On Power

I start with the disclaimer, that I form my thoughts as a rank of a student on these subjects. Minds of ponderous weight have contributed to these issues and I hold their intellectual ability in the highest regard. I just want to exercise the process of rationalization to the multitude of information on this topic that plagues our modern world.

Of late I have pondered over the idea of "caution against the undue concentration of power". To me it appears that a lot of social issues arise from disparity in power. Power works in many ways, and although , it has beneficial outcomes, when used in a paternalistic manner, I will focus on the issue of excessive power, which despite its outcome, appears ominous to me.

As a child, you may encounter the use of excessive power in the form of an over-bearing teacher. I vouch that the Indian schooling system is sprinkled with them. You also encounter power in your own parents. Excessive power almost always has the effect of undermining the ability of the less-powerful party to negotiate. This ends up making them feel helpless & disgruntled. Hopefully, some of the cases, listed above, that kind of power is mediated with benevolence and love, which makes it bearable, perhaps, to the degree, that one does not think about it.

But, I did not start thinking about the subject due to repressed memories of childhood.  I thought about it because of the tumultuous political storm that has gripped the world over the past 5-6 years. I am interested in political power. I have heard, and have been enticed by many ideological philosophies regarding the matter. Essentially, there are two flavors - One which states that political power should be dismantled and another which is convinced of the benevolence of "Big Government".

I wonder if the believers in "Big Government" think of it as a countermeasure to what they perceive to be the concentration of  "private economic power". I think that is a valid assumption, in that, most government policies pander to the masses in a democracy at the cost of those who can pay - which happens to be a minority in many cases. However, it has been pointed out to me that once assembled , the power center of government is coerced by economic power centers to be a proxy for capitalists and special interest groups. This seems reasonable to me, since I think politicians like any individual are profit-motivated, and once elected, there is little "monetary profit" in uplifting the masses.

In essence, I see the world as a collection of entities, each desiring to maximize its profit. Some of these endeavors are considered "good" and others are loathed- largely determined in some sort of consensus driven by the populous. And what comes of this is the desire to prop up power centers to protect what one sees as their interests.

I see the great usurpation of liberty once we allow government to intervene in things that one may hold sacrosanct and beyond the realm of governance. But, I am not certain that "free markets" solve the issues of disparity either.  I am told that a free market is the perfect system, wherein the competing forces balance each other. I am also told that there is incredible efficiency in the market that always keep prices at the lowest level possible. This, I find, very very difficult to grasp. What are the initial conditions here?

Let us talk about the element of competition. The assumption is that in a free market, it is this element that serves as internal system of measures and checks, and hence does not need any scrutiny from a third party - a benevolent government, for e.g. But I find this assumption deeply flawed, I know of only one system that was ever truly a free market - the system of evolution. Over billions of years, organisms of all sorts competed openly for resources without any "regulation", without any "control". I think we all agree that "competition" is a process of selection and not that of co-existence. It appears man has come out on top of this process. The competition between the other participants and man is over -  Man has monopoly of every resource available, other participants have no ability to negotiate.

The other element is efficiency. What does this mean? I have heard, that the market always distributes resources to those who value it the most - and this is efficiency.... Hmmm? Now what does "value" mean?
Are we saying that a man dying of hunger values food less than a man who can afford it? Well, we need to revisit efficiency and if thats really the way to go.

I think what I fear, is that free markets although allowing competition, will eventually destroy it. That eventual victors always emerge and can prop up barriers that have nothing to do with legislation. Barriers can be propped by secrecy, by force, by association with others who prop barriers. There is nothing in the free markets, in my opinion, that will stop this kind of concentration of economic power. And in such a world, despite small government, and the celebration of liberty, nothing will prevent the lopsided nature of negotiations between those who wield power and those who dont, not much unlike today.

It might appear that I am making a classic Marxist argument, except that I started with the observation that usurpation of power by the public is eventually self-defeating as well. I believe the contribution of "liberty" to your well being is over-rated. In itself, liberty means nothing without the ability to participate in a market. Your freedom to participate and your ability are two very different things.

So far, in what I understand, as appealing as I find the idea of personal liberty , and as unfair I find the notion of progressive taxation and all other elements of heavy-handed governance, I am not quite bowled over by Milton Friedman. I am not proposing answers but highlighting my lack of conviction in what I understand of extant economic-political ideology.  I am still looking for many answers, especially regarding the never ending battle for personal liberty and the "common good".

"End the Fed"

I had an interesting read of this one. I learned several things. I was convinced of many of the points that Ron Paul made, others not so much.

In essence what I understood was that Ron Paul claims that the system of fiat monopoly and the unethical standards of direction and leadership of the Fed is the root cause of pretty much all of America's economic woes - these include the housing bubble, all bubbles before that, the following depression and all of the ones before that. The argument made is fairly easy to grasp, i.e. inflationary monetary policy provides false sense of security to participants in an economy and just perpetuates a cycle of boom and busts.

One of the points that hit home with me, was the lack of oversight with which the fed acts. I am not convinced that government oversight would somehow fix all the problems, but still, the fact that an institution that is supposed to behave in the best interest of the people, is shrouded in secrecy and lacks any transparancy.

Ron Paul goes to some length to explain some of his libertarian views as well. I found the idea of the sanctity of personal freedoms very appealing.  In that sense, I found myself seeing the problem of too much governmental power and the degree to which statism limits personal liberties. Not to mention that the people in government are corrupt and are influenced by special interest groups. What I lacked clarity on was the alternatives to big government. Big governments arise from the need of the majority to be given security blankets. I am not sure if I understand how we can circumvent this fundamental issue of democracy. i.e. How do we address poverty and hunger and the desperate circumstances of the severely dispossessed and uphold personal liberties at the same time? To me those two seem to be at irreconcilable odds.

He goes on to say that the powers vested in the fed are un-constitutional . Although I was convinced of this argument, I am not sure that in itself it is a morally strong one. That would imply that the constitution dictates a doctrine that is perfectly moral. Or a template of  "perfect economy" , for that matter.

In any case, I would like to summarize:
I see that low interest rates can spawn speculative behavior leading to unrealistic prices of assets and subsequent realizations of the speculative nature can lead to precipitous drops.
I feel that certain personal liberties are sacrosanct and should not be held hostage to the whims of the masses. However, I am certain that in the entire history of humanity, these boundaries of personal liberties have been drawn, encroached and re-drawn.
I am still not sure what exactly happened in 2008.
I felt that Ron Paul does not present a balanced view. i.e. he does not criticize the gold standard at all. He presents it as a solution for all. This I find far-fetched.

I will probably go on to read either the work of an economist from the "Austrian School" to further deepen my understanding of Ron Paul's position or perhaps read Paul Krugman to get a Keynesian POV. At least, I understand that, those schools of thought are in direct constrast to each other ( at least in parts)...