Naomi Klein, Profit and Freedom

James Delingpole and Bella Gerens have both been taking shots at Naomi Klein’s recent article in The Nation, Capitalism vs. the Climate, in which she wrote, among other things:

It means that a green-left worldview, which rejects mere reformism and challenges the centrality of profit in our economy, offers humanity’s best hope of overcoming these overlapping crises.

It’s one of the central dogmas of the Left that Profit Is Evil. In fact, it used to be one of my own dogmas. If something cost some amount of work to make, shouldn’t it be sold at that price? Wasn’t selling it for a higher price a form of theft, and asking something for nothing?

That’s how I used to think, but it’s not how I think any more. My thinking about this didn’t change because of anything I’d read anywhere. It came of beginning to see that a great many goods not only cost some amount of time to make, but also in use provided some amount of time in return.

Take something as simple as food. It costs some amount of time to produce food. But that food, when consumed, provides some period of continued life (what Buckminster Fuller called “forward days”). It’s the most elementary fact of life. Food has a cost, but it also has a value, both of which can be measured in hours or days. It may cost, for example, 2 hours of effort to produce some food, and that food keeps you alive for 10 hours.

And the interesting thing about this elementary fact of life is that the amount of forward days of life that food provides must be greater than or equal to the amount of time it takes to produce that food. And in practice this means that it must always be greater. Because if it’s less, you’ll soon be dead.

And here’s an example – perhaps the prime example – of how doing some work generates more of something than was originally invested in it.  It’s a way of getting something for nothing, or more for less. You work 2 hours, and you win 10 hours.

And this elementary fact of life is in turn reflected in the economy in which such goods are traded. They’ll regularly sell for more than they cost to make.

And that’s where profit comes from.

So if, like Naomi Klein, you wish to “challenge the centrality of profit in our economy”, you may as well be challenging the centrality of gravity or energy or the laws of motion in our universe.

Because it really is that fundamental. We can’t live without profit. When profit has been banished from the world, life also will have been banished. For all life, from plants to animals, relies on the natural profitability of nature – as plants scoop up enough sunlight in the daytime to last them through the night, and animals eat enough sugar-laden plants to also see them through the night.

But I’ve never seen anyone ever justify profit in the manner I just have. Bella Gerens doesn’t do so. She writes:

Let’s also address the problem of “profitability.” You know, the one where “profit” is the positive difference between outgoings and incomings. You know, the one where that difference—that profit—is what the government takes a slice of (“tax”) to get its money to build lots of lovely infrastructure?

This is a dig at the Left, who rely on taxes to fund all their various pet projects. And it’s perfectly true: no profits means no taxes. But it doesn’t amount to a justification of profit, except at one remove. It doesn’t explain how profit is a good and necessary thing.

Much the same kind of reasoning can be used to dispose of most of the rest of what Naomi Klein says:

The abundance of scientific research showing we have pushed nature beyond its limits does not just demand green products and market-based solutions; it demands a new civilizational paradigm, one grounded not in dominance over nature but in respect for natural cycles of renewal—and acutely sensitive to natural limits, including the limits of human intelligence.

This is another characteristic of the Left, that they believe that we can change our ways at will, and create a better and fairer society if enough people want it that way.

It’s the assumption that we are free to choose how to re-order our affairs as we are free to choose how to re-order the furniture in our houses.

We are not thus free. We are only free to do what we like in the interval between when the food has been produced and its nutrient energy value has been used up, and we must repeat the process all over again. If it takes 2 hours to produce sufficient food to keep us alive for 10 hours, then we will only have 8 hours in which we are free to do what we like, and re-organise the furniture. And if it takes 10 hours to produce sufficient food to keep us alive for another 10 hours, then we will spend all our days producing food, and we will have no freedom whatsoever. 

We are not free simply by virtue of being alive. We may be alive, but almost completely constrained to one single activity.

But the Naomi Kleins of the world will quite happily set out to re-order all our (unfree) lives in favour of “one grounded not in dominance over nature but in respect for natural cycles of renewal”. And one with chintz curtains in the windows, and leatherette sofas circling the floor?

We are not free to do any such thing.

I could go on, but I won’t. All I would say is that while the aversion of the Left to profit, and to growth, and to real freedom, is not tackled head on, at source, they will never stop dreaming up one mad scheme after another to re-order the world, every single one of which will result in the increased toil and suffering and death of millions of people.

About Frank Davis

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7 Responses to Naomi Klein, Profit and Freedom

  1. harleyrider1978 says:

    Frank get a LOAD of this from Blair:

    Blair, who was premier for a decade until 2007, was also asked if his former finance minister Gordon Brown had been right to push hard for Britain to stay out of the euro when Labour was in power.

    “He was right, although I would also say by the way, I was never in favour of doing it unless the economics were right,” Blair replied.
    Blair warns of ‘catastrophe’ if euro collapses

    They ALWAYS KNEW it appears!

  2. harleyrider1978 says:

    Johh_C 89p · 12 hours ago
    Congress should never have allowed people with no credit, income, or money, to buy houses, and then threatened to sue banks that didn’t want to make such high risk loans (well duh). But you know, it’s a liberal-progressive (socialist/communist) thing; the same type of flawed policies that have led Europe down the road to bankruptcy – the American home loan fiasco just hastened the inevitable.

    The mans talking about the 1993-94 Democrat passed PREFERENCE IN LOANS TO MINORITIES LAW!

    Time frames very coincidental to the EPA ETS study!

  3. harleyrider1978 says:

    Smoking-Gun Document Ties Policy To Housing Crisis
    Posted 10/31/2011 08:05 AM ET

    President Obama says the Occupy Wall Street protests show a “broad-based frustration” among Americans with the financial sector, which continues to kick against regulatory reforms three years after the financial crisis.

    “You’re seeing some of the same folks who acted irresponsibly trying to fight efforts to crack down on the abusive practices that got us into this in the first place,” he complained earlier this month.

    But what if government encouraged, even invented, those “abusive practices”?

    Rewind to 1994. That year, the federal government declared war on an enemy — the racist lender — who officials claimed was to blame for differences in homeownership rate, and launched what would prove the costliest social crusade in U.S. history.

    At President Clinton’s direction, no fewer than 10 federal agencies issued a chilling ultimatum to banks and mortgage lenders to ease credit for lower-income minorities or face investigations for lending discrimination and suffer the related adverse publicity. They also were threatened with denial of access to the all-important secondary mortgage market and stiff fines, along with other penalties.

    Bubble? Regulators Blew It

    The threat was codified in a 20-page “Policy Statement on Discrimination in Lending” and entered into the Federal Register on April 15, 1994, by the Interagency Task Force on Fair Lending. Clinton set up the little-known body to coordinate an unprecedented crackdown on alleged bank redlining.

    The edict — completely overlooked by the Financial Crisis Inquiry Commission and the mainstream media — was signed by then-HUD Secretary Henry Cisneros, Attorney General Janet Reno, Comptroller of the Currency Eugene Ludwig and Federal Reserve Chairman Alan Greenspan, along with the heads of six other financial regulatory agencies.

    “The agencies will not tolerate lending discrimination in any form,” the document warned financial institutions.

    Ludwig at the time stated the ruling would be used by the agen cies as a fair-lending enforcement “tool,” and would apply to “all lenders” — including banks and thrifts, credit unions, mortgage brokers and finance companies.

    The unusual full-court press was predicated on a Boston Fed study showing mortgage lenders rejecting blacks and Hispanics in greater proportion than whites. The author of the 1992 study, hired by the Clinton White House, claimed it was racial “discrimination.” But it was simply good underwriting.

  4. harleyrider1978 says:

    It took private analysts, as well as at least one FDIC economist, little time to determine the Boston Fed study was terminally flawed. In addition to finding embarrassing mistakes in the data, they concluded that more relevant measures of a borrower’s credit history — such as past delinquencies and whether the borrower met lenders credit standards — explained the gap in lending between whites and blacks, who on average had poorer credit and higher defaults.

    The study did not take into account a host of other relevant data factoring into denials, including applicants’ net worth, debt burden and employment record. Other variables, such as the size of down payments and the amount of the loans sought to the value of the property being bought, also were left out of the analysis. It also failed to consider whether the borrower submitted information that could not be verified, the presence of a cosigner and even the loan amount.

    When these missing data were factored in, it became clear that the rejection rates were based on legitimate business decisions, not racism.

    Still, the study was used to support a wholesale abandonment of traditional underwriting standards — the root cause of the mortgage crisis.

    For the first time, Washington’s bank regulators put racial lending at the top of their checklist. Banks that failed to throw open their lending windows to credit-poor minorities were denied expansion plans by the Fed in an era of frenzied financial mergers and acquisitions. HUD threatened to deny them access to Fannie Mae and Freddie Mac, which it controlled. And the Justice Department sued them for lending discrimination and branded them as racists in the press.

    “HUD is authorized to direct Fannie Mae and Freddie Mac to undertake various remedial actions, including suspension, probation, reprimand or settlement, against lenders found to have engaged in discriminatory lending practices,” the official policy statement warned.

    The regulatory missive, which had the effect of law, advised lenders to bend “customary” underwriting standards for minority homebuyers with poor credit.

    “Applying different lending standards to applicants who are members of a protected class is permissible,” it said. “In addition, providing different treatment to applicants to address past discrimination would be permissible.”

    To that end, lenders were directed to “make changes in marketing strategy or loan products to better serve minority segments of the market.” They were also advised to “change commission structures” to encourage brokers and loan officers to “lend in minority and low-income neighborhoods” — a practice Countrywide Financial, the poster boy of the subprime scandal, perfected. The government now condemns the practice it once encouraged as “predatory.”

  5. harleyrider1978 says:

    FDIC warned banks that even unintentional discrimination was against the law, and that they should be proactive in making “multicultural” loans. “An ounce of prevention is worth a pound of cure,” the agency said in a separate advisory.

    Confronted with the combined force of 10 federal regulators, lenders naturally toed the line, and were soon aggressively marketing subprime mortgages in urban areas. The marching orders threw such a scare into the industry that the American Bankers Association issued a “fair-lending tool kit” to every member. The Mortgage Bankers Association of America signed a “fair-lending” contract with HUD. So did Countrywide.

    HUD also pushed Fannie and Freddie, which in effect set industry underwriting standards, to buy subprime mortgages, freeing lenders to originate even more high-risk loans.

    “Lenders should ensure that their loan processors and underwriters are aware of the provisions of the secondary market guidelines that provide various alternative and flexible means by which applicants may demonstrate their ability and willingness to repay their loans,” the policy statement decreed.

    “Fannie Mae and Freddie Mac not infrequently purchase mortgages exceeding the suggested ratios” of monthly housing expense to income (28%) and total obligations to income (36%).

    It warned lenders who rejected minority applicants with high debt ratios and low credit scores to “be prepared” to prove to federal regulators and prosecutors they weren’t racist. “The Department of Justice is authorized to use the full range of its enforcement authority.”

    It took a little more than a decade for the negative effects of the assault on prudent lending to be felt. By 2006, the shaky subprime mortgages began to default. In 2008, the bubble exploded.

    Clinton’s task force survived the Bush administration, during which it produced fair-lending brochures in Spanish for immigrant home-loan applicants.

    And it’s still alive today. Obama is building on the fair-lending infrastructure Clinton put in place.

    As IBD first reported in July, Attorney General Eric Holder has launched a witch hunt vs. “racist” banks.

    “It’s a more aggressive fair-lending enforcement approach now,” said Washington lawyer Andrew Sandler of Buckley Sandler LLP in a recent interview. “It is well beyond anything we saw during the Clinton administration.”

    Tom Perez, assistant attorney general for civil rights, recently testified that his division “continues to participate in the federal Interagency Fair Lending Task Force.” And he and the task force are working with the newly created Consumer Financial Protection Bureau to “enhance fair-lending enforcement.”

    The fair-lending task force’s original policy paper undercuts the notion the financial crisis was all about banker “greed,” though it certainly played a role after the fact. Rather, it offers compelling evidence that the crisis evolved chiefly from government mandates and threats to increase lending to applicants who could not afford them.

  6. Gary K. says:

    Hmmmmm;so, profit is evil.

    When people produce goods, they have only about three options:
    1) Produce only enough for your own use and no more.

    2) Produce enough for your own use and some extra that you can barter locally for things you do not produce.

    3) Produce enough for your own use and extra that you can sell locally or afar because there is a system of money.

    Or, they can become traders and procure goods in one place/country and sell those goods in another place/country. By doing this they will make a ‘profit’ which they can use to by those goods they have not produced for their own use.

    The chance of making ‘profits’ encourages risk taking and innovation.

    I have no desire to go back beyond our 10,000 years of civilization to when we lived in caves or grass hovels and hunted animals with long sticks with sharp stones on the end.

  7. harleyrider1978 says:

    I have no desire to go back beyond our 10,000 years of civilization to when we lived in caves or grass hovels and hunted animals with long sticks with sharp stones on the end.

    I understand that in the UK thats all citizens have left to PROTECT THEMSELVES WITH,after Tony Blair took away their guns! Even the UK shooting team had to leave the UK just to prcatice for the olympics!

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