon University and the author of A history of the Federal Reserve : Volume 1, 1913—1951, a highly recommendable book.

Professor Meltzer observes:

Surely Mr. Bernanke and his colleagues remember what happened in the 1970s. They console themselves with the belief that they will respond to any inflation that occurs by promptly raising interest rates. That repeats the commitments made repeatedly in the 1970s, which the Fed was unwilling to keep. The blunt fact is that there is rarely a popular time to raise interest rates. And with the growing streak of populism in the country, it will become more difficult.

Unfortunately,the Fed has chosen to forget the most important empirical lesson from the stagflation of the 1970s: after inflation takes hold, raising interest rates is ineffective in stemming it. 

Only once has the Fed actually stopped inflation.  In the early 1980s, under President Ronald Reagan, Fed Chairman Paul Volcker let interest rates find their own level and concentrated on reducing the money supply.

Had that course been followed earlier, the nation would have had a shallow and quickly ended recession.  Instead, by seeking to manipulate the economy by ballooning the money supply to fund more Federal spending, as Keynes recommended, the Fed gave us the prolonged agony of stagflation: a severe economic recession, while prices rose at the fastest rate in United States history.

The Fed doesn’t just issue an order for rates to come down.  It has to pump artificially created money into the financial system to reduce interest rates.

Interest rates are the price for money.  The relationship is easier to see with ordinary goods and services.  If a bumper crop of apples hits the market, the price of apples will fall.  In the same way, if the supply of money increases, interest rates (the price of money) will tend to fall.

There is, however, a real limit to the effectiveness of the process, as we learned painfully in the 1970s stagflation.  Up to that point, faith in Keynesian economic orthodoxy (the standard doctrine of the Democratic party) assured us that increased government spending is the cure for any recession.

To implement decisions of the Federal Reserve Board to reduce interest rates, the open market desk of the New York Federal Reserve Bank creates money with bookkeeping entries and buys Treasury securities from financial institutions.  The result is a net addition to the money supply, which ordinarily will result in lower interest rates and an increased readiness of financial institutions to make more loans.

Such an increase in the money supply precedes any increase in production of goods and services.  The result is to create an overall inflationary push throughout the economy.  More money available to buy the unchanged supply of goods means that prices for goods and services will be bid upwards.

Artificially increased deposits in banks’ hands abets speculative lending, as we saw in the 1990s dot.com boom-and-bust and in the recent collapse of the overbought housing market.

Artificial expansion of our money supply enables us to consume more than we are producing.  Increases in consumer credit, via credit cards and home equity loans, creates an illusion of prosperity that adds fuel to the inflationary fire, driving upwards prices of goods and services.  Foreign exporters such as Japan and China meet the increased demand here with cheaper merchandise manufactured overseas. 

An additional result is loss of jobs here, because our inflated costs make us uncompetitive with those exports from foreign nations.

As our imports grow, the supply of dollars in the hands of central banks in exporting nations balloons beyond our ability to recycle those dollars via offsetting exports of goods that we produce. 

As it becomes more apparent to the rest of the world that the United States cannot redeem those central bank dollar holdings, foreign exchange traders bid the dollar down against other major currencies.  Central banks have already begun to redeploy some of their dollar holdings into other assets and other currencies.  Oil producing countries and others have begun to demand payment for our imports in currencies other than dollars.

The ultimate negative thrust is that, while the Federal Reserve attempts Keynesian efforts to boost the economy with lower interest rates, foreign central banks demand higher interest rates on the U.S. Treasury securities in which most of their dollar holdings are invested in order to compensate for the declining purchasing power of the dollars they hold.  Domestically, institutional investors look down the road and foresee that interest and principal repayments on bonds, five to thirty years from now, will be worth much less in purchasing power, because of inflation.  The rise of interest rates begins to accelerate.

Thus, from both overseas and here at home, pressure mounts for increasingly high interest rates.  As interest rates rise, business profits are squeezed and incentives for increased production are reduced.  More plants lay off workers and we fall into economic recession.

The result is stagflation of the sort that scourged the nation under President Johnson’s Great Society, the last great Democratic party, liberal-progressive money expansion.

Be prepared for a rerun if a Democrat is elected to the presidency this November.  The recessionary impact will be compounded by higher taxes on businesses and upon the wealthy whose savings are essential to finance business capital investment that expands production and jobs.

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Commentary on Education for Slavery

By Kartik Ariyur

The lack of knowledge of history, combined with equating education (etymologically, bringing that which is already within--the Omniscience of the Image of God within everyman) with apprenticeship and vocational training certainly make for a populace ready for slavery. But then, the United States still has a greater proportion of its populace with a true education and a broad enough knowledge of history--somewhere between 10 and 20% would be my guess. So there is much more hope for better conditions. With most young individuals obtaining their information from the Internet through critical study rather than from a single source of propaganda, there is even greater hope.
 
Of course, modern conservatives (also socialists, albeit socialist lite) may well give the socialists the means to gut freedom of speech on the Internet for short term political expediency. This is likely given that they attacked political free speech through McCain Feingold, have opened the door to socialist bureaucratic control of organized religion through government funding of religious charities, and almost got rid of the filibuster in the Senate.

Most other parts of the world are much worse off--the prosperity of Europe, Japan, Korea, Australia, or New Zealand is artificial; they haven’t paid for their defense for a long time. The United States has been paying the bills and has remained in constant war mobilization since WW-II at great cost to itself.

This is because the fall to ignorance is inevitable for any society that devalues its currency to pay for constant war mobilization. Indeed, no war can be paid for without inflation--it is just not possible to have a debate of raising taxes or borrowing under those circumstances.

Under inflation, everyone has to gamble to preserve their capital, and those with little capital end up losing what they have in the boom-bust cycles engendered by inflationary monetary policy. The middle class thus gets wiped out in this process, as has happened in Mexico, Argentina or India. And instead of a smooth gradient from the poor to the rich, you eventually have a society with a lot of extremely rich and poor individuals. Secondly, the middle class and poor have to scramble to make ends meet--they end up working much harder and longer, and then don’t have the time to raise their children. Because the cultural knowledge of dealing with different circumstances is not taught to them, the children default to the instincts of self-preservation and procreation, and this starts a vicious cycle, wherein the rate of degeneration is determined by the rate of inflation.

In the US, this cycle perhaps began during the Presidency of Woodrow Wilson: the Federal Reserve, the temporary Income Tax, and complete abandonment of the noninterventionist foreign policy of the Founders all began in those eight years. From then onward, the ‘conservatives’ have over every election cycle continued to become more ‘liberal.’ Today’s conservatives want to preserve and expand the House that Johnson, Carter and Clinton built (Medicare prescription drug program, No child left behind, and nation building...), just as the conservatives of the 1950s preserved and expanded the House that FDR built (expansion of Social Security, and constant war mobilization combined with a supply of food and credit to the Soviet Union).

But all of these problems have their roots in spiritual progress failing to keep up with material progress--when individuals gain more power without concomitantly gaining more wisdom they end up making more poor choices everyday. Put in another fashion, power corrupts, and enhancement of power without enhancement of character results in the misuse of power. With greater prosperity, individuals have more power in their hands, and liberty is bound to turn into license without a greater awareness of the consequences of one’s actions.

In the political domain the course appears to have been set with the institution of the Interstate Commerce Commission, and the Sherman antitrust Act of 1890. Interventionist policy began with the Spanish-American war of 1898, when society welcomed the Nietzschean Will to Power of Messrs. Hearst and Teddy Roosevelt among others. The secularization of religion--with organized religion taking up political activism rather than increased efforts at character building was another indication. A reverent understanding of the unlimited possibilities of the Infinite, and the inscrutability of His Justice through merely material means was replaced with a Gnostic certainty of ‘what God wanted to get done’--’social justice’--perfecting the world (to the limited lights of human planners who believe they can play God).

There is, as I mention in the first paragraph, much greater hope for America than for most other parts of the world, but that hope does not lie in the sphere of political or social activity. It lies in the efforts of individuals striving for perfection, with a humble awareness of their own fallibility, which eventually attracts the grace of God that removes all limitations. It is only when individuals improve themselves rapidly that they are able to influence others to experiment with cultivating virtue (cognate with virility). This only happens when those around them notice their improvement within their limited attention span. When they manifest the glory that God intends everyman to manifest, they turn many toward their Maker. Tis thus that the ten men good in the eyes of God save their societies from oblivion. If a society doesn’t produce such men in every generation, it will share the destiny of Sodom and Gomorrah. If it produces many of them, there will be a significant expansion of liberty.

Historically, all great expansions of social or political liberty and consequent prosperity have been preceded by a spiritual renaissance--the Reformation in Europe, the several reformations of the Hindus in India, or that of the Greeks due to the schools of Pythagoras and Orpheus. The printing of the King James version of the Bible, the efforts of the Puritans preceded the Glorious Revolution, the Scottish Renaissance and the settlement of many True Pilgrims preceded the American Revolution, the Reformation and the efforts of the Calvinists and Puritans to practice Scriptural tenets in Holland preceded their freedom from Spain, Gandhi making himself a moral man and catalyzing an upsurge of morality enabled a free India (though with a government antithetical to his vision of a confederation of village republics with a minimal federal government conducting foreign policy and coordinating the national defense, an armed citizenry and no standing army).

In closing, there is a condition where the expansion of the money supply need not be harmful. That would happen if the government consistently follows the Hamiltonian ideal.

There are three important components to this ideal besides a very small and therefore highly accountable Federal government: the import of enough capital (individuals with knowledge and character) into itself to offset the expansion of money supply through the increase of productivity. A national debt incurred from this importation of character (into the universities, and for specific pressing needs) large enough that the banks and the established businesses they control do not destabilize the government, but serve to strengthen it in order to recover their dues. The absence of subsidies for individual irresponsibility at the Federal level.

The Founders (the Federalists--Adams and Hamilton) had this policy of importing the best artisans and mechanics from Europe, offering them funds and resources to start up in America. It has been continued to some extent in the present day through the import of scientific and engineering talent into the Universities, mostly for working on defense related science and technology. But there is a need for much greater importation given the present rate of monetary inflation.

Second, there is seldom a need for any society to import labor on a permanent basis--this need has arisen in the United States simply because of the disincentive to work of the welfare state. Moreover, it is much more difficult for labor to quickly become part of the melting pot; the truly educated can adjust easily to new conditions. Indeed, if these steps were assiduously followed without mixing Hamilton with Marx, the US could solve most of its problems quickly. The Jeffersonian ideal of continually decentralizing authority can be attained through using the 14th amendment (in a manner consistent with the rest of the constitution) to limit and decentralize jurisdiction to smaller units (perhaps eventually leading to Jefferson’s Ward Republics) rather than centralizing jurisdiction. Jurisdictions are certain to discriminate against certain individuals, and the Federal government exists so that they can shop jurisdictions. It is only when jurisdictions discriminate against groups that order comes under threat. Greater decentralization of jurisdiction reduces the probability of miscarriages of justice and therefore of violence.

Ironically, Jean Jacques Rousseau, a liberal-progressive of the 1789 French Revolutionary era, spoke of freeing men from the chains of social custom and morality, forged, in his view, by Judeo-Christianity.  Yet it is today’s liberal-progressive educators who have assumed the role of blacksmith to hammer anew the chains of ignorance and slavery onto our children.

When the British North American colonists fought for their independence in 1776 and when they wrote the Constitution in 1787, equality meant equal economic opportunity, unfettered by government, to improve their lives and to pass along the fruit of their labors to their children and grandchildren. 

The focus was upon political and economic freedom.  Today the focus is upon imagined and undeserved rights to enjoy the fruits of others’ labors. 

Those rights exist only to the extent that government arbitrarily confiscates the property and freedoms of others and redistributes them in the name of social justice.  In short, rights, as opposed to liberties, cannot exist outside government that is to some degree tyrannical.

Today’s doctrine - liberal-progressive-socialism - is what Hilaire Belloc called The Servile State.  Today’s educational focus is what Friedrich Hayek called The Road to Serfdom.

Jane S. Shaw, Executive Vice President at the J.W. Pope Center for Higher Education Policy in Raleigh, North Carolina, alerted me to an article titled Ignoring the Ideological Elephant in the Room.

It describes one aspect of the process by which today’s college professors, the bomb-throwing student radicals of the late 1960s and early 70s and their acolytes and progeny, fasten the chains of political and philosophical ignorance upon callow youth.

It also highlights the mischief arising from the ahistorical view that college education is little more than preparation for a high-paying job.  Unthinking voters are led to believe that the essential need in education is spending more money, without regard for the purposes to which the spending is put.

Key quotations from the article:

The state university system recently invested considerable time and money in the UNC Tomorrow Commission to see how North Carolina’s public colleges can “best meet the needs of the state and its people over the next 20 years.” The commission placed particular emphasis on how to provide for the future prosperity of North Carolina.

They traveled the state and spoke to hundreds of people from all walks of life. Yet one of the most important questions was not asked: is what we are teaching our students in the classroom going to produce a prosperous and free North Carolina?

...It wasn’t that long ago when most people understood that there was a real threat to freedom posed by the collectivist philosophy. The tendency for countries ruled by collective regimes to condemn many of their citizens to forced labor camps was well documented in books like Alexander Solzhenitsyn’s “The Gulag Archipelago,” an expose of the former Soviet Union’s treatment of political prisoners, and films like “The Killing Fields,” which chronicled how half of Cambodia’s population was either killed or driven into exile through a brutal system of “permanent revolution.”

Today, many people seem to feel that any danger from collectivist ideologies ended when the Berlin Wall was dismantled in 1989.  Yet Russia is returning to the more authoritarian ways of the old Soviet Union. The educational systems in the supposedly benevolent welfare-state countries of France and Germany now teach elementary and high school students “that economic principles such as capitalism, free markets, and entrepreneurship are savage, unhealthy, and immoral”...

When children indoctrinated to such beliefs from an early age reach their majority, they are likely to produce a society where the factors that determine prosperity, such as innovation and the accumulation of capital, will be eyed with suspicion or punished. 

In the United States, these ideas have found long refuge in our universities, and their adherents are thriving. Of what value is an education, when the best that can be hoped is that the students sitting in their classrooms will ignore their lessons?

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As G. K. Chesterton wrote in The Everlasting Man, ancient Rome’s great rival in the period of the republic was Carthage.  Along with Tyre, at the eastern end of the Mediterranean, Carthage, in Chesterton’s characterization, was a Phoenician city-state dominated by commercial councils who cared little for spiritual religion based on principles of morality and benevolence.  Everything was measured in money and goods, even propitiating the gods and seeking their favor.

Carthage’s principal deity was Moloch, a particular object of hatred by the Romans. 

Rome’s deities were relatively benevolent, representing the spirit of home, hearth, and agriculture.  In violent contrast, Moloch demanded of his worshippers a steady sacrifice of young babies, who were placed in the metal arms of Moloch’s image over a raging fire, where the infants were burned to death.  In recent times, archaeologists excavating the site of ancient Carthage have uncovered altar sites surrounded by large numbers of human infant skeletons.

We have sixteen references in the Bible to the barbarity of Moloch worshipping.  In the earliest of these, recounting God’s injunctions to Moses roughly 3,500 years ago, we read:

‘Do not give any of your children to be sacrificed [or to be passed through the fire ] to Molech, for you must not profane the name of your God. I am the LORD. (Leviticus 18:21)


Sacrificing some of their children to Moloch was simply good business practice in a Carthagenian society dominated by a materialistic philosophy.  Moloch worship effectively continues to the present day, albeit in a more attenuated form.  For today’s liberal-progressive politicians, sacrificing the young working people a couple of decades hence to staggeringly high taxes is just good political business.

Liberal politicians and a public besotted with welfare handouts get what they want today, measured strictly in materialistic terms, while ignoring their longer-term social responsibilities.

Liberal-progressive-socialist politicians, intent upon buying votes of the masses, deliberately ignore the ongoing sacrifice of young, working people on the materialistic altar of mandated welfare-state spending for Social Security, Medicare, and Medicaid.  As with the Carthagenian ruling councils, it’s all about near-term political success, without a scruple over immolating our children.

The ratio of younger workers to older folks on Social Security and Medicare-Medicaid is rapidly declining.  FICA taxes have risen relentlessly.  One of two things must occur over the next couple of decades.  Either taxes on future young workers will rise to devastating levels, or today’s young workers will not receive the welfare handouts for which they now labor.

Present-day liberal-progressive politicians ask why should they fix the roof today, when the rain won’t come until tomorrow.  Let someone else deal with the disaster in the future.  Meanwhile just keep piling more young workers on the altar pyre of modern-day, liberal-progressive Moloch.

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