Bank bashing popular, but taxpayers lose, too

Photo: Queensland Newspapers Pty Ltd [Public domain], via Wikimedia Commons

I am imagining the populist sentiment: "About time those banks got some of their own back!" 

But this won't make much difference to the banks, that will simply pass on the costs to shareholders and consumers. This is effectively a tax increase on anybody who has a bank account and anybody who has a superannuation fund - in effect, almost everybody of working age. 

The Treasurer, Scott Morrison, saying "Cry me a river" sounds funny, but the populists should be crying in their soup, even though they won't because, despite paying more, they will do so without knowing. As a political scientist, this is the part that fascinates me.

Extracting more revenue from successful Australian industries is now de rigueur. Australia's penchant for tall poppy syndrome lends popular support for governments to go after any part of the economy that dares to do well. 

Sometimes there is good reason to rein in the cost of externalities like pollution, but doing so using a populist approach to attack the mining industry ended in disaster for everyone. Australians missed the opportunity to capture the benefits of the mining boom and then forgot to implement a proper emissions trading scheme.

If the targeting of industries for revenue extraction was based on the prevalence of high-wealth individuals in the Forbes list, then the packaging and media industries should get a guernsey, too. Note there are no bankers on the list!

It will be interesting to see how the banks react. The carbon tax potentially impacted mining industry profits (it is difficult to pass on costs to customers in commodity export industries). And the Association of Mining and Exploration Companies' advertisements worked.

The big question is whether the banks will do the same. They may simply pass on the costs to consumers and quietly simmer away. But I daresay the backlash has already started.

What I find interesting is the basis of the claims and counter-claims about industry profitability and the value of particular industries to the nation. Given that almost all Australian workers have super funds that invest in Australian shares, which more than likely include the big miners and the big banks, one might think that targeting successful industries was counter-productive.

By way of example, BHP's performance since the global financial crisis (GFC) of 2008 is shown below. Notice how, due to global market factors and the change in value of the Australian dollar, BHP shares have not recovered their pre-GFC value.

ASX: BHP via Google , 9 May 2017

The Commonwealth Bank, however, has been travelling quite well. What happens to the share value of the major banks remains to be seen, but it can't be good for investors.

ASX:CBA via Google, 9 May 2017

If the major banks choose to pass on the increased costs to shareholders and consumers, the impact upon households may be significant. If the Australian Bankers' Association launches a counter-offensive, then the budget will be ineffective as in past years.

How did this happen? I suspect that the lumbering, inefficient nature of liberal democracy is largely to blame. Citizens do not want to pay more tax, consumers do not want to pay higher prices, but somebody has to pay.

If only it could be as simple as saying this is what everything costs, and this is how much tax will be charged. But it is never so simple. The political process is inevitable. The only way to overcome politics is to allow tyranny. Most people don't want this, so the system evolves as it has.

But a cold, dispassionate view of the tax on the banks is that it is effectively a tax increase for everyone. That governments have to use smoke and mirrors to increase taxes is a consequence of the political process.

Harold Lasswell's famous definition holds true: "Politics is who gets what, when, how". The key to good politics today is to hide how the getting gets done, and I think populism helps this cause immensely.

PS: Ironically, the ABC's Budget Winners and Losers list shows taxpayers and banks side by side!

From Brad Baranowski, Aeon: How Robert Nozick put a purple prose bomb under analytical philosophy

Photo: Suzy Dubot CC0 (Public Domain)

Libertarians are a quarrelsome lot. Debates about who is the better von, Hayek or Mises, rivalries between the Austrian and the Chicago schools of economics, and fights among Ayn Rand’s objectivists and Murray Rothbard’s Circle Bastiat – schisms that would make a Leftist blush – have rent libertarianism. So heads turned when one of their fold decided to throw in the towel on arguing.

Robert Nozick (1938-2002) was not averse to controversy. Five years after arriving at Harvard, he published Anarchy, State, and Utopia (1974). A response to John Rawls, who had just published the monumental A Theory of Justice (1971), Nozick outlined the libertarian case for limited government. While plenty found A Theory of Justice unconvincing, critics found Anarchy, State, and Utopia to be unsavoury. One reviewer equated Nozick to ‘the average owner of a filling station’ whose only joy in life comes from ‘grousing about paying taxes’.

Such criticisms stung. ‘Is not the minimal state,’ Nozik’s book had asked, ‘an inspiring vision?’ A state stripped down to providing protection and enforcing contracts was simple and elegant. It was an art form, enchanting and efficient. Why didn’t others see this beauty? A sickness, answered Nozick, had descended upon Anglo-American thought. This illness had transformed intellectual life into a fit of assertion and counter-assertion. Nowhere was this impulse more malignant than in his own discipline, philosophy.

Postwar American philosophy departments were not famous for providing insights about living the good life. Dominated by philosophical analysis – a movement preoccupied with logic – professional philosophers neglected or even condescended to issues of broader interest such as ethics. In The Rise of Scientific Philosophy (1951), Hans Reichenbach, a prominent defender of analysis, asserted: ‘Those philosophers who are willing to derive moral directives from their philosophies can only offer you a sham proof.’ Proof, in this rigorous, new philosophy, was everything.

Nozick had studied philosophy as a graduate student at Princeton University during the early 1960s, writing his dissertation about logical notation and decision theory. Few other topics were appropriate. Analytical philosophers made up the bulk of the faculty, and they sniffed at ethics and aesthetics. ‘There was a purity about the air,’ recalled one graduate student. Professors believed that there ‘were philosophical wars to be fought, with good guys and bad guys’. The latter, those who talked about the good and the bad, were easy targets. As W V O Quine, the philosopher whose work launched many dissertations, declared in 1953, ‘philosophy of science is philosophy enough’. All other approaches should be purged.

By the 1980s, Nozick had had enough of this mode of philosophical enquiry. ‘The language of analytic philosophy,’ he complained, ‘“forces” the reader to a conclusion through a knock-down argument.’ Discussion thus became a zero-sum game. If the loser of an argument did not accept his opponent’s conclusion ‘he dies’, a victim of his own mental weaknesses. Among the collateral damages of this aggression was an appreciation of intellectual diversity. Nozick aspired to pacify philosophy.

He was not alone. At nearly the same time, three highly regarded analytical philosophers began an intellectual guerrilla war within the discipline, breaking down the conceptual barricades against the value-talk that the previous generation had erected.

In 1979, Douglas Hofstadter battled the widely held perception that formal logic was impenetrable, showing in Gödel, Escher, Bach how cognition ran around a ‘strange loop’ of self-reference. The same year, Richard Rorty staged a coup against academic epistemology, calling it a ‘self-deceptive effort’ in Philosophy and the Mirror of Nature. Following these engagements, Alasdair MacIntyre launched a frontal assault on contemporary meta-ethics in After Virtue (1981), decrying how the ahistorical assumptions of contemporary moral thought had created a new dark age.

‘I want to speak of the purity and dignity of an apple, the explosive joy and sexuality of a strawberry’

In Philosophical Explanations (1981), Nozick opened a new line of attack. Philosophers, he posited, would be better off if they stopped trying to prove things like scientists, an impulse he believed led thinkers to overlook how philosophy might stimulate the ‘mind’s excitement and sensuality’. Rather, they ought to limit themselves to explaining how a system of thought is possible. This would allow a ‘basketful’ of approaches to exist within philosophy, transforming it into an art form, one that sculpted ‘ideas, value, and meaning into new constellations, reverberative with mythic power’. Such an attitude would also recognise philosophers for what they were: ‘valuable and precious’, free to mould and express their lives as artists do theirs.

This big change in conceptualising philosophy liberated Nozick. He now discussed topics ranging from explorations of modern poetry and Hindu theology, to considerations of parenthood, emotions, and personal enlightenment. Gone, too, were the formal equations of his dissertation, replaced with the considerably looser prose in his next book, The Examined Life (1989), a series of informal reflections on life, death, and fruit. ‘I want to speak of the purity and dignity of an apple,’ he waxed in a representative passage, ‘the explosive joy and sexuality of a strawberry.’ Remarking on the shift in style himself, he admitted that he would have found this second line ‘ridiculously overblown once’. Some of his readers still did. As the British philosopher Bernard Williams observed, reading Nozick’s later work was like watching ‘a commercial for breakfast food’.

Purple prose aside, Nozick largely won praise from his colleagues. He had appeared, as one reviewer wrote, like a ‘knight in shining armour’, rescuing his peers from doing obscurantist philosophy. Thanks to his willingness to quit arguing and start explaining, philosophy had rediscovered its obligation to provide the public with lessons about living the good life. The Canadian philosopher Ian Hacking thought it nothing less than the ‘rebirth of philosophy’. Lost in this ballyhoo was the irony that a man who, in the previous decade, had argued for the moral benefits of privatisation, now spearheaded philosophy’s concern with the intellectual commons.

Of course, it had become easy to overlook such political incongruities. Nozick certainly did. If his libertarianism had gained a joie de vivre, it had done so by diluting its original raison d’être. Students should read Max Weber or Karl Marx, he contended in Philosophical Explanations, not because these authors provided insights into how society functioned. On the contrary, these political theorists were notable because their books are part of the ‘long list of human accomplishment, striving, and excellence’. Capital (1867-94) was a model of what hard work could achieve, not a book about how hard work is.

The same standard applied to Nozick’s own work. ‘The libertarian position I once propounded now seems to me seriously inadequate,’ he announced in The Examined Life. From here on out, he would apply his libertarianism inwardly, focusing on the cultivation of his self rather than the destruction of the state. While this admission shocked admirers of Anarchy, State, and Utopia, it was a logical outgrowth of the author’s intellectual development. After all, this was the man who had declared that attempting to convince others of your views – the modus operandi of politics – was a ‘philosophically pointless task’. For Nozick, libertarianism had ceased to be an ideology. It had become a lifestyle, one that was not better or worse than any other – at least, not arguably so.

Brad Baranowski

This article was originally published at Aeon and has been republished under Creative Commons CC-BY-ND 4.0.

"Into the Wild" but not Out of the Misery, or: First World Problems are simply history repeating...

Fairbanks City bus, Stampede Trail, Alaska, where Christopher McCandless starved to death in 1992.

A recent email from The Atlantic explains how, in 1857, Henry Wadsworth Longfellow, Ralph Waldo Emerson, and James Russell Lowell sat down for dinner (Harriet Beecher Stowe wouldn't go because alcohol was being served), and the iconic magazine was born. The Atlantic "would make politics, literature, and the arts its chief concerns". 

For a long time I have been fascinated by these very things, but since the beginnings of the twenty-first century, I have become somewhat pessimistic about the prospects for humanity. 

Art and literature, fine; but politics? For a political scientist to be jaded at politics, things must be really bad. Oh woe is me. Turns out this is a First World Problem.

The first indicator came via Scott Pape, the Barefoot Investor. I like Pape's newsletters. He tells people straight: 

Old Lady: "Sir, we can't afford our McMansion, what can we do?"

Barefoot Investor: "Sell it and move into a smaller house you can afford, moron!"

This evening I watched Sean Penn's 2007 movie Into the Wild (based on the non-fiction book by Jon Krakaeur). This was no Hollywood sap story, and finding it on Netflix was a bonus (I had it sitting in my inbox as a "must watch" movie that Google had informed me about, no doubt because I recently read and blogged about Rolf Potts' book Vagabonding). 

As "Alexander Supertramp" travels throughout North America as a rejection of modern materialism, it had me thinking about my tiff with politics. And I was thinking about how the more things change, the more things stay the same.

As I read historical literature, the same old patterns keep repeating. Willa Cather said it best in O Pioneers: 

...there are only two or three human stories, and they go on repeating themselves as fiercely as if they had never happened before...

Fairbanks Bus 142 (pictured above), where McCandless was found starved to death, has become a pilgrimage site since the book and the movie. This is creating its own problems, not to mention some rather tacky re-enactments.

But pilgrims do what pilgrims do, and nothing much has changed since Ibn Battutah's time. Even Virgil was bemoaning the loss of the pastoral life that didn't exist for most people way back when.

The reaction to McCandless' plight provides an apt metaphor for contemporary politics. In the words of the book's author, Jon Krakaeur:

I’ve received thousands of letters from people who admire McCandless for his rejection of conformity and materialism in order to discover what was authentic and what was not, to test himself, to experience the raw throb of life without a safety net. But I’ve also received plenty of mail from people who think he was an idiot who came to grief because he was arrogant, woefully unprepared, mentally unbalanced, and possibly suicidal.

What does it all mean? Different things to different people. Some sick of experts telling them how to be, others sick of populism undoing all that is good for others. 

None of this is new. It is the same old story. And being jaded is a First World Problem. Although it may still be end of empire, it probably won't happen before my time is up. 

So what is there to be jaded about? For this, I return to the ancient wisdom of the Stoics, and the words of Marcus Aurelius:

You have power over your mind - not outside events. Realize this, and you will find strength.

I suppose I won't need to go on the wallaby to grapple with contemporary politics, after all. And what I find repulsive today will be the fascinating beginnings of post-truth politics in years to come. I don't need to go on a pilgrimage or recreate McCandless's photograph, maybe just somewhere in between.

Amazing what can happen to one after watching a movie that is un-Disneyfied. Shakespeare-esque is much better!