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The Contrarian Manifesto
Boom or Bust? We're Always Wrong
NEW YORK -- My father taught me to go left.
Not politically. He was a right-wing Republican. At the movies.
"Most people choose the right entrance," he told me. "There are usually more seats on the left side of the theater." I've found that to be true.
He dressed like a conformist. But Dad was a contrarian. "If you don't know what to do," he said, "do the exact opposite of what everyone else is doing. On average, conventional wisdom is always wrong. Run away from the crowd--and you'll come out ahead in the long run."
Never has the wisdom of his words been more apparent than now. Acting like Chicken Little proven right--this time, the sky really is falling--government and business are making decisions that are the exact opposite of the right ones.
Which is nothing new. Politicians and businessmen also do the exact opposite of what they should do during boom times too.
Consider prison policy. Hit hard by the Depression that began in 2008, cash-strapped states are releasing prisoners early. California's early-release bill even eliminated supervised parole. Because the average recidivism rate is 80 percent, "[unsupervised parole] is designed to reduce the number of parolees returned to prison, essentially because the state will not know if they are violating the terms of their parole," reports The Contra Costa Times.
But facing a state underemployment rate of 23 percent, California parolees have no real chance of finding work. Most will commit more crimes. From the standpoint of social stability and public safety, it would make more sense to keep them locked up.
If anything, a better time for leniency would have been the 1980s and 1990s. Jobs were plentiful. Wages were steady. Some employers, dealing with a tight labor market, would have welcomed ex-cons. Criminals could have gone straight. But leniency is not what happened.
Instead, "tough on crime" politicians pushed through longer sentences, fueling a massive boom in prison construction. In 1975 there were fewer than 600 state prisons in the U.S. By 2000 there were over a thousand--a 70 percent increase.
Many of those prisons are now being closed due to budget cuts.
If the leaders of our government and major corporations were smart, they would respond to booms and busts the opposite of the way they do.
During a boom, salaries are high. Stock prices rise. State and federal tax revenues go up. Governments run a surplus. Soon we hear calls to "give back" the people's money--by cutting their taxes. As a result, tax rates fall. So do government revenues.
This is stupid. During a period of economic growth and low unemployment, governments should increase taxes. After all, people can afford to pay more when they earn more. And booms eventually end. So some surplus should be set aside for a rainy day.
During a bust, salaries stagnate or decline. Securities markets seize up or crash. Governments run into fiscal trouble. So they raise taxes.
This is stupid too. People are broke. The last thing they can afford during a recession is higher taxes. Governments should cut taxes when the economy sucks. They should be drawing on that big nest egg they should have stashed away during the fat years to pay bills and stimulate recovery.
The Stupid Opposite Game has been in full effect since the mid-1990s. Bill Clinton, who presided over the largest and longest economic expansion in U.S. history, slashed income taxes. Barack Obama, dealing with the gravest economic catastrophe since the 19th century, is effectively increasing them. To Obama's credit, he doesn't have a choice. The cycle can only be broken during a boom. It has to begin with that nest egg.
Then there's spending.
Obama is a typical victim of the fear reflex, proposing a budget that freezes federal spending for the rest of his term--except for the military. Hit especially hard would be the Army Corps of Engineers and NASA.
This is exactly the opposite of the budget he ought to be proposing. The Army Corps of Engineers builds the massive public works projects that create a ripple effect through the economy, immediately employing thousands of workers and leaving a legacy of infrastructure that can promote future economic growth. As FDR did during the 1930s, Obama ought to increase spending on infrastructure. Funding for NASA ends up paying a lot of salaries for scientists--people we ought to be encouraging.
The military budget, on the other hand, ought to be slashed. True, wars stimulate the economy. But they cost more than they earn--in lives, subsequent foreign aid and international contempt.
If CEOs and government officials were smart, they would be hiring like crazy. Millions of smart people are out of work. They can be hired much more cheaply than in the late 1990s. Plus they'll stay longer. Competitors real and imagined have vanished. There's less pressure to expand too quickly.
Venture capitalists ought to be loosening, not tightening, their purse strings. After all, there's no better time to start a new business. Eighteen of the top 30 Dow Jones index companies were founded during economic downturns, including Johnson & Johnson, Caterpillar, McDonald's, Walt Disney, Adobe, Intel, Compaq and Microsoft.
So what is a good contrarian to do? Celebrate. Take chances. Because the sky really is falling--and that's great.
22 Comments so far
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Thank you Ted. It is a amazing when I argue with people who lean right on the discussion of Tax Cuts. It always seems since the early 80's of good times "Tax Cuts", then we get a downturn and the Feds seem to remain ok but the States and Local Governments seem to get hit the hardest. The other argument is "cut that agency, but not ours". Anyway you made very good points. When will CNN, Fox, and all the rest get it?
Ah. A fellow contrarian! Hiya neighbor, My own father never expressed himself as your's did but he lived his life as a contrarian and I followed his example. I always seat on the left as well.
If only we had the sense to store up for the bad times -- which we KNOW will be coming if we didn't let our greed get the better of us. But we are so short-sighted and have such short memories we forget, or ignore, that boom and bust is a constant in history. And will be as long as we utilize a corrupting form of capitalism as our economic system.
It's lonely being a contrarian. People are so set in their conservative (I don't mean necessarily ideological) ways. It cause conflicts. I went my own way nevertheless. Had some good times and some really bad times but stuck to my guns. If most people think so -- hold on to your wallet so to speak.
People can be so stupid -- especially when they depend too much on "common sense," as that's just what people USUALLY do and think. And if that was so sensible why are things so screwed up?
So here's to being a contrarian. Hip-hip-hooray.
Gary
“When someone cries "fire" in a crowded theater, a contrarian is the person who first checks to see if there really is a fire before rushing to the door”
-- unknown
Good thinking, Ted. However, with human nature the way it always is, nothing will change, as most people follow the crowd right over the cliff, like the herd of sheep following the leader, who is blind. Don`t worry though, with our next generation all depending on their magic cell-phones to do everything but eat for them, the country has a bright future.
True.
When Dubya stole the 2000 election we thought about leaving the US until we realized that globalization has tied 99% of us together. We can run but we can't hide. Unless you are wealthy enough to buy influence you are going to get screwed.
Ted misses one thing about why the right is winning and that is the left is divided between practical vs ideal. Before anyone flames me or calls me a status quo shill, I don't support Obama's plans on slashing domestic spending while increasing military spending. The reason Obama is staying to the right is he joins the side that is crowded which means that if more right wingers take action to pressure him compared to the progressive left, then guess who wins. The other day when Senator John Marty's article on single payer came up, a few people were pessimistic and said that as soon as John Marty wins, he will be stopped. That is where it is up to us to step in and keep the pressure on our elected officials. It doesn't matter if the Democrats win or the Green Party wins. Corruption will always be a golden opportunity for the right wing ruling class unless we put aside our Democrat vs Green and ideal vs practical differences and keep putting pressure. Obviously, I can't do it alone but if everyone does it, then everyone wins. In short, voting alone isn't enough. Obama, Nader, Barr, or Mckinney, the president will remain fearful of the right wing ruling class until we progressives unite and pressure. Last year's push for single payer petitioning showed that with only thousands instead of millions of signatures and peacefully protesting in millions, guess who won? Some people think it is idealist of me to suggest cooperation from millions but it is idealist to expect a leader to listen to left when there is more pressure from the far right compared to the left.
As I've posted on Mr. Rall's site:
--
1) There has been no real, substantive "expansion" since the early 1970's.
It's all smoke and mirrors, mostly in the form of debt.
See:
http://www.shadowstats.com/
and
http://www.rprogress.org/sustainability_indicators/genuine_progress_indicator.htm
2) Please--seriously, you're obviously smart enough to know better--stop the Growth talk.
The myth of infinite growth on our finite planet rates high among our fundamental problems.
Simply stated, we're not going to grow, consume and indebt our way out of the problems of growth, consumption and debt.
--
And
--
To follow up on my previous comment, you and readers might benefit from this review (tinyurl.com/ye7nxyr) of William Catton, Jr's new book, Bottleneck: Humanity's Impending Impasse.
Not to mention the Worldwatch Institute's, State of the World 2010 (tinyurl.com/y8tra9z), which, ironically, has been featured in Common Dreams (tinyurl.com/y9mxzz2).
We're living at the end of empire, during the century of contraction, in a culture of make believe.
All this talk of new-and-improved, more absorbent, home-made, gourmet, zesty, no-money-down, endless, booming, business-as-usual, exponential Growth is as counterproductive and clueless as it gets.
Rall, while raising some good points, totally misses the big picture. Thanks for the links. Also see Prof. Michael Hudson's excellent article on Counterpunch recently:
http://www.counterpunch.org/hudson02022010.html
This helps explain why Bizarro World (USA) is going through such tough times now. North of the border things are going pretty much as they were before the Great American Recession. Housing still appreciates (no subprime mortgages), taxes never change (always pretty high, but as this article points out, that can be a good thing), and the economy is fine (no gazillion dollar bailouts for the stupid super-rich). To the extent that Canada has "suffered" it is only because it has so foolishly allowed its economic foundation to be hitched to the falling star of the south.
If the US was capable of learning from its mistakes - which is doubtful - it would take the advise of this article and the example of the rest of the world to heart. But, alas.
gladtobeincanada
If only we could be more like the paragon to the North, sigh. :)
Just give them time.
From the sort of tax hating, public sector-hating, union- hating reader commentary I read in Toronto Star articles, the ghosts of Reagan and Rand are stalking the land across the lakes and that 49th parallel big time.
"the ghosts of Reagan and Rand are stalking the land across the lakes".
This too is very true. But there's a difference. Canadians have a deep abiding faith in the concept of The Commons. Reagan and Rand will always be a fringe factor here, unlike in the States. (Even as a novelty you hate to see it, but what can you do?).
Oh, you know what? I just realized something. You get paid with our taxes don't you? You are a government employee. No one else I've noticed posts so many comments about "tax-haters" so you must get paid with our tax money right?
I realize this is off-topic but: Police officers, teachers, prison guards and firefighters get paid with tax money as well. We should fire all of them and save a few bucks eh?
It is off-topic. My point was that someone who posts comments on CD all the time accusing people who oppose tax increases of being heartless should disclose if they are paid with tax money.
But to answer your question... I think the War on Drugs is a big waste of money and there are too many prisons and too many unjustly incarcerated people who are disproportionately people of color. I think we should be closing prisons and firing police. Teachers and firefighters I don't think are a problem. And the biggest most wasteful part of the government is the military and we should fire everyone and we should close down the entire defense department and every security agency.
I don't know who pjd412 works for but considering how angry they get with me, probably Homeland Security or something.
"Politicians and businessmen also do the exact opposite of what they should do during boom times too."
And almost all are conservatives on the take.
Exaclty, the slick conservative D pary and the nutty conservative R party.
I agree with the "slick D" conservatives comment, but I don't think "nutty" is a good description for psychotic, fear driven, greedhead, war-mongering, "troglodyte R" conservatives.
"But facing a state underemployment rate of 23 percent, California parolees have no real chance of finding work. Most will commit more crimes."
I need proof that shows parolees will commit more crimes during this recession than during boom times. Many--if not most of the parolees are those who were incarcerated under the stringent requirements of California's mandatory sentencing laws--and were given more time than most countries and most states would give for the same crime. Some sixty- and seventy- year olds are not a danger to society and should be let out.
Anyone know the fastest way out of Dodge?
The only people they really need to impose more taxation on are the richest 1% and corporations.
Why is Ted Rall so smarmy? Is it his schtick? He's like a parody of a Gen X'er. I wonder if he still hates his dad.
Erratum: Bill Clinton did not slash taxes. He raised taxes on the rich.