INTRODUCTION:

As the recent credit crunch and current recession attest, American social trends have not kept pace with the economic requirements of capitalism and we have walked blindly into financial distress.  It is an unfortunate state of affairs, indeed; we have neglected a common sense approach to financial prudence, allowing trusted institutions to gamble wildly with our collective economic well-being.  Therefore, this paper asks this question: what reforms of public and personal economic behavior can alleviate the private and national distress spawned by the current economic crisis, and, moreover, provide some assurance that we can prevent a recurrence?  The true problem of the 21^st century may prove to be a matter of deciding to reform the management and theory of financial practices in the United States to avoid future investments from coming up short, perhaps embracing systems of trade that better support local economies, and regulating the cooperation of corporations.

This paper confronts today’s recession as equally a problem of irresponsible practices within the financial sector as it is a problem of the financial imprudence of the public.  In the wake of the recent credit crunch and subprime mortgage crisis, the United States, along with much of the world, must reexamine the practices of our banks, investors, creditors, and corporations, all which contributed to the state of our current recession.  Moreover, we must examine the contribution of common credit holders and consumers, whose excessive spending and unaffordable debt accumulation solidified the financial crisis of the middle classes.  The urgency of the situation begs us to question what appears to be a veneration of consumption within our society, and the historical implications of the social function of consumption, which may have overridden a more prudent logic of investment and credit on the part of the American consumer.  The purpose of this paper is to explore these questions and examine the possibilities for installing financial protections while promoting growth for investors.  Moreover, this paper will explore possibilities for systemic change, which could be the next necessary step in the conversation between the financial sector and the federal government.

Certainly, the scope of this paper is unfortunately insufficient to adequately examine the trends and data it hopes to understand.  Moreover, this paper suffers from numerous other deficiencies, in particular, a noticeably weak exploration of vital international data and perspectives, which only serves the detriment of the ultimate goals of the paper.  However, deficiencies aside, it is the author’s hope that the intentions of this paper will be valid nonetheless, and perhaps will contribute a different understanding than has been voiced in recent times.  This is, perhaps, too much to hope for, but nonetheless, I will try!

The Structure of the Current Problem

(The Subprime Mortgage Crisis and Modern Financing Practices)

The problem of the current economic crisis is a problem of financial handling.  According to a 2008 report on subprime mortgage performance published by representatives from the Federal Reserves, “A subprime mortgage is one made to a borrower with a poor credit history (e.g., a FICO score below 620) and/or with a high leverage (as measured by either the debt-to-income ratio or the loan-to-value ratio).”[i] In theory, these types of loans intend to extend access to financial aid to normally ineligible borrowers.  However, in the case of subprime loans and mortgages, the potential (and eventual) detriment often far outweighs the benefits.  Disaster, in hindsight (as always), seems to have been inevitable.

In a comparison between the delinquency rate for fixed and adjustable rate prime and subprime mortgages, the disparity is astounding.  For a fixed rate prime mortgage in 2008, the delinquency rate was about 1.11%, and about 5.43% at the adjustable rate, whereas the fixed rate subprime delinquency was about 8.73%, and the adjustable rate a whopping 24.11%.[ii] According to CNN analyst Les Christie, by May 2010, the overall delinquency rate on all mortgage payments reached 10.06%, with 4.63% foreclosed.  Of the mortgage types within the 10%, 6.17% of fixed rate prime mortgages went delinquent, along with 13.52% of adjustable prime mortgages.  Subprime fixed rate mortgages went delinquent at 25.69%, and the adjustable went at 29.09%.  According to Christie, the rates are ballooned in part due to delinquent borrowers whose homes were not foreclosed in order to permit their continuation in the system, and prevent repossession during the recession, otherwise lenders would not recoup even a small percentage of their losses from the borrowers.[iii] Clearly, the adjustable rates pose the most risk regardless of borrower qualification; nonetheless, lenders were still willing to give loans that carried the highest risk to borrowers who stood the greatest risk.  After the value of investments plummeted and interest rates soared with the decline of house sale prices in the mid-2000’s, the number of sellers outnumbered the buyers in the housing market, leading to a rise on loan and mortgage repayment delinquencies and defaults.  As a result, financers tightened credit and left investors to sink or swim.

The crisis was not restricted to homeowners, however, as student and automotive loans were similarly affected, amongst other industries.  The College Board and Department of Education, for example, reported in 2008 that nearly one fifth of student loans, seen numerically as 238,000 out of 3.4 million, borrowed that year would eventually default.[iv] Such a problem was earlier predicted in a Project on Student Debt study,[v] which noted the 8% increase in student debt from 2005 to 2006, while, in contrast, the offered starting salaries of graduating seniors rose only 4%, indicating early on that income would eventually fall short of loan repayment.  According to the New York Times, by 2008 (no information for 2009 or 2010 is available yet) the student default rate was at 7%, up from 5.2% in 2006.  The Times also notes that included in the total are the debts incurred by students attending for-profit institutions, which increasingly offer loans more readily to students who may not be able to afford repayment, which has left for-profit educated students with higher debt percentage after graduation than non-for-profit educated students.[vi] Awareness of this concern has led lawmakers to seek regulation of recruitment practices and loan approval, in addition to suggesting that schools with the highest debt per capita should provide programs with higher employment opportunities to maintain access to future federal aid.[vii]

The parallels between the situation of student loans and subprime mortgages portray a combination of misunderstanding and misrepresentations of (and perhaps, lackadaisical attitude toward) the financial practices involved in borrowing—much of which is evidenced in the seeming atmosphere of surprise that permeated both the media and public venues after the price bubble burst.  Were we so unaware of the risks involved?  Or was sheer overconfidence blinding ordinary prudence?  Why were lenders willing to take such a risk with subprime borrowers, and why were borrowers eager, willing, or at least, resigned to accept such risk?  About this time, numerous explanations for the problem abounded on the airwaves and in print, but none could pinpoint a cause or suggest how we may have foreseen the extent of the “muddle” of our “delicate machine,” to borrow from Keynes post-Depression warning.[viii] In keeping with Keynes, we should not expect the outcome of our financial crisis to be regressive—there no such thing as economic backtracking, only adaptation; instead, it is what he calls “magneto trouble,” in that the “machine”—capitalism, or the economy—is stalled or jammed, as he states, and must be unjammed and the ignition restarted, so that the machine may continue toward its destination.[ix] The problem then as now was how to establish the jam sites, which are neither causes nor sources of distress, but symptoms of the basest materials of the system’s construction.

According to Senior Research Economist at the Cleveland Federal Reserves Bank, Yuliya Demyanyk, pinpointing causes are nearly impossible.  Many of the explanations that are suggested as precise causes of the crisis are misjudged, and have created what she calls “myths” of the credit crisis—myths of subprime mortgages in particular.[x] The causes of the problem, Demyanyk insists, are instead symptoms of the larger problem of lender/borrower practices dating as far back as the 1980’s or earlier.  One of the top myths is that of who received subprime mortgages.[xi] It is a false assumption that only borrowers with poor or no credit histories received subprime loans.  Demyanyk asks us to look at high-cost loans given to borrowers with excellent credit histories, who, for example, wish to purchase luxury commodities, such as multi-million dollar homes or a private boat.  Taken into account, this occurrence does not appear to be a problem of at-risk borrowers, but of the attitudes of borrowers in general, who voraciously seek commodities.

Demyanyk’s further analysis deals with empirical evidence, and she finds that certain suggestions—that a) subprime mortgages promoted homeownership, b) declines in home values caused the crisis, c) underwriting standards declined, or d) extensive refinancing—have no empirical evidence of widespread contribution to the crisis.  In fact, she implies that the lack of such empirical evidence shows that these issues were actually situational and while contributing to an extent in certain cases, were in no way causes of the ultimate problem.  Ultimately, the lack of empirical evidence suggests that the circumstances of the borrowers and the individual acts of lending were so diverse that the most common guidelines for lending were interpreted on a borrower-to-borrower basis, which meant that often, the only commonality between borrowers in a particular grouping was the desire for the particular loan and its intended use (a house, education, etc.).  Considering the state of the mortgage industry, this is an odd thought, though perhaps it indeed tells us something about attitudes toward borrowing.  To think about this further, we need to know more about lending guidelines.

In the 2008 report submitted to the Federal Reserve by Demyanyk and Otto von Hemert,[xii] the pair explores information provided by banks, examining loan quality, borrower characteristics, loan characteristics, and macroeconomic conditions.  Loan quality, defined as the performance of the loans, depended on the expected and eventual outcome of loan repayment.  This is depicted in the increased visibility of risk taken by high loan-to-value loans with adjustable rates as the trend spread from low and mid income borrowers to high income borrowers seeking even higher risk loans for otherwise unaffordable properties.  Borrower characteristics include credit scores, previous and current debt, and personal documentation.  As previously remarked, the characteristics of the borrower are not necessarily high risk, and the individual may even have an excellent credit history that would permit a prime rate loan in other circumstances.  The risk is ultimately a high stakes gamble, regardless of traditional or no documentation of the borrowers credit and income history, and contingent on a projected future ability to meet payments.

Unfortunately, loan quality is often determinable only after delinquencies begin, though the characteristics of the loan should aid in the early determination of whether a particular borrower can feasibly afford the debt.  Beyond the actual mortgage amount, terms of interest and the ability to pay off portions of the principal balance also may determine the financial capacities of particular borrowers on a case-to-case basis.  The subprime loan itself may not be a disaster so long as its terms are adequately and responsibly established.  Here is where macroeconomic concerns are raised; in particular the widespread changes in unemployment rates and property values, along with personal and overall community incomes.  Mortgages were sold with all of the mentioned circumstances in mind; however, the variability of macroeconomic conditions posed a looming threat for the subprime market—not merely in terms of appreciation and depreciation, but of the overall sustainability of a lending system that knowingly depended on successful speculation.  The success of the subprime mortgage market was that it made borrowing accessible; its failure was that it depended too much on predicting the future state of the economy and financial state of the borrower.[xiii]

Thereby the problem of speculation is sustainability.  As Gary Gorton suggested in 2008,[xiv] the sustainability of the subprime mortgage balanced on the appreciation of house values, which differed to some degree from other subprime loans, such as auto loans, which comparatively depend less on variables of the economy, and more on individual financial ability to repay small amounts (small as compared to a mortgage payment).  As we have already discussed, the high risk loans left little wiggle room for affordable debt during an economic downturn, and the decline in house values meant the sale of the house might not yield enough to cover the balance of the mortgage repayment, leaving the borrower unable to sell.  That there was a decline in subprime mortgages between 2005 and 2006 is further evidence that financers had already begun hedging their bets.  As delinquency and default surged amongst all mortgage types, indicating that the depreciation of house values indicated that the market was already riding an ill wind.

The subprime loan was never intended to cause economic damage.  It was intended to extend loan eligibility to otherwise ineligible borrowers, who as recently as the 1970’s or 1980’s (even more recently) were redlined for reasons of credit history, current income and debt, and, unfortunately, due to ethnic or racial discrimination.  Anti-redlining legislation intended to block discrimination, by creating a means of getting a loan for those who wanted one enough to accept certain risks.  The subprime category of loan provided an avenue for borrowers who were willing to bet on their future job and income prospects, and who showed indications of need and a readiness to begin payments.  Thus, borrowers played an active role in determining the success of subprime lending.  Lenders, however, would try to make it profitable for themselves, engaging in a poorly (or insidiously) rigged opportunism.  According to Gorton, the new problem with the subprime category was the decreased informational transparency for investors, forging an informational gap.[xv] Therefore, as lines of securities paved a winding trail from the original loans, the balance of ultimate risk became uncertain, and like a Ponzi scheme, eventually the risk, though spread out, was shouldered by the security holders and the banks that supported them, and later by the taxpayers.

Here is where the concern over hedging bets occurs: securities, as described by Gorton, were “nested”,[xvi] thus providing ample opportunity to disguise risk.  In 2007, Goldman Sachs was found to have done as much, when it was shown that the firm was selling securities designed by its clients to investors.[xvii] The result was a web of obscured connections and misconduct.  Gorton best illustrates the chain reaction:

When housing prices began their growth and ultimate fall, the bubble bursting, the value of chain securities began to decrease.  But, exactly which securities were affected?  And where were these securities?  What was the expected loss?  Even today we do not know the answers to these questions.  In 2007, there was a run on off-balance sheet vehicles, such as structured investment vehicles and asset-backed commercial paper conduits, which were, to some extent, buyers of these bonds.  Creditors holding the short-term debt, i.e., commercial paper, of these vehicles did not roll their positions, which was tantamount to a withdrawal of funds.  A number of hedge funds collapsed.  As of this writing, the crisis is not over.[xviii]

Amidst this seeming frenzy, investors were buying securities in order to pass the bill onward to the next buyer.  All the while, as became clear in testimonies from investors such as Michael Burry[xix] (who by now has contributed to The Big Short by Michael Lewis), purchasing insurance on their securities and mortgage bonds became common practice—literally betting on the failure of subprime loans through the classic credit-default swap (CDS).[xx] By assuming that the loans would fail, but publically showing professional prudence by protecting a risky investment through insurance, investors such as Burry were sinking money into an annual premium with the expectation that they would more than recoup the expense upon loan default.  The default of risky borrowers became, in essence, a fast cash cow for those like Burry who knew enough to insure his losses, and avoid the final, crippling debt of those investors who bought the last security in the chain.

Much of the whole situation seems as if it could have been avoided, but was not.  Certainly, in hindsight, it is hard not to feel aggravated at what feels like society was duped—all the more since it was the well-intended legislation of the 1970’s that opened the door for subprime mortgages and potential for opportunism (read: predation).  However, we should not feel duped, I think, because the country and borrowers alike walked hastily into this situation like high-stakes gamblers, with bravado, high hopes and expectations.  Anti-redlining laws were created to end an era of financial prejudice and usher new demographics into the middle class.  Lax government and private supervision, predatory approaches toward those new demographics, and a lack of or disregard for forethought ruined the potential of the laws, turning borrowers into prey.

It seems wise to keep in mind the rather common sense advice offered by Paul Krugman in 2008[xxi]— that the country must determine which practices and mechanisms of the current system have caused the most noticeable damage, and place well defined, permanent regulations upon them, not merely for times of financial crisis, but for non-crisis times; that to regulate is not to restrict but to remind future investors and future generations of the potential for widespread debilitation certain practices entail.  Moreover, as Gorton advises, “innovation is a powerful force;”[xxii] and thus must be done with care.  For example, Gorton notes that the Financial Accounting Standards Board (FASB) began to scrutinize the “originate-to-distribute” practice of many lenders, in which banks did not merely sell high-risk loans without sufficient capital to back them up, but designed the loans this way in order to sell percentages to third parties.[xxiii] This is the primary issue at hand when subprime mortgages are discussed today, and Gorton emphasizes that dangerous as the practice may be, in its absence banks will be forced to maintain sufficient capital to cover the cost of lending, not only reducing the number of loans they are able to provide, but rendering them unable even when warranted to act on regulations passed from 1968 until 1998, which give banks cause to provide loans to underprivileged borrowers.  The choice he determines may ultimately be between reigniting the lending cycle when the current crises have settled and the “fittest” banks remain,[xxiv] or ceasing subprime style lending all together, and regressing the nation’s economic policy.[xxv] Ben Bernanke suggests a median ground exists, however, where monitoring lending can continue with the backing of the Federal Reserve in case of panic or crisis,[xxvi] though someone thinking along the lines of Gorton may argue that bank cooperation and responsible reactions will determine the viability of this option, especially in view of the controversial conduct of firms like AIG after the bailout.[xxvii] Where both agree is that it is necessary to approach monitoring through specific, manageable reforms aimed at protecting and stimulating consumer activity.

In their 2008 study, Carmen Reinhart and Andrew Felton contend that the current state of events are more or less manageable, due in great part to interventions to save the banks, and level of market discipline in the face of scrutiny.  This is not to say that problems are over, but stable so long as consumption remains steady though not exorbitant.  For the government and banks to deal with borrowers in dire need of assistance, there must be some semblance of stability in place for the larger economy, or the crisis will worsen.  To do this, the only prevention they can immediately offer is short-term injections of capital through real estate liquidation, and cessation of certain high-risk loans.[xxviii] However, cessation of loans does not necessarily end all risk, since not all subprime transactions involve traditional loans or mortgages.  Atif Mian and Amir Sufi’s 2008 calculation of the probabilities of high risk loans defaulting in 1996 – 2005, indicate that in communities where mortgages were most denied for new homes, borrowers who were already homeowners had access to high risk loans through refinancing and home equity loans.  Moreover, the number of houses for sale varied from far below to high above demand, though the rate of mortgage approval did not increase or decrease, indicating that risk was often omnipresent whether the market was favorable or not.  The research indicates, then, that the problem was a combination of tantalizing risk, house price, and housing supply shifts, combined with rate of approval, further indicating that there was a problem with how and which borrowers were chosen over others. [xxix]

The choices and loan designs made by lenders are therefore very important, and we must address these choices in order to understand the thin line between financial practice and financial predation.  Claudio Borio provides a fascinating approach to understanding the situation of choice and design, which are often very hard to understand from a lay perspective.  Borio asserts that “turmoil” is a more effective way to think of the economic crisis—not to downplay or shroud the actual effects on regular lives, but to understand that we are not experiencing true catastrophe or true failure; instead, we are experiencing the results of what we can here describe as an economic experiment in the making for as long as the economy has been reformed in response to changing needs and trends in society, especially after the turn of the century, moreover after legislation to reduce redlining.[xxx] The experiment resulted in a posed solution—subprime loans, which in turn were integrated into the banking system within a decade.  After a period of over thirty years, the results are in, the practices by which banks made subprime loans possible have proved faulty in the long term.  Thus the experiment must either be rejected or redone with a new solution.[xxxi] Borio does not excuse banks for their predation—quite to the contrary, he condemns the aggressive nature through which borrowers were courted; however, the point remains that what was intended as a limited socio-economic solution became widespread and desirable across incomes and qualifications, affecting macroeconomic conditions as foreign investors became further entangled, and culminating in the massive defaults and withdrawal of investments that brought about the credit crunch.

Most commentators we have discussed have suggested a need for increased transparency to combat the present circumstances of the economy, and to prevent future misinformation.  Moreover, securities must be limited and trade procedures distinctly outlined.  Certainly, too much regulation is not a good thing to maintain a healthy capitalist economy, if such a thing is possible.  If congress approaches regulations with too much zeal, however, then there may be borrowers denied loans that do have the capacity for repayment in their future, which, though unforeseeable, can be deduced from the growth and scope of respective careers and fields, and savings habits.  Large-scale loan denial would potentially prove detrimental if consumption is stunted by lack of loan availability.  The key is to prevent loopholes for opportunism.

The government may want to look at local or regional successes to determine a body of prudent approaches and solutions.  For example, the well-balanced local success of moderate loan approval increases in mid sized cities, as reported by the Wall Street Journal in 2009.  As the small locales were able to stabilize their economies, banks felt more confident giving loans, and the observed effect is that where small loans are approved, local economies are able to speed up economic activity, whereas in the big cities, where few loans are approves, regardless of qualifications, economic activity is slowing.[xxxii] This may indicate that the best reaction at this point is to avoid overreacting.

A 2007 study conducted for the National Bureau of Economics (NBE),[xxxiii] indicates that borrowers from the late 1970’s up to around 2000 were fairly successful with their risky loans, due in part to manageable housing costs and values.  This ensured that borrowers at the time were able to bet on their future earning prospects with confidence.  The NBE study suggests that borrowers acted responsibly within the limits of their current prospects, and banks were provided legal leeway to lend toward the future, so to speak, thereby expanding access to homeownership throughout the echelons of the middle class.  Thus, with responsibly assessed risk, this loan type can be beneficial.  Whether borrowers were misled in the long run is situational at best; however, the dangers of sustainability where risk was ignored were apparent from the start.  But how did this happen?  How did the financial practices of a country and system design its own distress, and why were there no protections in place to prevent such an outcome?  Was the outcome expected yet deemed manageable?

The Historical Implications of Modern Financial Practices

To begin answering the previous questions, we should look back to the period at the turn of the century when banks and trust companies had only minimal regulation before the foundation of the Federal Reserve.  This was a time of rampant speculation amidst the boom of technological advances and consumer frenzy following the Civil War and preceding the First World War.  The Federal Reserves Act of 1913 responded to the Banker’s Panic of 1907, caused in part by a run on trust companies after the stock market fell 50% from the previous year.  Jon Moen and Ellis W. Tallman have noted that the striking difference of 1907 from past panics is that the national banks were not affected to the extent that we have seen in the past.  The affected institutions were trust companies, at times owned by the major banks, but initially in service only to large institutional investors.[xxxiv] Though the national economy was affected at large, there were no runs on national banks.  Instead, investors at the trust companies rushed to removes their trusts, sometimes with penalties, to avoid losing their investments.[xxxv]

Until 1906, New York trusts, unlike banks, could make investments that exceeded their holdings, which permitted riskier investments and potential for greater yield, which made the trusts more desirable to certain depositors.[xxxvi] However, after 1906, banks convinced the state to place a minimum on trust reserves against deposits, which was set at 15%.[xxxvii] At the time, trusts were local institutions and there were fewer distinctions between them and the national banks.  The Glass-Steagall Act of 1933 eventually divided the banking industry into investment and commercial varieties, and trusts fell under the commercial heading, though they were not originally designed as commercial banks.[xxxviii] However, in 1907, whereas banks were required to invest based on reserves against deposits, trusts were investing with impunity and found themselves facing low returns compared to speculation.  The result was failure in the form of a banker’s credit crunch, leading to calls for more government regulation by many of the trusts’ critics.  However, the reforms put in place were often disregarded by the industry, or worse—so gradual as to go unnoticed by former supporters of the reforms, thus the true effects went unanalyzed and unappreciated.

As remarked by Charles Calomiris and Gary Gorton, regulation “prevents the evolution of the banking system in ways that may be very desirable” though not necessarily observable.[xxxix] The writers suggest that the inherent danger of regulation is doubt amongst critics and observers—doubt whether the regulation actually fostered change, or if the catalyst was no more than part of a cyclical shift of economic and social conditions.[xl] From this doubt can spring a trend toward under-regulation, which has proved time and again to lead to short-term booms, where only a very small percentage of investors ultimately profit.  The writers suggest that two options are necessary for successful regulation: 1) banks must be monitored by private and governmental coalitions; 2) banks should be able to sell loans to each other, not only to offset costs, but to diversify and reduce potential risk; however, banks selling loans must be responsible for maintaining transparency, and have the ability to prove coverage for securities.[xli] Ultimately, banking might need a public and federal check on its privileges, literally to be treated as a system of political entities subject to oversight, rather than mere business enterprise, of which it would seem many institutions perceive their interests.  After all, their business is the business of investing the deposits of private citizens and institutions, which is quite different from selling stocks and commodities.

The lesson we gain from the Panic of 1907 is that lack of restraint and aggressive practice are urgent social problems of the economy.  Ultimately, regulation is only necessary because basic human behavior proves too variable for so large a system where the assets of so many are at stake.  Instead, as Calomiris and Gorton contend, we should consider the effects of technological change on the economy.  Specifically, it is important to look beyond “seasonal money shocks,” and understand panics as indicators that the environment of the economy—commodities, demand, methods, markets, production—has changed beyond the limitations of its safeguards,[xlii] such as where regulation was lacking in 1907, the country accepted after the Panic that new safeguards were necessary—hence the formation of the Federal Reserve.

The idea of a central bank was not new in the U.S., though one had never before been established on a federal level.  The National Banks Acts of 1863 and 1864 had provided a set of guidelines for national banks across the country to follow (though not state banks, the point of the act was to coerce state currencies out of circulation); however, they were ultimately under direct supervision of Congress, without an expedient centralized source of supervision and lending, as found in European banking.[xliii] By 1907, the investment practices of trusts complemented foreign investment to create a safety net for depositors.  After the Panic of 1873, which prefaced the Long Depression of the 1870’s, depositors and industrialists alike had feared the effect of foreign investors on the availability of credit, and the trusts provided an alternative means of capitalizing on domestic investors, which reassured some investors that foreign defaults would prove less damaging to American interests.[xliv] The hope for economic balance at the turn of the century seemed to be political engagement against future crises.  The financial history of the country following the Civil War indicated that banks needed better control over investments,[xlv] but did not take into account vested national or public interests.   The eventual foundation of the Federal Reserve was a first step, and not until the crash of 1929 and the start of the Great Depression did it become clear that the role of the Reserve should also be as an analytical and regulative facility.

In 1913, the Federal Reserve was founded in the image of many of the centralized European banks that have existed since the eighteenth century, though, according to Allen Meltzer and Alan Greenspan’s history, its initial orientation took until 1920 to fully mirror the structure and efficiency of the Bank of England.[xlvi] Central banking evolved under the gold standard, which was officially adopted by the United States under the Gold Standard Act of 1900.  Bankers at the time were concerned that currency was too tied to the value of government bonds under the National Banking Act, thus early designs for the Federal Reserve were of a large commercial central bank of last defense, so to speak, responding to the bankers’ fears of government interference.[xlvii] However, critics of the design accused the bankers of designing a banking and big industry monopoly, as interests could be traced from the big banks and many the nation’s largest industrial corporations.  As a result, it was agreed that the bank should be under political control only to monitor practices and prevent centralization of commercial power.[xlviii] As Meltzer and Greenspan write of the early Fed:

First, there was the core principle of the gold standard: the central bank must raise or lower the discount rate as required to protect the gold stock and exchange rate.  Second, the central bank served as lender of last resort by offering to lend in a panic when the market did not function.  Third, the central bank was to accommodate the needs of trade and agriculture by discounting only (or mainly) commercial paper, a principle known as the productive credit or real bills doctrine.  This principle prevented purchases of government securities, mortgages, other long-term debt and the use of these instruments or equities as collateral for borrowing from the central bank.[xlix]

Despite the ability to control the value of currency and lend to troubled banks, in the early days many banks, state banks in particular, did not participate in the Federal Reserve System, leaving gaps in the American banking landscape.  Further, the Reserve did not automatically cover all pre-existing banks, but expected them to join the system by choice.  Credit became problematic at this time when foreign countries sought loans, since not all countries valued their currency against a gold standard, creating a credit imbalance when lending overseas.[l] Furthermore, as American banking expanded throughout the nation and internationally, the Reserve was at a disadvantage, namely because the system could only initiate reforms after the onset of a problem and could not stop the trend of those already in place.[li] It was thus the Roaring Twenties came to a screeching halt.   Massive speculation and borrowing occurred in the two or three years before the stock market crash, and as John Kenneth Galbraith wrote in 1954, “This was the way past speculative orgies had ended.  It was the way the end came in 1929.  It is the way speculation will end in the future.”[lii] The Federal Reserve needed no better proof that it needed the ability to preempt such crises in the future.

Today, as a result of the experience of the Depression, the Reserve regulates banking, and oversees economic policy and financial practice, all in addition to its role as a banking safeguard and lender to both the federal government and national financial institutions.  Ben Bernanke has argued that one of the biggest problems faced during an economic slump is the lack of information gathering on borrowers combined with misinformation given by lenders, which during a boom a time of speculation can lead to a collateral buffer of borrowers who will default, thus bringing the market to a grinding halt, as happened with the stock market crash.  Combined with poor domestic and foreign trade policy, the effect is speculation on the speculation, which layers the risk beyond control.[liii] During and preceding the Depression, numerous decisions were made to the detriment of the nation’s economic standing, including the controversial Smoot-Hawley Act under President Hoover, which raised tariffs on thousands of imports, resulting in decreased international trade and economic cooperation.[liv] More damaging, perhaps, was the refusal of the Federal Reserve to supply money to struggling banks, and all around deflation in commodities.  As investors jumped ship over fears of Smoot-Hartley, and banks began to call in loans on borrowers who could not meet payments, widespread default swept the country and the stock market collapsed.  With the added instability of the housing market now completely crippled by a lack of investors and credit, the country found itself stranded in a decade of hard times, characterized by unemployment and falling prices, which were accompanied by falling wages and the terrible natural disasters that hit rural areas of the Midwest of the country, leaving debtors of all kinds to repay debts that were now worth more than the current costs.[lv]

Bernanke, in line with Milton Friedman and Schwartz’s A Monetary History of the United States, has argued that the problem with the Fed at this time was that it was “highly doctrinal.”  Though the Reserve was founded with the purpose of safeguarding the banking system, the Depression Era governor believed in a kind of honor system among banks, along with a doctrine of ‘survival of the fittest’.  Bernanke suggests that Federal Reserve officials, along with United States Secretary of the Treasury Andrew Mellon, believed it would be to the benefit of the banking system if the weakest banks were allowed to fail, permitting the larger and more efficient banks to flourish.  Therefore the Reserve refused to give loans to the smaller banks, regardless of whether they belonged to the Federal Reserve System.[lvi] At the time, financial practices were still greatly influenced by 19^th century solutions for banking panics, and the solution for many early panics was to allow the large banks to bail out the little ones by suspending the payment of deposits for a period of time, regardless of public burden.  The 1929 decision of the Reserve reflected the perspective that banks were responsible for resolving crisis level issues before government intervention should occur.  This still is an ongoing debate on the issue of financial ethics and the political morality of the economy.  Since then, safeguards were put in place to prevent the Reserve from taking a moral-type stance in the future, though the extent to which such safeguards are effective are only now becoming apparent, and some may not be certain for many years to come.[lvii]

Some of the Reserve’s more responsive reforms from the past are today becoming snared in one of its most controversial actions, however.  In the case that banks are faced by widespread credit defaults, the Reserve has the ability to funnel money to lenders in need, more recently known as bailouts, in effect acting its part as the primary bank of the banking system in the country.  The eventual bailouts enacted in the U.S. and Europe after the 2007 crisis intended a rescue in this fashion.  However, additional non-depository and commercial industries were also bailed out, raising the question of whether the Reserve has the legal ability or political responsibility to lend to any institutions besides banks.  The consequence for bailouts and other government investments intended to unfreeze markets is raised taxes to cover interest repayment.  Unfortunately this plan, as in place since the regulations of the Depression Era, was met with much distrust and confusion, encouraged all the more by the face of indifference and extravagance put on by much of the industry, despite public and governmental outcry.  No one seemed sure of the ramifications of asking taxpayers to support industry and its failings.

For this reason, taxation plans to fund the bailouts were probably a serious catalyst for an outcry against the decision.  Another reason for the distrust and confusion over the bailouts is that the credit crunch that followed brought with it the unease of an increased unemployment rate and not-unfounded fears that investment firms would misuse funds—for instance by continuing to give out large bonuses and hold expensive business soirées.[lviii] Section 13(3) of the Federal Reserves Act in 2006 stipulates that under “unusual and exigent circumstances” an institution that is not a bank can receive government aid if the collapse of the institution is perceived as a threat to the national economy.[lix] However, while the bailout was legally enacted, some still argued that the federal government had overstepped its jurisdiction over business matters by asserting a moral-type stance of political responsibility without precedent.  Moreover, critics were concerned that the officials hired to oversee the specifics of the bailout transfers were themselves current or former employees of many of the firms in question, and pressure was exerted to ensure that conflicts of interest were avoided. [lx]

As William K. Sjostrom explains of the legality and reasoning behind the AIG bailout, the company was estimated to be days from collapse, and as the government was also dealing with imminent crises at both Lehmann Brothers and Merrill Lynch, there was little time to consider an approach to the AIG problem.  Therefore, a bailout was granted to avoid international repercussions should AIG collapse and the value of investors’ securities diminish.  Sjostrom notes, however, that the imminence of collapse was overblown in part by AIG itself, as the full-scale effects of bankruptcy were never fully calculated due to the assumed urgency of the situation.  To add insult to injury, in succeeding months it became clear that bankruptcy would not have majorly effected shareholders, as the value of CDS’s sold was not affected, and enough third party transactions could offset any negative effects.[lxi] In the end the federal government may have needed to facilitate a credit default swap replacement process at a lesser cost, though a complete bailout was probably unnecessary.  Moreover, Sjostrom suggests that the federal government was offered misleading information by AIG and Goldman Sachs, in which the extent of the CDS’s value was purposefully obscured to portray Goldman Sachs as in imminent danger should AIG go bankrupt because of $20 billion dollars in CDS’s purchased by firm.  Goldman Sachs did not, however, report that collateral and hedges sufficient to offset the effect of an AIG bankruptcy protected its CDS’s. [lxii] The truth of the situation is obscured however, since it is unclear what information was withheld or presented to AIG before negotiations with the federal government, as time was believed to be running out to take action.

What then can we deduce from the problem of AIG, and what does it illustrate for the purposes of this paper?  This question is vital, because the AIG problem is symptomatic of a trickle effect of deregulation upon the economy.  The truth of culpability may always be obscured, as truth always is; however, we can understand from this situation that a problem of the banking industry extends well beyond the banks.  Stocks and securities are so intricately interlaced within the market that a major investment bank such as Goldman Sachs can be perceived as threatened by the collapse of a major insurance company, throwing the whole economy into frenzy.   To fully comprehend this situation, we must examine the conditions that most immediately affected the practice of “layering”[lxiii] securities through diversification, and its effect upon lending practices, especially in the mortgage market, beginning, in particular during the 1970’s.

It must be noted that until the late 1970’s, savings deposits funded most home loans, which meant that subprime loan characteristics were virtually unheard of in the housing market, and subprime merely described a borrower who would probably never qualify for a loan (whereas today, it is often popularly conflated with the loan instead of the borrower).  However, during the 1960’s, as inflation rates rose along with interest, lenders were finding their business too costly.  As a result, in 1968, Congress permitted banks to sell loans to other investors to buffer the cost.  The investment agencies Fannie Mae and Freddie Mac, along will Ginnie Mae, and the Federal Home Loan Bank Board (FHLBB) were created to facilitate this change.[lxiv] While these institutions did not create a new regime of lender/investors, they facilitated one major occurrence in the economy: competition within the highly conservative lending/investment category of Mortgage-Backed Securities.  The result was an atmosphere in which lending practices were up for review to attract new borrowers while building security against risk through new and diverse investors.

Fannie Mae, around since 1938, continued its job as the Federal National Mortgage Association (FNMA, hence Fannie Mae).  The agency was originally formed in order to provide financing for banks issuing mortgages.  By 1954, the agency was no longer 100% government controlled, but partially funded by private investors under the Federal National Mortgage Association Charter Act.  In 1968, Fannie Mae was split into the modern privately funded corporation and Ginnie Mae, the Government National Mortgage Association, which covered government protected mortgages, such as those of the Veterans Administration.  Freddie Mac, the Federal Home Loan Mortgage Corporation, was created later, by 1970, in order to create competition for Fannie Mae and pump up the mortgage industry.[lxv] However, these innovations were slow to show results, and lenders and economists began to explore other ways to broaden the market, such as competitive mortgage design and higher risk securities.[lxvi] In 1975, Congress passed the Home Mortgage Disclosure Act, which intended to end the practice of redlining, and provide greater access for low income and discriminated against borrowers seeking to buy a home.[lxvii] Thus, we saw the birth of the subprime mortgage phenomenon as public and private lenders embraced the possibilities for investment and profit.

However, in view of the massive losses incurred by Fannie and Freddie Mac in 2007 and 2008, the problem of their bi-focused loyalties to shareholders and the government has shown itself.  Though subject to more stringent regulations and self-monitoring than completely private institutions, these two, due to their reputation, effectively validated risky mortgage lending in the industry by engaging so thoroughly in the subprime market.  According to Peter J. Wallison and Charles Calomiris, Fannie and Freddie Mac were caught between loyalty to Congress and private interests, which meant their losses were made all the more dramatic as the institutions purchased thousands of junk loans hoping to rake in higher yields.  However, their timing was both unwise and terrible, because, as we know, high-risk loans during this period defaulted at a rate not seen since the Depression.[lxviii] The junk trend grew in popularity during the mid 1990’s, and Fannie Mae and Freddie Mac had been quick to follow the private institutions.  Junk trading and subprime lending had long been a means of raising a higher yield for investors, ever since the start of anti-redlining legislation, and the continued trend of such legislation unfortunately left too much leeway for the temptation to continue gambling, even when the high stakes were so transparently approaching failure.[lxix]

Behind the risk trend of the 1990’s was the strong deregulation of banking, starting in 1980.  The Saving and Loans Crisis of the 1980’s further exacerbated the potential for problems and predation amongst mortgage lenders when increased inflation and interest rates put the industry in danger, which led to the passage of the Depository Institutions Deregulation and Monetary Control Act of 1980 and the Garn-St. Germain Depository Institutions Act of 1982.  These laws permitted lenders to determine their own regulations to a great extent in order to stabilize the mortgage market, and consequently provided lenders a means of protecting other investments through private transactions (transparency-free).[lxx] The Housing and Community Development Act of 1992 would further alter the course of the mortgage industry, with mandates for lenders to meet affordable housing goals, and later in 1999, to fulfill portfolio quotas in lower income and inner city areas.[lxxi] Unfortunately, as we have seen, the results were two-sided—higher risk borrowers were given access to home ownership, but were also potentially subject to predation by lenders through the terms of their mortgage.

Moreover, the lending industry became unbalanced as institutional purposes, popular incentives, and new investment practices were no longer in sync.  According to a study by Dwight M. Jaffee and John M. Quigley, part of the problem of the state of mortgage lending during the 1980’s and 1990’s was that housing policy expanded faster than the federally backed institutions that served as purveyors and guarantors of credit; therefore, the institutions were forced to compete in a market for which they were not equipped.  As the housing market changed, these institutions were subject to old regulations that changed too slowly, and thus private lenders took up the slack.[lxxii] As the federally backed corporations shifted toward the subprime market, the chasm began to close between them and privately owned mortgage lenders.  Private lenders often lacked the standards required of Fannie Mae and such, and marketed what Fannie Mae CEO, Daniel Mudd, described as “layered risk” mortgages,[lxxiii] which restricted repayment options while making it easy for borrowers with little or no documentation to obtain loans, so long as they were willing to take the risk.  As the layering process became a more and more prominent and acceptable practice, Fannie Mae and Freddie Mac began to follow suit, though, perhaps, not quite so aggressively.  With the growth of the housing bubble in the late 1990’s until the mid 2000’s, it became clear that the jig was up, and house prices would soon climax and drop, leaving homeowners with homes that could not sell.  As if the situation was not already urgent enough, the government was temporarily cornered by a need for expedient yet well-planned action that would cover domestic turmoil and perhaps prevent undue crisis overseas.

The extent of the subprime mortgage crisis is not restricted to the United States, and is in fact more prominent for some foreign investment institutions who purchased U.S. based securities, thus receiving the brunt of crisis.  According a study by Kenneth W. Dam, the international scope of the crisis is perhaps the greatest factor behind the haste with which the United States government acted in the weeks following the most urgent bankruptcy scares.[lxxiv] Dam notes that very often, foreign investors did not research the securities purchased, therefore there was little awareness of pending disaster, which effectively drew the crisis overseas and away from American investors.  This, odd as it may seem to the American observer, is not, Dam notes, strange to European investing, where mortgage securities have been sold for as long as 200 years in some countries and is considered quite commonplace, even safe, and risk on the American end of the transaction was apparently not expected or, at least, not viewed as an immediate threat.[lxxv] It is not very hard to observe how the effect of the American subprime crisis effectively mirrors the effect of the American Panic of 1873, which was caused by massive defaults in the European land market.[lxxvi] U.S. investors have effectively treated securities with the same lax attitude that European investors were forced to eschew, and now the country must confront its regulatory demons head on.

For the past four years a barrage of suggestions and observations has entered the national debate on how to deal with the current economic state, especially about the benefits and setbacks of permanent regulation of the banking and investment industries.  Research conducted in 2008 shows that banks—contrary to common assumption—often provided subprime loans of a lesser quality than private enterprises, oftentimes ignoring the principles set by their own institutional guidelines.  The authors of the study suggest that before federal regulation is permanently applied, banks and private institutions alike must be called upon to review and reform their lending practices, perhaps forming a kind of “ethical” guide among lenders, which then will be presented during the process of legislating firmer, more permanent, and more responsive regulation.[lxxvii] Moreover, the authors warn that state regulation has in the past led lenders to become less competitive, which reduces consumer options.  Therefore, the authors suggest that any legislation made must keep in mind fostering and, perhaps, mandating a code of competition that will not embroil borrowers in investment disasters.[lxxviii] While internal reviews conducted by companies is inarguably necessary, it seems unlikely, however, that the companies in question, whose ethicality is already under scrutiny, are best suited to interpret ethical behavior within their staff or the industry at large.

For this reason, Charles Calomiris has asserted that government regulation must be pliable in order to respond to “regulatory sidestepping,” in which investors find ways around regulations that restrict high-risk maneuvers, such as the method of securitization to offer a larger number of loans.[lxxix] Calomiris bluntly assigns blame to investors, bank managers, Congress-people, and bank regulators—all who he urges us to remember are subject to the basic human frailty of greed, temptation, and lack of consideration.[lxxx] Therefore, before any regulation is designed, the designers must take into account the psychology of economic and political behavior from a historical perspective, and regulate by accommodating for the potential for human fault.  Thus, regulation must not be rigid or reactive; it must be responsive—emerging from the historical dialogue.  However, it must also be authoritative, and once the regulation responds to new circumstances in the financial landscape, it must be clear in the legislation that any sidestepping, any use of loopholes or treating rules as options, will be considered a violation of the regulations and subject to public review before the regulatory commission.  Ultimately, the key to modern financial regulation is public transparency of both action and consequence; moreover, reforms must not punish retroactively or react solely to singular circumstance without connecting them to the larger pool of activities and future potential.  Essentially, Calomiris calls for a national doctrine of economic ethics and principles of practice, transforming the economic realm into a modern social and political agent.[lxxxi] Unlike the code previously mentioned, this one would be an official all-inclusive corporate and banking economic code, and not industry specific.

Observing the state of affairs today, it is fitting to wonder whether a new economic doctrine is on the horizon, or if it is even feasible in the present political climate.  However, Congress has passed the Dodd-Frank Act of July 2010, which intends to confront financial sector vs. national public relations issues. [lxxxii] Ultimately, the goal of the act is to eliminate the trend of “To-big-to-Fail” in American economics, and especially to eliminate the possibility that taxpayers will ever again be charged for the flaws of Wall Street.  Primarily, the act establishes supervision and dispute resolution capacities for the federal government.  The Federal Reserve will house an independent watchdog commission and a council devoted to determining problems and potential for risk or harm in advance.  In addition, the act intends to eliminate loophole strategies used in the past, requiring complete transparency and accountability in all large scale or potentially risky transactions.  Finally, the act establishes a right for shareholders to determine corporate compensation and governance, and provides investors with access to corporate investment information, all protected under a provision for a strict and aggressive regulatory monitoring council for all suspicions of fraud, conflicts of interest, and corporate manipulation.[lxxxiii] To an extent, we can observe aspects of the doctrine Calomiris suggests; however, as Arthur E. Wilmarth, Jr. contends, the act relies too much on supervision and does not protect consumers from information withholding on the part of investment institutions.  Without the adequate information to investigate and eventually prosecute when necessary, the regulatory procedures may turn out impotent.  It may not be farfetched to imagine that in the future there may be an automated monitoring system in which investment information is automatically entered into a public or governmental database however intrusive upon trade it may seem; however, at present institutions are in control of the diffusion of information to the government; thus even with a shrewd watchdog in place, institutions will still have the ability that they have now to simply withhold information until it is too obvious to miss.  There is no provision for enforced or automatic transparency—it is to be offered willingly and thus provides little safeguard.[lxxxiv] Wilmarth’s reservations aside, the act at least attempts to be reassuring to the American public and perhaps to foreign observers.  Additionally, it is prudent to wonder, when considering Wilmarth’s thought, how enforced transparency would work without limiting competition and perhaps pushing investors overseas.  Nonetheless, this paper does agree with Wilmarth that some degree of enforcement should be considered in the future, though it is hard to identify the best method of achieving a well-balanced result.

Ultimately, this paper must agree with Calomiris’ suggestion of a well-designed doctrine for the economy.  The public has a vested interest in the market as consumers, borrowers, and by-standers; moreover, the activities of Wall Street and the banking industry effect the national and international economy, and effect the overall ability of individuals of all qualifications to receive credit and make investments of their own.  Any time credit is frozen or the markets imbalanced, the balance of the whole society is rocked, and therefore accountability is necessary from all contenders—investors, lenders, borrowers, and regulators.  It is unfortunate that it has a taken over a century for a conversation of the current caliber between the financial sector and federal government to take place—bombastic and inadequate as is may be.  However, for this conversation to truly lead to a reform of our economy, society needs to ask itself some very important questions—namely, what is it about the structure of modern living and the structure of the economy itself that converged to create a crisis?  This is not merely a question about bad practices, legislation, or regulation, but of basic social behavior.

The Economic Implications of Social Trends

Arguably, we may understand the connection of social behavior and the economy as analogous to that of syntax and grammar.  Thus, consumption has social motivations, as much as it is driven by necessity, which greatly influences our perception of the functions and risks of financial practices.  To understand the social underpinnings of the mortgage crisis, we must try to understand the meaning of home ownership in American society, both as desire and necessity.  To achieve this understanding, it is important to understand (or at least try to understand) cultural ideals as the syntax that inform our economic behavior, and which underlies the blurry conception of the “American Dream.”  In this way, we can ask the ultimate question: what about us (Americans, consumers, society) made the subprime crisis possible?

To begin with, we should examine the ideals into which members of society are inculcated from birth, and which are absorbed (or at least embraced) by many of those who wish to become citizens.  Many of the ideals described by Tocqueville in 1840[lxxxv] are still valued, such as the implicit path of hard work to financial and social success, and democracy as the foundational character of a national culture of “Americanness.”  However, it would seem that the ideals behind the archetype of the American Dream no longer necessarily determine success.  An individual may work hard for many years at a particular job, never earning enough to be considered wealthy; moreover, she or he probably will not even earn enough to purchase a home without a mortgage.  Rising costs, employment qualifications, and standards of living wages affect the earning potential of everyday workers, affecting their access to credit.  Nonetheless, the essential message of the American Dream ideal is that anyone can achieve her or his dream of financial success.[lxxxvi] It is integral, perhaps, to the inspirational political character of the economy, and thoroughly embedded within the concept of American democracy.

Therefore, it is fitting to examine the symbol of the current economic crisis, the home, which was so significant to American consumers that they were willing to borrow money to obtain one of their own.  What is the significance of homeownership in American society?  As recent ontological security theory suggests, home ownership has come to symbolize an element of modernity—nearly a right.  The home is a site of personal control where the individual is unsupervised by external entities, such as employers, teachers, friends, or other individuals and authorities.  It is the symbol of self-identity and of political identity within the community—an environment of the self that exists as a respite amidst the potential stress and anxiety of everyday life.[lxxxvii] As suggested by Anthony Giddens, individuals seek a physical safety zone to feel secure enough to pursue goals in life.  The acquisition of such a place is vital to the individual, who may rationalize the risk taken to acquire this place based on preconceived notions of privilege, right, or nature.[lxxxviii] “The home” becomes a psychological need as much as a desire or necessity for shelter and community.  Others more recently have suggested that we may take this idea one step further, and understand risk as a social ideal—that the risk taken to acquire a house, the symbol of financial success, is a partial rite of passage toward the goal of success.[lxxxix] Risk becomes a social expression of determination as much as an action to fulfill a desire.

Peter Saunders’ study of the home as a locale of security and trust suggests that “home” represents something much deeper than a house—that the two have a certain degree of conflation is thus highly significant.  Owning a home effectively determines who owns the self, as the home becomes the location of identity.[xc] Even a cursory examination of American history shows a cultural preoccupation with the rights and identity of the individual, and the individual’s right to achieve independence of home and finances.  Home ownership is thus a fitting symbol of American individualism that lends itself to an ideal of the pursuit of independent means and socially visible success.[xci] In many ways, it is a symbol of the transition from worker to manager, from class to class, even from child to adult.  It is a symbol of the self-reward for individual deeds.[xcii]

There is a religious quality to the symbolism of the home when thus examined, and the foundations of the earliest ideals of the nation are not far from a set of ethics and values of religious origins.[xciii] As Tocqueville suggests, democracy in America was not merely unique for its political processes, but for its integration of religious and social values into the makeup of the political process.  To Tocqueville, this lent a distinct character to what we today call the American Dream.  This character was expressed in the belief that the society at large was destined to reap rewards based on individual effort; thus the individual has a natural right to independence of person and of means of living.  It is hard to think of any other physical object or structure that could denote achievement and success to the extent and with the deepest and most personal psychological meaning as the home and to whom it belongs.

A recent study by Ann Duipis and David C. Thorns raises a number of important issues concerning the rationale of meaning behind homeownership, in particular the social context.[xciv] How homebuyers perceive class and social group imparts the meaning of the house to the buyer, as well as the meaning of the community in which the buyer will live.  Different buyers may have separate motivations for home ownership ranging from utility and security, to sense of normalcy or status—that somehow home ownership is a “next step” in an adult life, or a middle class life, or a public life.[xcv] The degree of a buyer’s determination ultimately sheds light on the point where home buying ceases to be merely of sociological or economic interest, and indicates a deeper psychological value, on a societal level.

The determination of homebuyers, especially when widespread demand is obvious, influences the level of risk at which homes will be sold and that desirable loans will be given.  Risk is therefore learned as much as accepted where the reasons bear the strongest significance.  As noted by Alan Aldridge, when commodities become increasingly accessible, consumers begin to expect the expansion of accessibility to more commodities as a natural part of the market and of economic society in general.[xcvi] To a degree, the notion of affordability adheres to expectations of access, creating a sense of security around the transaction.  Even when risky, the opportunity of “access” suggests that the structure of the transaction will eventually permit a kind of natural financial balance—even if the transaction will lead to initial debt.  Access therefore is conflated with capacity (to afford, to repay) in a way that obscures the process of granting access; that obscures the process of receiving access.  Access becomes capacity, muddled as that may seem.

This is a matter of authority—to be clear, of who has authority over the transaction.[xcvii] Does the “granter” have the authority to decide who receives access, or does the “receiver” have the authority to demand or expect access?  When access becomes conflated with the capacity to handle the consequences of an opportunity, then the design of the transaction acquires a new meaning.  It is no longer a matter of an ideal of access but of expectation.  When this new ideal of expectation converges with the inculcated ideals and expectations of the individual, then the design of the transaction becomes seemingly unstoppable.  It becomes systematic—and that is what we have witnessed during the current economic crisis.  The transactions between many borrowers and lenders are a part of a systematic design of lending that was intended to create access, but instead has fostered an idealized form of speculation.  The symbolism of homeownership overrode any reservations about the actual affordability of access for borrowers.

When we consider the historical experience of the American economy, risk—often unaffordable—is inherent to its success and its failings.  Its ability to adapt systematically is part of its strength, even in the face of crisis, which means risk plays a strategic role in the formation of the economy.  There is a certain degree of logic involved in the transactions of the economy; however, where investing and lending occur, like with all games of strategy, player psychology can always alter the course of the game.  We can see how individuals can alter the financial course just by looking at the millions of loans since the 1970’s.  The manageability of the situation was not merely out of control because of the presence of these loans, but because so many people wanted to take part.  Furthermore, so many wanted to take part because the loans were so accessible, and the loans were only accessible because so many people wanted to buy homes.  Legislations that permitted subprime lending and deregulated banking practices were in part a response to demand; however, more importantly, they were recognition of a basic, perhaps, natural desirability of homeownership.  Underlying everything were two factors: 1) the desire to purchase, and 2) the ideal of the naturalness of this desire—the very inherency of it to our culture, whether as a symbol of individual success or security, or of achieving “the dream,” however one wishes to think of it.[xcviii]

“Wanting” and the ideal of its naturalness are integral to the mortgage borrowers impulse.  Wanting in general may lead to borrowing; however, when paired with the ideal of homeownership and all that suggests, the circumstances of this particular wanting are linked to identity as social evidence of an individual’s success in life.  Access and wanting have always had a connection, but with an ideal of nature in the mix, that which we want develops a nearly natural character about it—a natural desire to be expected; what anyone would want or expect from a member of society.  The ideal provides the justification, the access provides the solution, and the desire provides the impulse.  What we are left with is a psychology of American homeownership.

It is the psychology of homeownership that must be addressed to fully understand and deal with the mortgage problem and any future crises of the kind.  The choices made by borrowers intending to purchase a home reflect the values and ideals held about homeownership more than the desire itself.  Subprime mortgages are a recent a phenomenon of the past thirty years.  Before then, prospective buyers could only get a loan based on a combination of collateral and credit history.  In absence of these qualifications, borrowers have little evidence of an ability to repay a loan.  Therefore the practice of risk is made to satisfy the desire, but the ideals and values behind the house-as-home determine how much the risk is worth to the borrower.  The logic of practice, as Pierre Bourdieu has written, is that our actions are informed by experience and intuition; the logic of risk as practice, however, is no logic at all—there can be no syllogism, only a game of chance, in which a person is willing to stake everything on the probability of achieving a higher goal.[xcix] Perhaps that is in itself a cultural ideal so adhered to American society that it, in fact, makes any ideal of success possible through the seduction of risk as a kind of Herculean trial.

However, embracing risk does not explain why amidst the current crisis, reservations abound regarding the role of the government in dealing with banks and corporations.  In spite of the actual misconduct that contributed to the current crisis, the public appears hesitant to regulate the contributing industries and institutions.  Steven Barley has suggested that major corporations have grown beyond the sphere of private financial interests, and now involve their environments (social and ecological) to the extent that their locale may rely on the presence of the corporation as much as investors across the country or overseas.[c] The web of investment, securities, employment, and other diverse interests makes the presence of many corporations vital to the survival of certain industries and regions.  Areas of the U.S., such as Gary, Indiana[ci] have been devastated by the removal of factories overseas, leaving ghost towns in their wake, providing ample evidence of this reality.[cii] At the white-collar level, the AIG/Goldman Sachs debacle illustrates the extent to which the federal government was willing to step in to avoid a bank crisis involving multiple corporations and foreign nations.  A problem behind the current economic crisis is that the growth of the economy has outpaced the growth of our understanding and, more importantly, the growth of our capacity for fruitful dialog.  We are stubbornly stuck on our economic ideals.

Therefore, while sectors of the economy flourish, others flounder.  This is a problem of society needing to learn how to recognize its integration with the economy, and how to make sure that it is an economy of the country and not of corporations.  Though a corporation has no legal vote in a democratic society, it does have the power to lobby and to control employment and the types of jobs offered in particular regions.  After all, there are regions of the United States that depend entirely on specific industries, and often, on specific corporations.  The investments and business decisions eventually affect these regions to positive or negative effect.[ciii] When the corporation is vitally connected to the banking and investment industry the entire financial future of the public can be affected.  We have already seen evidence of this in the recent credit crunch, and the damages suffered by the American automotive industry.[civ] As the country works its way out from the recession, it may become necessary to take under consideration the ways to permit financial growth of corporations, while protecting the public and economically invested regions of the country from the negative effects of corporate decision-making.  However, corporations must not be allowed to profit from government exploitation.

A first step may be semantic, following the advice of researchers Palazzo and Scherer, who suggest that by labeling large corporations, especially the multinationals, “political actors,” a special political and intellectual category may be created to determine the kind of political entity that is a corporation.[cv] The writers reject the term “corporate citizens,” asserting that the phrase does not recognize the true character of the political relationship with the public.  “Corporate citizens” suggests that corporations exist as entities with the rights and regulations of an individual, but also with the sphere of influence of the individual.  Palazzo and Scherer contend that this must not be the assumption.  Corporations are not individuals, and we must label them for what they are: businesses.  The federal government has an invested interest in regulating interstate and overseas trade, but the regulation of business decisions has always been a blurry area.  By determining the character of corporations not as individuals per say but as actors creates a performative distinction between the businessman and the business interest, establishing that business activity can have active political effects.[cvi]

Semantic differences are not to be overlooked in any political dialogue, and nowhere less than in the dialogue between corporations, the public, and the government.  There needs to be a clear recognition of the roles and abilities of institutions and individuals, and a clear recognition of where institutions and individuals converge—as in where the individual represents the interests of the institution (a CEO or institutional figurehead).  Moreover, there needs to be a distinction between roles and purpose.  An institution, like an individual, has a role in society, but their purposes are different.  The purpose of a business is business, just as a bank’s is banking, and the rights of the institution, which function as a system (and not an organism), should not be confused or conflated with the rights of the human individual.  Instead, institutions should be recognized as an extension of the public, whether private or publically owned, which means their actions have political ramifications with effects outside private concerns.

It would be too easy to pardon the failings of the financial sector wielding the Shakespearean adage, “neither a borrower nor lender be,” laying blame on individual choice and practice by both financial professionals and the public, and not on systematic conduct.[cvii] Individuals are not the problem.  The problem is the system—more specifically, the discipline of the system.  American capitalism wedded to American consumption produces the out of control situation, in which we find ourselves.  Moreover, as a society we overvalue the ideals that promote economic growth, squelching some crucial social inhibitions such as predatory lending or spending beyond means.  We have truly formed a credit society, in which the value of expectations outweighs risk.  Our confidence in “too-big-to-fail” encouraged us to invest too much of our wealth, and too much of our expected wealth.  What resulted was a void, and the question now is whether we can fill the void before the crisis worsens.  To prevent a worsening scenario, actions must be drastic yet strategic; moreover, we must be willing to reevaluate our economic system, and reject those practices and structures that have contributed to detrimental effects, regardless of what those structures symbolize.  Our economy must adapt to the modern character of contemporary American democracy, responding to the needs and desires of consumers and wage earners; moreover, responding to their ideals.  Only then can a new transformation begin.

CONCLUSION:

Implications of Crises Toward a Future Economy

The success of economic reformation in the U.S. is contingent on the ability of reformers to align fresh ideas and manageable plans with the democratic and cultural ideals that form the base of the psychology of our political economy.  A strategy for success that feeds into the American psyche should promote democratic ideals while embracing a new relationship of oversight between the federal government and the business and financial sectors.  Ultimately, the strategy must encompass a reevaluation of the political economy of the country, promoting a systematic strengthening of weaker sectors and determining the extent to which credit is made accessible.  To achieve this goal, there must be a coherent regulation of the practices of borrowing and lending, in addition to firm consequences for corporations that opt to outsource labor.  Moreover, there must be a zero tolerance policy for corporate and institutional misconduct, and repercussions for opportunism.

The principles of stakeholder theory complement the ideals and economic structures currently relevant in American society, including the promotion of democratic process and continued expansion of investment opportunities, and thus are of great utility to current considerations for the future.  According to Thomas Donaldson and Lee E. Preston, “Stakeholders are identified by their interests in the corporation, whether the corporation has any corresponding functional interest in them.”[cviii] This could be defined as shareholders or other corporations or individuals connected through business association, borrower/lender relationship—the definition is blurry, and often depends on any particular writer’s intended meaning.  However, as Donaldson and Preston suggest, a new definitive meaning of “stakeholder,” could alter the way corporations are conceived and run.  “Functional interest” could mean any party that is affected by the presence of a corporation, or any economic institution, whether positively or not, including local communities and the public at large as connected through the market.[cix] Currently, this is one of the most significant concepts to debate as the recession wears on, as we desperately need to recognize the breadth of true economic interests.

Already, the Dodd-Frank Act attempts to open the doors for increased government and public oversight of the financial sector.  Its expected effect is a wider understanding of whose stakes must be recognized by an institution; however, the breadth is not wide enough.  While direct investors are protected, borrowers must rely on the competence of the watchdogs to ensure that lenders are engaging in responsible business.  Additionally, bank depositors are not assured that their savings are safe from bank failure, since they still must rely on the conduct of bankers and investors, who need not disclose the details of institutional investments.  Dodd-Frank effectively protects against only the “layered risk” element of the securities failure that contributed to the subprime mortgage crisis.  If given the chance, it could open up a debate on how best to involve community interests in the reformation of failed economic structures and financial practices.  However, at present such an inclusion in the national debate seems noticeably lacking.  Nonetheless, the act set a precedent for the extension of direct interest from major shareholders to all shareholders and connected institutions.  Is it so unlikely that we might see a further extension to include depositor access to information on bank investments, and borrower access to information on the investment and securitization methods of their lender?   This idea does not seem so farfetched, and may even prove beneficial in the long run, promoting ethical conduct in the investment industry, and providing the public with the option to choose banks and investment institutions based on a sense of security derived from the open operations of the institution.  However, even amidst the already existing extension of protections, the systemic problems of the economic crisis are not attended to—namely, long-term public interests.

Nachoem M. Wijnberg argues that the systemic problem that obscures the idea of “interest” is a consequence of a missing code of ethics to psychologically join economics and politics.[cx] Wijnberg asserts that the reason the idea of “stakeholders” is so blurry and sometimes controversial is because the code of ethics that are expected in the political realm are not expected in the economic.[cxi] It is necessary to establish the potential and actual agency of corporations at a national level, which, for Wijnberg, entails the emergence of a new discourse on the convergence of the public and the economy within a democracy.[cxii] However, such a discourse is only possible if reformers can arrive at the heart of the American dilemma—how to involve the federal and state governments in economic regulation and reformation, without encountering semantic, ideological, and philosophical conflicts with deep-seated social and political ideals of economic freedom.

There is certainly no easy solution, since the political morality of the economy elicits heated and emotional debate.  What is easy, however, is accepting the very present circumstances of the economy, which inform the public that it is vulnerable, and at risk—by its own fault and by the fault of those with power over the financial sector and regulation.  Whether the public accepts the ease of this observation relies on how firmly we can deny the self-perpetuation of unequal and harmful practices.  In a democratic society, this vulnerability is not acceptable, though neither is it irreparable.  We should not embrace a new (or continued?) doctrine of social Darwinism; instead, we should look to the political structures we so value of democracy for a change.  The very structure of democracy, regardless of its variations of administration, lends itself to adaptability.  Adaptation, ultimately, is what we must aspire to.  Robin Hahnel has long argued that unregulated and unrestricted markets fly contrary to basic democratic ideals, and this notion is increasingly validated as the recession persists.[cxiii] Uninhibited economic freedom results in what we are currently experiencing, and perpetuates a system of conflicting interests, where the benefit of one party leads to the detriment of another.

Thus, leaving ethics to the expectation of self-control and “common decency” only leaves room for predation and victimization.  However, in a system where the public has supervisory power over the market at large, the market ceases to be “the market” in the common uncontrolled sense of the term—a giant, ominous force that most people are uninformed about, of Wall Street, private and exclusive; it is, instead, a market place—a place of commerce, where rules dictate conduct, and transactions are out in the open.  Part of the problem of the market is its lack of transparency—more importantly, its reliance on probability.  As much as strategy is involved, the ultimate result of market action is conceived by chance, just like a chess game if player victory was determined by a roulette wheel or role of dice.  All strategy is in the end for nothing—except for those who profited before the spin of the wheel.  This is the essence of Hahnel’s argument—business must be political in a democracy, otherwise the democracy, constructed of public interest, fails.  It fails because the economy excludes the public.

An important step toward reform will be to study areas of successful alternative economic practices, such as worker cooperatives or public shareholding practices—in a way that is not attempted or possible in this paper.  It is not necessary for workers or the public to absorb a corporation or its shares in order to vest interest in the company.  We need only look at the effect companies have on the environment and employment of the surrounding community to see the obvious relationship.  Carrying that observation into the larger macroeconomic view, we can perceive a similar relationship between the market and general public.  Therefore, there is a general ethical precedent already guiding the practice of regulating corporate action to protect communities from negative consequences such as pollution.  However, this requires a combination of self-regulation and government oversight, which unfortunately, also permits the persistence of opportunism.[cxiv] At the national level, we must reject the notion that government interference or regulation represents a takeover of economic freedoms, because this fearful and irrational notion only prevents the country from confronting economic instability head on.  Instead, we must embrace ideas and solutions that promise to protect our economic interests in the long run, regardless of ideological conflicts.

For example, research conducted by Henry Hansmann in 1990 indicates that where homogenous[cxv] groups of workers had significant vested interests in their corporation, the corporation ran more smoothly and efficiently.  This occurrence was evident in worker owned firms in such areas as law, accounting, medicine, investment banking, and certain agricultural or commercial ventures.[cxvi] Hansmann concluded that the workers were more likely to protect their interests by preventing corporate misconduct through diligent participation in the operation of the firm.[cxvii] We may infer that the community of the workers, their homogeneity, permitted a social link to one another that encouraged diligence of surveillance and conduct.  We may not infer that community fostered any greater solidarity than already existed; we may only infer that the network of the community fostered greater efficiency.  The network of the community is the key to its success—it establishes the pathways of responsibilities and accountability, and it is the site where the associations of individuals are visible.[cxviii] As a homogenous community, the members of the network are known and trusted.  Ultimately, the corporation complemented the needs of the community; however, this was a consequence of worker-ownership of the corporation.  In the traditional corporate model, the workers do not own the corporation despite their vested interest in its survival.

However, even while many corporations will offer corporate interests and shares to employees, it is not without caveat.  As Robin Blackburn notes, the current structure of the investment and banking industry indeed provides a vital service to public interests, investing from deposits and 401(k) accounts; nevertheless, institutions are not required to disclose any information about how these monies are invested.[cxix] Instead, accountholders receive a percentage of the return from the larger investment made by the investing institution.  Even where public interests are at stake, there is no protection for industry outsiders; instead, they are expected to trust investors and accept that they are lucky to have access at all.[cxx] In the event that an employee’s company or the investment institution goes bankrupt, however, the 401(k) is lost.  As Blackburn notes, the beneficiaries are involved only so far as their money provides access; beyond that, their investment is out of their control and effectively no longer their own until the investors have taken their share.[cxxi] This is exactly the type of problematic conduct on the part of the investment industry that leaves a blemish of indifference on its relationship to the American public, and it is a vulgar manipulation of the ideals of economic freedom that promote industry in the first place.

Unfortunately, as Benjamin Friedman contends in a recent essay, so long as members of the public feel that the prospect of economic success outweighs the protection of their economic security, there will always be room for negative opportunism.[cxxii] The concept of the risk society as described Anthony Giddens[cxxiii] or Ulrich Beck[cxxiv] seems turned on its head when we think of the way that risk was assessed and seized, even in the face of obvious flaws.  As this paper has stated before, it cannot be ignored that the current character of risk found its roots in the advantages taken after the deregulatory acts, and after anti-redlining policies opened doors for unscrupulous investors and lenders.  The investment and lending industries used government deregulation as an excuse to ignore prudent risk assessment, and the public was seduced by the eased access of new financial and social opportunities.  It is imperative that this conduct is prevented in the future, and to do so, federal and state governments must officially recognize the vested interest of the public in all economic matters.  The market must be a place of transparent transactions without exception, and corporations must be held responsible as political actors for their role and effect in a region and community.  For this to occur, communities and regions of the country must have a clearly determined relationship with corporate and investment industries, promoting mutually beneficial economic policies to their area.

Whereas the country as a whole may not be ready for a shift toward total economic democracy, which would require a shift in mindset (pertaining to who has the right determine economic matters) as much as profit distribution, there is much to absorb from the body of theory and its practice instituted in various parts of the world, and I think this paper would benefit from some consideration of this perspective.  It would be premature to claim that a major and sudden socio-economic shift is in the works; there is no evidence that capitalism is in the throes of death or that globalization will cease and shrivel, just as there is not indication that the American people as a whole are willing to detach from long-held beliefs against interference in the economic realm, so for now at least, it seems unlikely that the public as a voting body will have a direct voice in the financial and corporate sectors.  Instead, it seems that capitalism is at the brink of a gradual adaptation to social problems that it has long enflamed, and globalization is headed for a boom time as so much of the world economy has proven inextricably intertwined.  Isolationist policy would only be detrimental, and a sudden shift toward socialism while the markets are so unsteady and regionally imbalanced would not be wise.  It seems that the best immediate course of action is to embrace Karl Polanyi’s observation that the state and the market economy have evolved as a unit, and thus their ultimate transformation will occur as such.[cxxv] The democratization of the economy will thus be a major, yet gradual cultural event, which may be inescapable as credit relationships draw the public further into the realm of macroeconomic interests.

We need only look to attempts around the world to democratize economic practices to envision the possibilities that lie in store (should the psychological hold behind our own economy permit).  Beyond the small white-collar or commercial worker cooperatives that we have mentioned, we should look at the Fair Trade movement, the existence of which is necessary for no other reason except gross exploitation of rural workers in developing (toward capitalism) or war torn nations.  Ideally, something similar to Takis Fotopoulos’ conception of inclusive democracy[cxxvi] would appeal to areas of the world that struggle to compete within the system of globalized capitalism; ideally, our own part of the world could embrace such a transformation.

However, the American national political system is deeply and socially bonded to its economy, therefore the social psychology of economic reforms, as previously stated, must speak directly to this bond—which we could think of as the majority voice.  As Hansmann notes, American culture has developed a strong hostility to ideological differentiation within its economy, and public involvement or ownership of institutions smacks of socialism, the long archenemy of 20^th century American capitalist democracy.  The fears of the Cold War are so ingrained within public ideology that anything that remotely resembles a government/public intervention in the economy is feared and the target of protest and political outrage.[cxxvii] When exploring the necessities of radical public policy change, we should heed the advice of recent group psychology research that suggests that we must determine the emergence of the properties of the group in order to devise links between individuals, and vice versa.[cxxviii] The goal is to determine how individuals cohere as a group, and inspires the group to act as one.  This is ultimately the spark to the fire—where the group may profit, so too will the individual.[cxxix]

As Polanyi suggests, we are a “market society,” so embedded is our market economy in our political society,[cxxx] and we must reform ourselves with that thought in mind, as well.  There is a sociological precedent for the emergence of new economic group properties—namely, the necessity for multiple shareholders to mitigate individual risk vs. security in modern trading and investing.  The market of the 20^th century was the true “risk society” along the descriptive lines of which Ulrich spoke, after all—not because it assessed risk at a societal level, but because industry assessed its private risk and created security web where only the “weak” or most at-risk traders suffered major damages.  It was the American public that ignored the warning signs, rejecting the most basic standards for affordable debt.  Therefore, as a political body—and the country as a whole is a political body—the mindset of the country was restructured by the desire to participate in the market, which they are invested regardless of personal investment of funds or bank loans, or whatever other means of directly dealing with the market there may be.  The economy, via the conduct of its financial and corporate elites, subverted the authority and power of the public, rendering the public at odds with its own social needs and political ideals.

For the “market society” to continue, it must embrace its political and economic origins, to which the public is inherent.  The new market society could be an increasingly open democratic capitalism, in which the federal government has the power to extend safety regulations for the public, restricting corporate actions that have the potential for negative market effects, and preventing major under-the-table investment deals to which the public is unadvised.  While public oversight does not necessarily mean public profit, oversight will provide a space for dialogue between communities and corporations, both who require the cooperation of the other to maintain consumption and employment.  At a national level, oversight may be overstretched, thus the federal government may eventually assign regional watchdogs that work out of Federal Reserve locations across the country, representing public interest.  Ultimately, it may serve the public if watchdogs are empowered to supervise corporate as well as investment practice, forging an undeniable direct connection of industry to public and community welfare and accountability.  The ultimate goal must be a balance of interests, and a rejection of the ideal of the “righteousness” of private economic freedom, to be replaced by an ideal of responsible economic freedom.  The future of a healthy economy is contingent on this action, otherwise no real changes will have been made, and the underlying problems of the current crisis will merely remain and fester.

The “spirit” of our capitalism, to borrow the term from Max Weber,[cxxxi] is under scrutiny only because of the unwavering trust (or unflinching bravado?) of the American public toward the promises of its economic ideology.  Evidenced in public forums across the country, from news programs to town hall meetings, there appears to be a great discomfort with the idea of permitting the federal government or the public to interfere.[cxxxii] This fear seems to be connected to a general fear that any extension of government oversight could lead to a domino effect, resulting in the loss of privacy.  However, this idea is mostly unfounded, since the structure of our society already limits privacy of its own accord, voyeuristic and preoccupied with security as it is.  Moreover, rationally, federal oversight does not negate the ideal of economic freedom unless that freedom includes the right to conduct business without following the ethics supported by society in the first place (ethics, which perhaps can only be inferred at a national level from legislation and judicial precedent).  The society that would trust its investment institutions and the market, does not trust its government, even when that government provides an opportunity to secure the public from financial ruin.  This is a quandary that requires delving deeper than this paper can and has achieved, unfortunately.

To conclude, this paper suggests again that before any drastic or radical reforms are even contemplated, the country needs to accept a new doctrine of American economics.  To do this requires a major shift in the contemporary political mindset that perceives American democracy as contingent upon the fixed ethics and structure of its capitalist economy.  Somehow, a new vision of the meaning of “American democracy” must evolve, as only then can the economy truly reform—the ideas are too ideologically and philosophically enmeshed.  Regulators of the current crisis need to keep this in mind while trying to remedy the ills of the recession.  A new economic doctrine must resonate with modern American ideals, taking into account the desire for homeownership, higher education, and access to luxury and commodities.  The process will be semantic, practical, and, moreover, psychological.  Commodity desire will not disappear just because the country at current needs to tighten its belt.  Old habits die hard, and the American economy relies as much on its own self-reverence as on the continuation of consumption, production, and investment.  Eventually, a new commodity trend will replace the homeownership push that enabled the subprime mortgage crisis, and the economy will face new burdens.  How we deal with the crisis now, however, could determine the form and extent of a future crisis.  The problem, perhaps, is whether political society can change enough to accommodate economic needs, or if it will need future crisis to be inspired.  One is left to wonder if a modern American economy can truly flourish with the absolute inclusion of the public into the financial sector—can it flourish without?  Moreover, what will be the catalytic transformation that will facilitate our ultimate goals?

history current is not affiliated with any political, literary or academic institution; it is the sole conception of its author, L.M.Zapata.

P.S.: Check out my other blogs at LIFEXPERIENCEINWRITING and The Back Room Bookshelf!

For Law and Revolution with Hauke Brunkhorst at the New School for Social Research

World peace cannot be safeguarded without the making of creative efforts proportionate to the dangers which threaten it. The contribution which an organized and living Europe can bring to civilization is indispensable to the maintenance of peaceful relations. In taking upon herself for more than 20 years the role of champion of a united Europe, France has always had as her essential aim the service of peace. A united Europe was not achieved and we had war.

Europe will not be made all at once, or according to a single plan. It will be built through concrete achievements which first create a de facto solidarity. The coming together of the nations of Europe requires the elimination of the age-old opposition of France and Germany. Any action taken must in the first place concern these two countries.

~Robert Schuman[1]

~ May 9, 1950 ~

Schuman stood before an assembly of press in the ornate conference room of the French Foreign Office on the Quai d’Orsay.  The atmosphere in the room seemed disinterested—preoccupied at best. Schuman gathered his energy behind the podium—thin and bespectacled, clad in a somber dark suit, his speech delivered with passionate resolve, perhaps the declaration that would found a new cooperative international community of Europe.[2] More so than Wilson’s Fourteen Points, or even the impassioned proclamations of the United Nations, five years after the end of the Second World War, Schuman’s proposal marked a revolutionary moment in the history of European politics—not merely for its hope for a stronger economic future, but for the new world image offered in the unity of France and Germany whose state interests had been historically pitted against each other since at least the 17^th century.

Schuman correctly viewed the long standing rivalry between France and Germany as one of the most powerful catalysts of the two World Wars; thus to rebuild and to recuperate, to prevent such world-altering devastation from ever happening again, the two nations needed to ally their interests in a show of good will to each other, Europe, and future generations.  In an attempt to unite Europe and diminish the prevalence of harmful economic competition during the time of post-War reconstruction, Schuman proposed an alliance that led to the Treaty of the European Coal and Steel Community[3] (ECSC) in 1951, marking the foundational moment of what would eventually become the European Union (EU), effectively pledging an oath of cooperation between France and Germany, also initially including Italy, Belgium, Luxembourg, and the Netherlands under the Treaty.  As a result, the pledge of cooperation would be the cornerstone of all future political and economic endeavors on the continent, effectively plotting a new direction for Europe’s future, and through this new politics of cooperation Europeans would come to identify themselves as joint by a new commonality as never before, transcending the boundaries of national identity.

~ * ~

For his efforts, Schuman is regarded as a founding father of the European Union, effectively founded on that day in 1950,[4] when the precedent was set that the future of Europe as a whole resided in its ability not merely to coexist as a comity of nations, but to cooperate in a unity of political and economic interests with the goal of forming a new heritage founded in a legal culture of inclusion.  Such a vision was not an immediate possibility, but one to be attained through diplomacy and patient strides forward as we have learned today as a global society; thus, one of the most pressing issues of Schuman’s time (and our own) has been the problem of adhering to and safeguarding our modern conception of rights[5] since the days of the League of Nations.  As evidenced by the brutal outcome of World War II and the treatment and genocide of the Jews by Nazi Germany, as well as numerous occurrences of the 20^th century that would come to be known as terrible instances of human rights violations, the larger problem was that there was not always a consensus on who was protected by which rights, and thus many groups and individuals have been excluded from receiving even the most basic and (in modern times) most necessary civil and human rights, otherwise taken for granted amongst non-marginalized groups in contemporary Western society.[6] In consequence, a need has risen to combat the exclusion of certain groups of individuals from the recognition and protection of certain rights, whether for ethnic, religious, or political reasons.  This is a problem of civil and human rights, and of reforming an entire large-scale society in the image of a fabricated conception of modernity, morality and ethics; this was a process of culture building.  It is in this light, and within the history of exclusions prior to Schuman’s declaration, that we may try to understand the dialogue of uniting Europe as a part of the dialogue of modern law and universal human rights, as a part of embracing a new image of the continent, and in the process embracing a new European identity marked by the constant restructuring of the present by remembering the past.

Our thesis thus springs from the perspective that the catastrophe of World War II effected such trauma upon Europe (and the other participating countries) as to bring about a cultural shift, in which we may observe that the concretization of certain universal rights into what became European law (as with other international and national legal bodies) has had a “people-shaping”[7] effect on Europe (just as on much of the world), which in the EU has had the consequence of encouraging (successfully or not) a supra- or (as Donald Phillips hopes, for the sake of building a peace-centered community of European partners[8]) a post-national European identity.  It does not deny national or ethnic identity, but instead embraces the unity of nations as an alliance for joint progress[9] and a safeguard against further devastation.  As such, it is through the growing inclination of modern Europe to encourage inclusionary reforms (as seen in EU treaties, or amendments to national constitutions)[10] that a new cultural identity follows suit, slowly shaping a culture of inclusion, which seeks to overcome current and future social and political exclusions of different—and sometimes new—social groups, more powerfully functioning internationally as a political culture of cooperation.

Perhaps one of the hardest places to start a paper like this is choosing the point that most would mark as the start of the particular period characterized as having a formative influence on the history of Europe.  To start with let us say that the block of time from 1917, when Lenin and Trotsky overthrew the Czar in Russia, until 1945 after the surrender of Japan to the United States, marks what we will call the WWII period.  While WWI carries intense cultural significance, the effect of that war that is most important is perhaps that it opened the floodgates of the post-imperial age, which led to the questioning of liberal democracy and the rebalancing of geopolitical power in the West.  After a period between 1945 and 1948 when the Allied occupation of Germany intended to provide stabilization in the aftermath of the war, we may identify a new block of time from 1948, with the start of de-Nazification and the formation of the United Nations and the European Council, up to 1988 or 1989, as Communism in the Eastern bloc, and eventually Russia, made the transition to more liberal capitalist economies.  We can call this the Cold War period, which seems to be a very traditional periodization of the span of time actually, though it is important to concentrate on this as the time when the character of European politics was formed as the product of necessary diplomatic relations, whether at the national level as in the case of a Schuman or an Adenauer, or as a political union with the establishment of the European Council in 1948.  Encompassing the period from the end of the First World War in 1918 until the present day, we can conceive of a period characterized by the dialogue of post-imperial international peace covenants and the normatization of universal human rights, starting with Wilson’s Fourteen Points in 1914.  However, the earliest block of this period also included a totalitarian counter-dialogue that appeared in time to argue for newly expanded imperial practices that transcended the boundaries of foreign colonization to include a new social system that found its strength (and eventually its weakness) in the panoptic surveillance and discipline in the structure of the large-scale European empire that sought to “rehabilitate” natives, shaping their cultural consciousness.[11]

It is within the crossroads of the effects and contributions of these periods that modern Europe should be understood.  The particular brand of historical responsiveness by which we may characterize European government is not merely a historical product, but it is the focal point of a particular phenomena of the modern age—namely, that as the primary geographic site of the two World Wars, in order to rebuild, Europe has had to culturally and politically negotiate the differences and controversies produced by these events, all the while reclaiming national identities from the outcomes of war.  Moreover, modern Europe represents the political template for cultural amnesty, meaning that after the Second World War, not only did countries and individuals have to overcome their roles as victims or victimizers, but the very structure of European culture had to reshape itself to permit Europeans to integrate themselves amongst former enemies and perpetrators of heinous crimes against humanity, if only to peaceably rebuild both land and psyche.

If we may suppose, the reconstruction of European identity is especially remarkable because it marks the jarring transformation of the society after the catastrophe of the war.  Though national leaders stepped up to plate immediately to guide their countries through the worst of the post-War period, these countries were nonetheless in the position of having had their values, their cultures, and the foundations of their society, shaken by the war.  Life may have continued, but what now did it mean to live in the post-War world?  Totalitarian regimes had shown that the rights of citizenship can be revoked, and thus have no inherent value.[12] The function of the state was thus under scrutiny, which contributed to a sense amongst leaders like Schuman that a new political morality was necessary.  This becomes the issue that Europe must address, because it now had a task to convince a diverse group of nations that their societies were in fact bound together by common political values that were somehow, more importantly, cultural values.  The culture of democracy and capitalism needed to become a culture of rights, which recognized that some rights are inalienable, and a new legal culture needed to accompany and foster this transformation.

A recent analytical paper presented to the European Constitutional Law Network Conference in Prague in 2004 by Rainer Arnold of Regensburg University, best states the purpose and function of this reform mindset:

National and supranational constitutional law are separate, autonomous legal orders.  As the entirety of fundamental norms of EC/EU [European Council/European Union] primary law, European constitutional law has such autonomy, but in many ways is interdependent with national law.  Furthermore, there are three bodies of constitutional law in Europe: national constitutional law, the EC/EU law and the European Convention on human Rights (ECHR).  For various reasons, the notion of constitutional law can be extended from the traditional national level to the supranational levels which include the Strasbourg Convention.  The main reason is that the functions of a state constitution are largely subsumed by the fundamental law of the EC/EU and, in part, also by the ECHR:

1) to determine the basic values of a society which serve as a protection against state intervention into the sphere of fundamental rights; and

2) to establish—insofar as the EC/EU is concerned—an institutional order to fulfill the substantial tasks of the community.[13]

For Christoph Möllers, this is a method by which the legal culture “is perpetuated in the lawmaking procedures set up by the constitution.”[14] Möllers, understood within the subtext of his interest in Arendt’s analysis of constitutionalism,[15] directs our attention to a critical issue of the modern constitutional state: a written constitution must have the ability to adapt to societal change, marking its constitutive power within a nation.  According to Möllers, this is the issue faced by the European Union (EU) in recent years, concerning the function and purpose of the treaties of the Union, and whether the Member States have established a de facto European Constitution in the Treaty Establishing a Constitution for Europe (TECE)[16] of 2004.  Historian Harold Berman illustrates a single point in his history of the Western legal tradition—the tradition has evolved as the symbolic embodiment of the nature of the relationship between the state and citizens.  The written law of a constitution furthers this embodiment.[17] According to Möllers, “Similar to a piece of art, [a constitution’s] objective character enables it to portray potential oppositions to ‘social reality.’  The objectification of the constitution in a text calls forth its symbolization.”[18] The process of constitutionalization thus becomes a process of affirming what Möllers calls the “normativity” of the terms and system established within the constitution as a product of historical experience, which is it’s logic.

The politicization of law is the use of law to establish a new system of government that ideally does not amend an earlier form—or, as Möllers writes, “the new constitution founded an entirely new order.  They did not just limit already existing powers.”[19] Thus, the constitution is as much a body of law, as it is the logic of the system it has established.

Möllers writes, “The constitution determines the form and the content of the sovereign power, and in doing so, terminates the previous political order.”  Moreover, “because the constitution must ignore and abolish already existing political power structures, it must make individual freedom its systematic reference point.”[20] The treaties of the EU,[21] similar to those of the United Nations, attempt to establish an overarching European system of government that will have authority over Member States, unifying their political and economic state efforts, though potentially limiting their capacity to act autonomously of EU regulations, whether or not state actions may be deemed destructive to other European states or citizens.  This dual character of the EU formation as “power founding”[22] regarding its supranational character, and power limiting regarding the regulated autonomy of the Member States, make difficult the task of pigeonholing the exact nature of the Union—an economic alliance, a political confederacy.   Harold Berman provides a helpful thought in describing the EU system as an intergovernmental contract to protect economic development that has blossomed into a political institution whose border-crossing economic and humanitarian laws are the foundation of a new ethos.[23] It is in that ethos that we may observe the evolution of European identity, and it is a process that is present, one would think, in most societies that have come to embrace or recognize human rights at an international level.  What makes Europe different, at least to a degree, is that the recognition of rights enhances a joint identity because war thrust the continent into a single course of reconstruction that European nations had no choice but to involve themselves.

The system seeks to unify Europe economically and politically through the integration of many diverse political systems, and as such may seem to be an adaptive and integrative as opposed to one that purely establishes a new order or reforms an old one.  It is this aspect of the Treaty and its counterparts that establish the character of the EU, and its reflection of forming[24] elements of the European society.  In 1951, the ECSC joined German and French industry, followed by the formation of the European Economic Community in 1957, founded by the Treaty of Rome.  Both treaties served to broker compromise between nations in the years after the war, but more importantly, they provided a political vehicle for cooperation.  As Norbert Frei elaborates, this was a time of reconstruction, but also of reconfiguring the past.  Amnesty in Germany acted as a sugar pill for German society, permitting a sense of psychological reunion and integration, while at the same time distinguishing the new government under Adenauer from the allied occupation, which emphasized retribution. This “policy of the past,” or Vergangenheitspolitik, according to Frei, became the method and mindset of German reconstruction of society; however, if considered from the perspective of the larger European experience, Adenauer was permitting Germany (or at least attempting) to reintegrate itself within the community of Europe.  Even if the reintegration was necessary in the long term for the well being of Europe as an economic community, the psychological effect of Adenauer’s policy was to suggest a “right to political error,”[25] which in Germany may have ironed out or at least masked the discomfort of post-Nazi German political and cultural life, but more importantly widely holds the rest of Europe accountable for human damages on both sides of the war.  After an attempted genocide, the “right to political error” is sadly a comment befitting of existentialist examination as much as political analysis.

As such, the history of the European Union is of a system founded in political responsiveness to the devastation of World War II and the legal changes that ensued at international and global levels.  As written by Halbwachs, “there are no recollections which can be said to be purely interior…from the moment a recollection reproduces a collective perception, it can itself only be collective.”[26] Thus, the nature by which the EU responds to the necessities of past experience, of trauma and the determination to rebuild together, marks a special model of collective memory at work.  Not because of living witnesses of war, or because the Union is a specifically post-Holocaust institution; what makes the EU special is that the very structure of its system is one of rebuilding, and thus it is a system that looks ahead constantly, and as a product of the war, it is the response to the children of that generation, and it is the political sire of their historical memory.  This is, for Frei, one of the more fascinating aspects of contemporary history—namely, that the specter of the past has intense psychological relevance to the generations of children and grandchildren who never experienced the war or Holocaust, but its reality is not subject to a process of contemporary subjective interpretation, fetishization, and emotional manipulation (comparing political leaders or movements to Nazis, fascists, Hitler, etc.).[27]

This has much to do with the social currency of WWII in our culture, and also of the sometimes uncomfortable debate on imperialism in the 21^st century.  Of special significance to the history of the EU, for instance, is the context of the time of its founding, when individuals and groups all over the world began to seek and often gained acceptance into the expanding order of global rights, whether through appeals to the United Nations Decolonization Committee,[28] or open protest, opening a dialogue at governmental and popular levels on the universality of rights, which, with the reintegration of survivors after the war, and the introduction of a host of Europe-bound immigrants during the time of decolonization, became a vital concern for the re-formation of post-War Europe.

The impact of the break up of the major European empires cannot be ignored, and to a great degree, we may contend that the EU is also a systematic response to the need to recover from or prevent an economic downswing as the former imperial nations found themselves at a loss after the war.  Moreover, the process of decolonization introduced a new political terrain to the post-War climate that increasingly became a dance between the supporters of capitalism and socialism.  Former colonial peoples represented influxes of new immigrants; their countries represented new players on the international field.  Britain provides an excellent example of the transformation to ensue from WWI until the 1960’s for much of Europe’s imperial power.  As India, South Africa, Ireland and others sought their independence following the close of the First World War, a new problem arose for the West: where do those lands and peoples fit into the cultural and geopolitical spectrum, and moreover, where do they fit legally?  The colonies were run under a separate regulatory system from the imperial home-state.  As explained by Fanon,[29] this was understood as necessary for organizing and maintaining the human resources (colonized peoples) of the empire, emphasizing chain of command and discipline as opposed to democracy and representation.  The success of empire was the manipulation of biopower, as we may borrow from Foucault,[30] and this biopower was the discipline and control of the human body and mind, the re-creation of the individual into the image of the imperial state.  However, as Arendt reminds us, the terrible effect of this process is the circulation of imperial practice in the colonies into the home state.  This “boomerang effect,”[31] to use Arendt’s words, is our evidence that the empire was a single society from the start, a system ordered by its internal disparities of wealth, class, race, and geography.

In consequence, the dialogue of imperial society mirrored that of the national society, in which marginalized populations are silenced by their lack of (and barricaded) access to positions of cultural and political agency.  The effect is dialectical, a systemic rebalance of society, including human resources whose role in society may have previously been disempowered, disdained, or ignored.  The discovery of a political voice is the same for colonized peoples as for groups repressed or persecuted for religious, ethnic, political, social, or sexual reasons within the imperial home state.  Once the marginal populations rejected the imperial state (a counter ethos, or actual violent or non-violent disobedience) and struggled for autonomy and independence, a chain reaction inspired an incensed solidarity against paternalistic surveillance and correction, and rage at the dispossession of culture and land.  Moreover, in Europe after the Second World War, a new political consciousness arose following the intra-European imperialism of Germany, fears of Communist expansion from Russia, and a somber recognition that the attempted genocide of the Jews represented a horrific hallmark in the history of cultural antagonisms based upon differences of birth, body, self, or belief.

As such, we must view this history as engaged within a larger joint cultural and legal problem of what sociologist Hauke Brunkhorst calls a problem of the “global inclusion of the other” and of the “global exclusion of inequality,”[32] and in so doing understand that the problem is engaged in the process of transformations of society and of individuals during and after the Second World War and Holocaust, and the ensuing Cold War years.  Moreover, to understand this dialogue we have to understand the interconnectedness of the imperial, totalitarian, and liberal traditions.  As Enzo Traverso wrote:

The massacres of the imperialist conquests and the final solution are linked by more than “phenomenological affinities” and distant analogies.  Between them runs a historical continuity that makes liberal Europe the laboratory of the violences of the twentieth century, and Auschwitz an authentic product of Western civilization. **

Traverso’s point is that we should concentrate on the genealogy of this violence and not its uniqueness, of the systemic formulation of the historical events that led up to the Second World War and on which the Cold War was firmly seated.  Within the continuity of the dialogue of modern European formations, the EU is the first institution of its kind that does not merely try to mediate between parties, but it is, instead, the conversation itself.  There is certainly a mitigatory aspect to the method of mediation practiced by members of the Union, especially evident in the role of the Merkel administration in the process of negotiations between the U.S. and Russia.  This is where the conceptualization of the Union as site of cooperation, as much as of a method, becomes important.

The purpose of a joint Europe, as hoped for by Schuman, is to lead to cooperation, as we have repeatedly insisted; the EU is, however, also constructed to found the permanent concept of a cooperative Europe.  It is “everyone’s Europe,” as Romano Prodi stated in 2000[33]—and this is not to say that the reality of the European Union is a Utopic dream of brotherly love!  Instead, the significance of Prodi’s statement is that the political message of the Union is cultural unity, thus conceptual reformation of the role of the government.  Much in the way that France conquered its rural provinces with a colonial fervor during the 19^th century,[34] the modern European culture is the product of a conceptual conditioning process based on the representation and structuring of the Union government as a repository for modern universal values, and in that way, as an experiment in shaping future generations into the image of humanitarian values.  Whether this is an actual human result of the political and cultural process is not necessarily true or relevant—it would be an odd thing, indeed, to characterize Europeans or any cultural group as a culture of humanitarians.  The point is that the concept of humanitarian values—of universal human rights, of having citizenship and civil rights that cannot be denied by the state—is embedded within Western discourses, and increasingly within the representation of the European political identity.

As with any identity, it is derived from individual and collective sources.  We can imagine American (U.S.) identity as closely bound to pride in our Constitution and revolutionary heritage as a nation.  While American identity may be a value of the individual, and to some extent, the modern European identity is also formed by this value; it is also the value of a respect for rights.  Of course, there are groups and individuals who are excluded from certain rights, as in any society, but the value of rights as a human value is the defining character of modern European law and its influence on society.

We can compare this influence to the civil rights legislation of the 1950’s and 1960’s United States.  New and controversial law eventually became taken for granted as normative to the protection enjoyed by American citizens, and the concept became a value of the American identity, even in such cases where some Americans would want to block the rights of others based upon race or sexuality.  There is a normative quality to the concept of civil rights in American society, and our identities are tightly bound to a belief in their inherency in our lives and the lives of others.  Essentially, this is a matter of conceptualization and the formation of an image of the world that adheres to our values.  Amos Goldberg has offered tremendous observations on the importance of understanding transformations of the dramatically altered “world-image” of “fundamental concepts, which form the infrastructure of any given culture”—what Goldberg describes as “deep categories”[35] within a culture, and of metaphor; an analysis owing a debt to linguistics, [36] and which we may concentrate on as the analysis of conceptual metaphor and the formation of our reality, the internalized world-view, as explored by linguists Greg Lakoff and Mark Johnson during the 1980’s.[37] Our questions, of course, need not adhere solely to the historiography of the Holocaust, to which Goldberg refers, but may apply more widely to our needs in a more sociologically linguistic treatment of a historical analysis of contemporary European identity.  A large part of this analysis depends on understanding the process and lasting effects of the reintegration into society of the survivors of war and genocide, alongside perpetrators complicit with (what would come to be known as) state crimes, and neighbors whose blindness or inaction further raise the controversy of complicity or even their own victimization.  We may also include the tepid reception of an influx of immigrants from the East and Africa within the structure of this new integration, a process closely bound to the protean shifts of the world order, as closely bound as the World Wars were to the onset and institutionalization of the universalist tenets of the global legal revolution, situated (by Brunkhorst)[38] after the First World War, solidifying with the creation of the United Nations.  Indeed, we must also take under consideration the effects of the concentration camps on survivors, and more broadly, on our understanding of the contemporary world, which still, philosophically and experientially through historical memory, must come to terms with the very human creation and use of such places.  Moreover, integral to this process is the development and embracement of what Brunkhorst describes as the “concretization” of new universal legal norms—the “normative progress” of global and international rights; in other words, the ways law becomes incorporated into the morality and ethics of a society, over time influencing and forming a different world-view then was there before; in this case, the established normativity of the “right to have rights,”[39] by which, it may be safe to say (at least legally) that all people have a right to an identity, both political (in citizenship) and cultural (as Europeans, for example).

To start with, we can consider the words of Talcott Parsons:

The normative elements of a social system do no stand alone, of course.  The reason for emphasizing them here is their involvement in the problem of order…[40] Whereas one can think of liberty primarily in terms of casting off restraints, equality inherently involves relations among units that are positively valued.  Units that claim the right to equality cannot legitimately oppose recognition of the equality of others.  Whereas in the context of liberty the evil is illegitimate constraint, in the context of equality it is illegitimate discrimination.[41]

As we may understand from reading Parsons, the practice of order—of rules, spoken or not, of standards, values, and beliefs—is integral to the formation of any system.  The format of the written constitution is not merely the codification of law, as we have discussed, but the representation of those “normative elements” of a society, the values recognized and proposed within the document, which are regarded as inherent to the system instituted or reformed by constitution, thereby protected as the rights of the citizens.  However, as we have discussed, these rights are not initially normative, but must become so.  The aim of such legislation is that in time the underlying values of the reform laws will be absorbed into the larger schema of the culture, eventually becoming embedded within the discourse not only of law, but of how a society comes to identify itself and express that identity.

We may start with the emphasis placed on “cooperation” by the European Council (EC) in their presentation of the EU as a democratic and cultural body on their website,[42] in their publications, and within the tenets of the various treaties of the past century, and decade.  However, it is important that we situate “cooperation,” the character of the Union, within the early doctrinal platform of the Union’s early foundation in Schuman’s speech, of the “coming together of nations,” to create a “de facto solidarity” intended to solidify a permanent “European” system.  As such, cooperation is a necessary concept intended to insinuate itself into the conceptual foundations of the political thought experiment that is the structure of Europeanness as an identity.  There is no “European” identity without cooperation—not merely as a practice, but as a way of thinking about the self as a “European” in conjunction with a national identity, and the understanding that all Europeans thus have a double identity.

Cooperation as a concept and practice is integral to the process of “coming together,” not merely as a political process, but one that is now normative to the reconstruction of modern Europe.  Lakoff and Johnson tell us “metaphor is pervasive in everyday life, not just in language but in thought and action.  Our ordinary conceptual system, in terms of which we both think and act, is fundamentally metaphorical in nature.”[43] These metaphors extend into our very conceptualization of the world, and are the vehicles of the majority of our communications, the expressive capability of our common world-images.  He built up my expectations, only to let me fall—an expression with an underlying metaphor of construction.  Under her administration the government ran smoothly, which expresses a metaphor of machinery.  This is fundamental to language, and especially our ability to communicate along lines of common understanding.  Moreover, the metaphor does not need to be direct or even intentional.  “The policy of the past” marks two meanings: 1) an actual policy for dealing with events that occurred in the past; 2) the psychological aspect associated with dealing with the past, which uses the metaphor of a policy, when really it is a form of denial.

The play of words involved in understanding the past and forming a better understanding of the future has a great deal to do with how we express memories and conceive of history, and the politics of language are very much a part of the limitations of our ability to express the past.  As Frei discusses, terms such as “war criminal” or  “Final Solution” are embedded in the discourse of the history and historiography of WWII, but their use also conveys a particular political perspective.[44] “War criminal” takes the position of judgement and conviction, whereas “Final Solution” (as opposed to genocide of Jewish persons or mass killings) is dramatic (but also less violent) and plays off the aspect of the attempted genocide that makes it so unimaginable—that the solution to the economic and social problems identified by National Socialism was to eradicate an entire group of human beings.

In this way, the process of becoming “European” is also a process of creating “Europe,” the cultural whole.  Certainly, this is an effort of people-shaping—not to control or subdue, but to promote the commonality that was lacking for so many centuries and was the cause of so many wars, and so many terrible moments building the competitive state.  Instead, modern Europe seeks to build a cooperative future founded in an ethic of rights protection.  Moreover, the protection of rights intends not to limit the range of rights to a particular set, but to embrace rights as expansive and universal, and thus inclusive.  Should the founders of the EU succeed in their vision, Europe will not merely possess a legal foundation for inclusive policies, but a culture that seeks the same.  It is the culture of cooperation that may lead to this, and as such, will be the deciding factor in the post-national formation of European identity as citizens of the European Union.

Bibliography

Arendt, Hannah.  1963.  “Constitutio Libertatis.”  From On Revolution.  New York: Viking, 139-178.

———— 1994.  The Origins of Totalitarianism [1951].  New York: Harcourt.

Arnold, Rainer.  2004.  “The European Constitution And The Transformation Of National Constitutional Law.”  In Ingolf Pernice and Jirí Zemánek, eds., A Constitution for Europe: The IGC, the Ratification Process and Beyond.  Baden-Baden: Nomos (2005), 1- 11.

Brunkhorst, Hauke.  2009.  “Dialectical snares: human rights and democracy in the world society.”  Ethics & Global Politics.  DOI: 10.3402/egp.v2i3.2068, uncorrected proof available at http://creativecommons.org/licenses/by-nc/3.0/, Part IV, Line 421.

—————2009.  From a lecture on December 1, 2009 on the paper “Dialectical Snares…,” for graduate seminar Law and Revolution at the New School for Social Research.

Brunkhorst, Hauke.  2009.  “Reluctant Democratic Egalitarianism: Global Constitutionalism, democratic inclusion, and Arendt’s Idea of the Revolutionary Foundation of the Modern Nation State.”  (Forthcoming).

Comaroff, Jeann and John.  1991.  Of Revelation and Revolution: Christianity, Colonialism, and Consciousness in South Africa.  Chicago: University of Chicago Press.

Fanon, Frantz.  1967.  Black Skins, White Masks (1952).  Charles Lam Markmann, trans.  New York: Grove Press.

————2004.  The Wretched of the Earth (1963).  Richard Wilcox, trans.  New York: Grove Press.

Foucault, Michel.  1977.  Discipline and Punish.  Alan Sheridan, trans.  New York: Vintage.

————1978.  The History of Sexuality: Vol. 1.  Robert Hurley, trans.  New York: Vintage.

Frei, Norbert.  2002.  Adenauer’s Germany and the Nazi Past: The Politics of Amnesty and Integration (1997).  Joel Gelb, trans.  New York: Columbia University Press.

Frei, Norbert.  “Farewell to the Era of Contemporaries,” History & Memory Spring/Summer97, Vol. 9 Issue 1, 59-79.

Goldberg, Amos.  2009.  “Forum: On Saul Friedlander’s The Years of Extermination, (2) The Victim’s Voice and Melodramatic Aesthetics in History.”  History and Theory 48 (October), 236-237.

Halbwachs, Maurice.  “Conclusion of ‘The Social Frameworks of Memory.’”  From On Collective Memory.  Lewis A. Cos, ed. & trans.  Chicago: University of Chicago Press.

Lakoff, Gregory and Johnson, Mark.  1980.  Metaphors We Live By.  Chicago: University of Chicago Press.

Möllers, Christoph.  2007.  “Pouvoir Constituant—Constitution—Constitutionalisation.”  In E. O. Eriksen, et. al., eds., Developing a Constitution for Europe, 2^nd Ed.  London: Routledge.

Parsons, Talcott.  1969.  “Order and Community in the International Social System.”  In Politics and Social Structure.  New York: Free Press, 121.

————1971.  “Counterpoint and Further Development: The Age of Revolutions.”  From The System of Modern Societies.  New Jersey: Prentice-Hall, 80.

Prodi, Romano. 2000.  “Speech to European Parliament on Shaping the New European Parliament, Strasbourg, 15 February 2000.”  Accessible at http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/00/41&format=HTM L&aged=1&language=EN&guilLanguage=en.

Schuman, Robert.  1950.  “The Declaration of 9 May 1950.”  Accessible via the European Commission at http://europa.eu/abc/symbols/9-may/decl_en.htm.  For footage, see the European Navigator website at http://www.ena.lu/

Sunstein, Cass R.  1990.  “The Functions of Regulatory Statutes,” from After the Rights Revolution: Reconceiving the Regulatory State.  Cambridge: Harvard University Press, 61-64.

Traverso, Enzo.  2003.  The Origins of Nazi Violence.  New York: New Press.

Weber, Eugen.  1976.  Peasants into Frenchmen: The modernization of Rural France, 1870- 1914.  Stanford: Stanford University Press.

[2] For footage, see the European Navigator website at http://www.ena.lu/

[3] Available on European Navigator at http://www.ena.lu/.  Most EU documents are found at europa.eu, the website of the European Commission.  However, as the ECSC Treaty expired in 2002, it has been removed from the archive of accessible documents on the website.  These documents are however all accessible online, despite expiration, at European Navigator.

[4] Though the title “European Union” was not made official until 1992, the span of time from the formation of the European Council in 1949 until the end of the Cold War is considered the early historical manifestation of the Union, which served the necessities of the time.  The era of “cooperation,” however, is marked by the 1950 Schuman plan for the joint economic interests of France and Germany under the ECSC Treaty.  Hence, May 9^th is celebrated annually across the Union as Europe Day.

[5] See Part 1: Of World War II

[6] For important discussions of this, see: Hannah Arendt, 1994, especially “The Decline of the National-State and the End of the Rights of Man,” The Origins of Totalitarianism [1951] (New York: Harcourt), 267-302, specifically passages on statelessness and the ability and practice of early 20^th century states to disown or denationalize former citizens: see footnotes on pages 277-285 in particular; also by Arendt, see 1963, “Foundation I: Consitutio Libertatis,” from On Revolution (New York: Viking Press), 146-147; Brunkhorst, “Dialectical Snares…,” the whole fascinating paper deals with this topic; also by Brunkhorst, see (as of) 2009, “Reluctant Democratic Egalitarianism: Global Constitutionalism, democratic inclusion, and Arendt’s Idea of the Revolutionary Foundation of the Modern Nation State,” (Forthcoming), 16, in which the author contends that the power of a constitution to found and legitimate rights is “up to the individual and collective self determination of the people;” Cass R. Sunstein, 1990, “The Functions of Regulatory Statutes,” from After the Rights Revolution: Reconceiving the Regulatory State (Cambridge: Harvard University Press), 61-64, on the subordination of groups. 

[7] Hauke Brunkhorst, 2009, From a lecture on December 1, 2009 on the paper “Dialectical Snares…,” for graduate seminar Law and Revolution at the New School for Social Research.  To a great degree, the scope and concentration of this paper derives from this concept of “people-shaping,” and thus, it is the overriding concept of everything discussed here, which is evaluated as somehow contributing to this process.

[8] Donald G. Phillips, 2000, “The Extraordinary End of the Cold War,” from Germany and the Transnational Building Blocks for Post-national Community (Connecticut: Praeger), 2.

[9] By progress I mean joint benefits from political and economic choices, and not “progress” in the sense of a normative evolution of society.  My analysis only professes to apply to Europe, and does not suggest that the “progress” of Europe is a model for all modern societies, or society in the more general sense of the concept of society.

[10] See for example the recent amendments to nearly all European national constitutions, which pledge allegiance to and admit the supremacy of international law regarding ratified universal human rights.

[11] Foucault’s prison metaphor is important to this paper, deriving from 1977, Discipline and Punish, Alan Sheridan, trans. (New York: Vintage), as is the concept of the colonization of consciousness developed by Jean and Jean Comaroff, 1991, Of Revelation and Revolution: Christianity, Colonialism, and Consciousness in South Africa (Chicago: University of Chicago Press), which the Comaroffs derived in part from Franz Fanon’s 1967, Black Skins, White Masks (1952), transl. Charles Lam Markmann (New York: Grove Press).

[12] See Arendt, Origins…, footnote on page 288 for excerpt on the revoking of German nationality.

[13] Rainer Arnold, 2004, “The European Constitution And The Transformation Of National Constitutional Law,” in Ingolf Pernice and Jirí Zemánek, eds., A Constitution for Europe: The IGC, the Ratification Process and Beyond (Baden-Baden: Nomos, 2005 [pp.1-11]), 1.

[14] Möllers, Christoph, 2007, “Pouvoir Constituant—Constitution—Constitutionalisation,” in E. O. Eriksen, et. al., eds., Developing a Constitution for Europe (London: Routledge, 2nd Edition), 204.

[15] Arendt, Hannah, 1963, “Constitutio Libertatis,” from On Revolution (New York: Viking), 139-178.

[16] Accessible at europa.eu.

[17] Berman, Harold J., 1998, “The Western Legal Tradition: The interaction of revolutionary innovation and evolutionary growth,” in Political Competition, Innovation and Growth: A Historical Analysis (Berlin: Springer), 38-39.

[18] Möllers, 188.

[19] Ibid., 185.

[20] Ibid., 186.

[21] Specifically: Treaty of the ECSC, The Treaty of Rome (1957), The Single European Act (1986), The Treaty on the European Union (Maastricht, 1992), The Treaty Of Amsterdam (1997), The Treaty of Nice (2001), The Treaty Establishing a Constitution for Europe (2004), The Treaty of Lisbon (2007).

[22] As discussed concerning the United Nations Charter of 1945 in Brunkhorst, Hauke, (as of) 2009, “Reluctant Democratic Egalitarianism: Global Constitutionalism, democratic inclusion, and Arendt’s Idea of the Revolutionary Foundation of the Modern Nation State,” (Forthcoming), 1.

[23] Berman, 47.

[24] Norbert Frei, 2002, Adenauer’s Germany and the Nazi Past: The Politics of Amnesty and Integration (1997), Joel Gelb, trans. (New York: Columbia University Press).

[25] Ibid., 311.

[26] Maurice Halbwachs, “Conclusion of ‘The Social Frameworks of Memory’” from On Collective Memory, Lewis A. Cos, ed. & trans. (Chicago: University of Chicago Press), 169.

[27] Norbert Frei, “Farewell to the Era of Contemporaries,” History & Memory; Spring/Summer97, Vol. 9 Issue 1, 59-79.

[28] Formed in 1962.

[29] Frantz Fanon, 2004, The Wretched of the Earth (1963), Richard Wilcox, trans. (New York: Grove Press).  Notably referring to French imperialism, though there is, of course, conceptual cross-applicability of the text.

[30] Michel Foucault, 1978, The History of Sexuality: Vol. 1, Robert Hurley, trans., (New York: Vintage), (especially) 140.

[31] Arendt, Origins…, 155.

[32] Brunkhorst, 2009, “Dialectical snares: human rights and democracy in the world society,” Ethics & Global Politics.  DOI: 10.3402/egp.v2i3.2068, uncorrected proof available at http://creativecommons.org/licenses/by-nc/3.0/, Part IV, Line 421.

**Traverso, Enzo, 2003, The Origins of Nazi Violence (New York: Free Press), 153.

[33] Romano Prodi, 2000, “Speech to European Parliament on Shaping the New European Parliament, Strasbourg, 15 February 2000.”  Accessible at http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/00/41&format=HTML&aged=1&language=EN&guilLanguage=en.  Former Italian Prime Minister Romano Prodi was President of the European Commission from 2000-2005.  Also known as the “Everyone’s Europe” speech.

[34] See Eugen Weber, 1976, Peasants into Frenchmen: The modernization of Rural France, 1870-1914 (Stanford: Stanford University Press).

[35] Goldberg refers to the term “deep categories” used by Aaron J. Gurjewitsch, cultural historian of the Middle Ages, from Das Weltbild des mittelalterlichen Menschen [The World Image of Medieval Men] (Munich: C.H. Beck Verlag, 1996).

[36] Amos Goldberg, 2009, “Forum: On Saul Friedlander’s The Years of Extermination, (2) The Victim’s Voice and Melodramatic Aesthetics in History,” History and Theory 48 (October), 236-237.

[37] Gregory Lakoff and Mark Johnson, 1980, Metaphors We Live By (Chicago: University of Chicago Press).

[38] Brunkhorst, Lines 382-383

[39] Ibid., Part I – Lines 83-131, Part III – Lines 281, 396

[40] Talcott Parsons, 1969, “Order and Community in the International Social System,” in Politics and Social Structure (New York: Free Press), 121.

[41] Parsons, 1971, “Counterpoint and Further Development: The Age of Revolutions,” from The System of Modern Societies (New Jersey: Prentice-Hall), 80.

[42] http://www.europa.eu

[43] Lakoff and Johnson, Metaphors We Live By, 3.

[44] Frei, Adenauer’s Germany…, 178.

(October 22, 2009)

In response to an October 13, 2009 discussion in the course Fascism and Memory with Eli Zaretsky and Federico Finchelstein ( New School for Social Research) on the influence of evolution and historical materialism upon Arendt’s conceptualization of totalitarianism and natality

For Arendt, in The Origins of Totalitarianism, Marx and Darwin play a special, almost invisible role—not because of the content of their work, per say, but because their presence reminds us that they represent a certain strain of thought in Western philosophy and theory: conceptions of the determination of history and nature.

Arendt does not approach her analysis of totalitarianism from the perspective of a materialist or evolutionist—this is important to keep in mind, because I am not describing her approach to fitting totalitarianism into some linear progression of human history suited to her philosophy; on the contrary, in my reading and understanding of Arendt, she describes and situates the concept of totalitarianism within a history of ideology, in which it is an alternate ideology of the determination of history and nature—one that disdains the presumption that either nature or history are beyond human manipulation or domination.  Totalitarianism is deterministic by initial human action (the totalitarian movement), which negates the power of nature and alters the linear conception of naturally progressing history to one dependent upon finalizing human actions found in war, government, or places like concentration camps, where the obsolescence of regard for the human form or existence is sought and possibly attained.

The basic idea, as I read it, is that the totalitarian movement attempts to enact the totalitarian ideology, and, in so doing, attempts to bring about—artificially (though in the totalitarian perspective it would be organic)—an end to history and nature (or at least our conception of the two, and their structural relevance to thought).  This can be understood alongside Arendt’s embrace of the Aristotelian discussion of phusis and nomos (in The Human Condition), which derives from Aristotle’s seminal work, Politics; namely, phusis is nature and nomos is law or convention.  If totalitarianism seeks to divest humanity of its conception and role in nature, as Arendt argues in “Ideology and Terror,” the final chapter of more recent editions of Origins, then phusis is obsolete.  If in totalitarianism, law as we know it (consensus iuris) is destroyed by terror and isolation from the social experience of human life (plurality), and law becomes embodied by the condition and existence of such life, then totalitarianism destroys nomos.  Moreover, if humanity is the embodiment of the law, but as a former part of nature is destroyed or made obsolete by the end of phusis, then totalitarianism in theory leads to the end of humanity.

Does this mean that Arendt implies the extinction or total eradication of the species?  Hardly—though as we have seen, historically, exterminations did occur, so in a way, physical eradication is a part of the totalitarian program in Arendt’s view; however, what Arendt describes is an end to the conceptualization of humanity as a thinking species identifiable within the standards of our own modern existence and sense of faculty.  Arendt understands totalitarianism as something that promises to enact a new vision of humanity of which we cannot entirely conceive, because it does not exist—or did not exist—in our own imaginations of possibility.  Her concern is that now that humanity can conceive of such a thing, now that humanity has seen totalitarianism, the future of humanity will always bear some influences of the ideology and its practitioners, for better or (more likely, for Arendt) for worse.

This is a radical vision of humanity that totalitarianism offers in Arendt’s view—radical much in the way that she understood the radical evil of the perpetrators of its actions.  Divested of the conventions, the very constitution of human society (or at least how Arendt understood human society) as a plurality, totalitarianism for Arendt was the enactment, effusion, and innovation of the unimaginable, which for her was the greatest nightmare, the most terrifying evil of all.  Her one respite was her concept of natality—that human mortality resembles the biological cycle of all life, of birth and decay; moreover, that an ideology that seeks its embodiment in mortal humans lays “the germs of its own destruction” as much in the limitations of its own constructed reality, as in the destructible bodies of the people it must rely upon for its own perpetuation.  As Arendt reminds us at the close of Origins, with every birth there is a new beginning, and she writes, “this beginning is the only ‘message’ which the end can ever produce.”

September 15, 2009

Christoph Möllers voices the underlying argument of this paper, which discusses essays by Möllers and Harold J. Berman—“the legitimacy of constitutional law does not end with laying down the constitution, but is perpetuated in the lawmaking procedures set up by the constitution.”[1] Möllers, understood within the subtext of his interest in Arendt’s analysis of constitutionalism,[2] directs our attention to a critical issue of the modern constitutional state: a written constitution must have the ability to adapt to societal change, marking its constitutive power within a nation; to be revolutionary, the constitution must establish a new political order.  According to Möllers, this is the issue faced by the European Union (EU) in recent years, concerning the function and purpose of the treaties of the Union, and whether the Member States have established a de facto European Constitution.  Through the historical evolution of Western law, notably outlined by Berman, the dilemma faced by EU Member States may represent the continuation of a revolutionary tradition of reordering political systems to adapt to changes in culture, economy, and social hierarchy within the nation-state (or in the case of the United States, the former colonial state); however, the latest potential incarnation of this tradition marks the establishment of a supranational government in continental Europe and the United Kingdom.

For Berman, revolutions have historically informed the development of law; the act of revolution, in the sense used by Arendt, is completed through the institution of a new political order, a new system of government that responds to the changes demanded by society.  In “The Western Legal Tradition,” Berman locates the origins of modern legal tradition within the effects of the Papal Revolution of the 11^th century, a series of civil wars between monarchs and the increased power of papal supporters, which established Church and secular legal authorities in Europe, spelling out a legal dynamic that would influence the structure of Western law in later centuries, owing as much to ecclesiastical courts as the royal magistracies.  Of the four other revolutions Berman identifies as crucial to the development of Western law (the Lutheran Reformation, the English Revolution, the French Revolution, and the Russian Revolution), each one marks the establishment of a new political system made official by a constitution.  The laws set through revolution represent its embodiment; to decide if the constitutionalization of European law marks a revolution in Western history, it is important to explore the relationship of law and European society.

Berman outlines six characteristics that define the growth of Western law, derived from this process:[3]

1)     The law must be conceived as a “coherent whole,” or a body of law;

2)     The body of law must be sufficiently flexible to be reinterpreted and change as society changes;

3)     The law must be handled as a historical product; it is comprised of precedents and thus changes to the law reflect a pattern within the legal tradition that may be referred to;

4)     The law must hold supremacy over political authorities: much in the way that the Church required secular authorities to be responsible to a higher authority, the law binds the state as a whole;

5)     The various local and regional governments and jurisdictions of a nation should be able to function without undue limitation under the terms of the law;

and finally,

6)     Western legal traditions are balanced upon a tension between legal ideals and social realities; revolution occurs when the law is not flexible enough to account for the social reality of the state.

With these six points, Berman illustrates a single point—the Western legal tradition has evolved as the symbolic embodiment of the nature of the relationship between the state and citizens.  The written law of a constitution furthers this embodiment.  According to Möllers, “Similar to a piece of art, [a constitution’s] objective character enables it to portray potential oppositions to ‘social reality.’  The objectification of the constitution in a text calls forth its symbolization.”[4] The process of constitutionalization thus becomes a process of affirming what Möllers calls the “normativity” of the terms and system established within the constitution as a product historical experience, which is the logic of the constitution.

In “Pouvoir Constituant—Constitution—Constitutionalisation,” Möllers divides the concept of constitutionalization into two categories: the politicization of law, and the juridification of politics.  The politicization of law is the use of law to establish a new system of government that ideally does not amend an earlier form—or, as Möllers writes, “the new constitution founded an entirely new order.  They did not just limit already existing powers.”[5] Thus, the constitution is as much a body of law, as it is the logic of the revolution and the system it has established.  As such, the nation becomes the source of the power behind the constitution, the pouvoir constituant of a democratic revolution, as discussed by Arendt in On Revolution, and which Möllers suggests will be the deciding factor of a constitution’s continued relevance to its society.

Möllers writes, “The constitution determines the form and the content of the sovereign power, and in doing so, terminates the previous political order.”  Moreover, “because the constitution must ignore and abolish already existing political power structures, it must make individual freedom its systematic reference point.”[6] The treaties of the EU, similarly to those of the United Nations, attempt to establish an overarching European system of government that will have authority over Member States, unifying their political and economic state efforts, though potentially limiting their capacity to act autonomously of EU regulations, whether or not state actions may be deemed destructive to other European states or citizens.  This dual character of the EU formation as “power founding”[7] regarding its supranational character, and power limiting regarding the regulated autonomy of the Member States, makes difficult the task of pigeonholing the exact legal nature of the Union, especially regarding its role as an international actor representing a European body politic and not merely the independent states of the Union.  However, in reading Möllers, we must consider this question—do the treaties “terminate” a “previous political order,” or do they represent, instead, a new form of self-limiting government?

Berman describes the EU system as an intergovernmental contract to protect economic development that has blossomed into a political institution whose border-crossing economic and humanitarian laws may be described as supranational.[8] As such, Möllers would argue that the treaties of the EU actually serve to limit the power of member states and the Union as a whole by maintaining an economic system.  Even with this understanding, however, the source of the power behind the Union ultimately remains invisible.  The juridification of politics, as Möllers discusses, is not a revolutionary act; instead, it is the act of amending and reforming a previously existing political order—limiting the power of an already sovereign government.  In his examination of On Revolution, Hauke Brunkhorst remarks, “the revolution ‘submits the constituent power to the people’—and the system of check and balances here has the only function to constitute, organize and stabilize that constituent power.”[9] This suggests that in the absence of a revolutionary act, of the establishment of a new political order through constitutionalization, a constitution is not a symbol of the constituent power of the nation, but a symbol of the protection of the nation from certain interference by the state.  In this regard, the EU is a newly instated system; however, its purposes are unclear regarding the integration of Member States as economic participants or as a system similar to a federal union.  This is the problem Möllers explores at the end of his essay—namely, that a federalized EU would have to decide where it derives it pouvoir constituant—the citizens of Member States, or the states themselves?  Or both?[10] If the Treaties of the European Union represent the constitution of Europe as agreed upon by Member States, then the states have authorized the power of the Union, and in this way, the Union may be conceived of as constituted under treaty, but not necessarily a constitution, according to Möllers, as the original treaties were not specified as such.

Within the constitutional tradition of Western law, the Constitutional Treaty of the EU enters the debate over the role of the state in modern international politics, and more historically, the establishment of new political orders.  The EU represents a supranational order, which has no prior history under a legitimate constitution, except perhaps as compared to empires of the past century, including Western colonies outside of Europe and expansion of totalitarian states.  The system seeks to unify Europe economically and politically through the integration of many diverse political systems, and as such may seem to be an adaptive, integrative constitution as opposed to one that purely establishes a new order or reforms an old one; by doing this, though, the act of integration is revolutionary because a system of its scale has not been seen before as democratically derived.

[1] Möllers, Christoph, 2007, “Pouvoir Constituant—Constitution—Constitutionalisation,” in E. O. Eriksen, et. al., eds., Developing a Constitution for Europe (London: Routledge, 2^nd Edition), 204.

[2] Arendt, Hannah, 1963, “Constitutio Libertatis,” from On Revolution (New York: Viking), 139-178.

[3] Berman, Harold J., 1998, “The Western Legal Tradition: The interaction of revolutionary innovation and evolutionary growth,” in Political Competition, Innovation and Growth: A Historical Analysis (Berlin: Springer), 38-39.

[4] Möllers, 188.

[5] Möllers, 185.

[6] Ibid., 186.

[7] As discussed concerning the United Nations Charter of 1945 in Brunkhorst, Hauke, (as of) 2009, “Reluctant Democratic Egalitarianism: Global Constitutionalism, democratic inclusion, and Arendt’s Idea of the Revolutionary Foundation of the Modern Nation State,” (Forthcoming), 1.

[8] Berman, 47.

[9] Brunkhorst, 14.

[10] Möllers, 221-226.

The counterman at the pizzeria was preoccupied, flirting with the female waiting staff, and he gave another customer the slice I had ordered for Anna.  Worried that I had forgotten her, or worse, run off with her three dollars, Anna found a young man to help her cross the avenue at a snail’s pace, stopping NYC traffic for three light changes.  They reached the street corner at the same time that I came out of the pizzeria carrying her slice.

At first, Anna did not recognize me, but when I reminded her who I am, slightly embarrassed, she asked the young man to help her cross the avenue again.  Once back to her side of First Avenue, she thanked the young man and asked me to walk her back to her apartment.  Though she lived only two buildings within the complex, we walked for over an hour, starting and stopping with aches and pains, and her intense tiredness.  Tired as she was, however, this tough old lady refused to rest on a bench or pause for longer than a moment or two.  All the while, she told me all about her 30 years living in the complex, and the years prior living on 6th Street in the Lower East Side, along with many other Ukrainian immigrants following the Second World War.

84 years old, Anna is a survivor of the forced labor camps in the Ukraine, which supplied foodstuffs to the German army.  At 16, she was taken from her family to work in the fields where she remained until the end of the end of the German occupation in 1944.  She was an Ostarbeiterin (f, Ostarbeiter): an Eastern Worker.  After the war, when the Soviet Union regained control of the Ukrainian territories and the field laborers sought out their families and homes, Anna, like so many survivors, had no one left to find.  Alone in a broken land, she decided to leave the Ukraine and immigrated to the United States, settling in the Lower East Side of Manhattan.  

Anna worked as a seamstress in a factory for two years, supporting herself, never missing a day of work until she received a wedding invitation from a friend from back home who worked in the same factory.  At the wedding she quite literally walked into the best man.  When she looked up at him to apologize, Anna says that she decided then that he was perfect.  In fact, within a year the two were married.  Anna and her husband had no children, but they participated in the children’s programs at their Catholic church and spent the years of their marriage taking care of each other.  30 years ago her husband was hired by the building complex where Anna still lives, and 28 years ago they moved into the apartment.  3 years ago her husband died, and now she has no one but a nurse and a social worker with power of attorney.

Anna says that her life is a circle.  As a young woman she had to work very hard in the fields in order to survive; now, as an old woman she has to suffer again with illness and pain.  In between her youth and old age, however, she was happier than she had ever imagined; even years of abuse and hard labor did not take away her zest for life, and an intense optimism.

————————————————

The role of the Ukraine in German plans for expansion was as the site for eventual colonies to hold the growing German population: lebensraum.  Rather than transport Jews and dissenters all the way across Europe to the concentration and extermination camps, German soldiers rounded up thousands of “undesirables” and executed them en masse under machine gun firing squads, burying the bodies in mass graves dug by locals forced to labor for the troops.  The New York Museum of Jewish Heritage recently held an exceptional exhibition of the grave excavations of the past few years, and what was most interesting was the effect of the rediscovery of these graves.  For the first time, survivors and collaborators are entering a dialogue about their collective, and a new image of the Ukraine is coming to light. 

The Ukrainian occupation is a very recent topic of Holocaust studies, subsumed, perhaps, within Soviet history.  The Ukraine, caught between the grasps of Nazi and Stalinist regimes represents a history of tactical repression and silencing of the past.  From the Reichkommissariat to the Comintern, this bloc nation has faced the challenge of external infiltration of its political structure, and now, nearly a decade after the dissolution of the Soviet government, Ukrainian officials and researchers are scrambling to understand what the New York Jewish Heritage Museum has named the Holocaust of Bullets.  On the border of Europe and the USSR, Ukrainian history is only beginning to be written.  The political history is well documented–as best as future generations can trust for the time being; however, the local and personal histories are at risk as the survivors, then in their teens, are now in their 80′s and above.  Coming years should provide an interesting understanding of that period which altered our understandings of both nation and statehood today, and the very practice politics at an international level.

——————————————————–

To be continued:  ”Memory and Historical Silences”; “Ukraine and the Third Reich: The Reichskommessariat Ukraine and Forced Labor”

Documents retrieved: from “The American Friends of Spanish Democracy Collection, 1936-1939”

Date range of documents used: 1936-1939

Site of Collection:  The New York Public Library, Main Branch, Social Sciences and Humanities Library, Manuscripts and Archives Department, Room 328

– Introduction –

The American Friends of Spanish Democracy [AFSD] operated as a non-for-profit charity and war correspondence agency from 1936-1939 in New York City during the Spanish Civil War.  Based at 70 Fifth Avenue in the W.W. Norton Building in the West Village, the AFSD campaigned for United States recognition of the Spanish Loyalists or Republicans, publishing a weekly newsletter of editorials and firsthand accounts of actions performed by General Francisco Franco’s Nationalist army.  I have attempted here to use articles from the collection as contextual reference as often as possible, and have only used other texts and online sources to verify dates and names involved.  Fortunately, the AFSD members quite conscientiously recorded the latest news, and preserved significant correspondences that easily permit a reader from 2009 to trace the organization’s actions alongside descriptive discussions of the civil war in Spain.  The effect is a fascinating history of a citizens’ campaign for national policy, centered in the Union Square area of New York during the start of the mid-20^th century.

This short paper attempts to outline two major trends documented by the correspondences and files of the organization: 1) the campaign for awareness and U.S. involvement in the civil war, and 2) unification with international aid organizations.  Five primary documents are utilized in tandem with associated items that best portray both the transformation of the AFSD membership during its time of operation and the overarching aims of its leaders as mobilized by pressing political concerns of the era.

To begin with is a letter from Bishop Robert L. Paddock to Secretary of State Cordell Hull, cosigned by more than a dozen high profile American academics and clergy.  As subscription correspondences increased during 1936, wealthy Americans returning from war torn Spain pledged donations and political support to organizations such as the AFSD; meanwhile, increased partisanship within the factions supporting U.S. involvement caused fractures in the membership.  Represented here are two postcards from supporters, Janet Delamore and Horace B. Davis; Delamore, who pledged her aid to Bishop Paddock, and Davis, who set a ludicrous ultimatum that the AFSD must drop philosopher John Dewey from their letterhead or lose monetary support.

In the final manifestation of the AFSD leaders joined forces with a larger New York based organization, the Medical Bureau and North American Committee to Aid Spanish Democracy (MNCSD), officially in 1938, though the groups were in contact as early as January of 1937 prior to the international delegation sent to Spain to observe conditions in the country.  In a telegram to co-Chairman Roger Baldwin, the AFSD is invited to join the delegation organized by the MNCSD as the only American representatives at the time.  Baldwin’s telegram, amongst others, indicate a rising overseas involvement of the AFSD whose notoriety arose through their ability to raise large sums of money for various war relief funds, often more so than any other singular organization involved.

As the aims of the AFSD matured the dialogue between its leaders and influential members increased, especially concerning the effectiveness of Bishop Paddock’s campaigns and other constructive criticism.  Lewis Mumford’s letter, discussed here, was perhaps the most concise criticism offered, though unfortunately ignored.  Mumford was already an active participant in various organizations, however, in the records following the failure of the campaign run by Paddock that he criticized, his participation increased, especially when the AFSD joined forces with international aid organizations.  Paddock and others also increasingly sought out Mumford’s advice on campaign organization and the wording of letters.

In the final document represented here, a report distributed by the MNCSD on their post-delegation Paris conference, the impact of the allied efforts of non-partisan secular, religious, and political organizations are reflected in the aid items and donations provided by these groups as war relief for both Loyalist and Rebel/Francoist victims, previously unheard of.  The report documents approximately two-dozen involved groups, including the AFSD, and represents the final and most influential action taken by the AFSD before the complete recognition of the international community of Franco’s seizure of power in Spain.

– The AFSD: 1936-1939 –

The AFSD was a small organization whose primary goal was to raise awareness about the civil war in Spain and to involve American citizens in a campaign against fascism in Europe, and fears that through Spain, fascism would gain a foothold in Latin America.  However, the AFSD was largely ineffectual, and it only gained notoriety when the organization allied itself with the Medical Bureau and North American Committee to Aid Spanish Democracy (MNCSD) in 1938.

The roster of members included a large number of prominent Protestant clergy, New York publishers, academics from several states, and New York judges, in addition to subscribers from the greater New York and tri-state area.  The administration of the AFSD consisted of Roger Baldwin (co-founder of the American Civil Liberties Union), Bishop Robert L. Paddock (former bishop of the Eastern Episcopal Diocese of Oregon), and honorary vice-chairman John Dewey.  Even a cursory rummage through the AFSD collection uncovers an interesting array of correspondences between Paddock, Natalie Hankemeyer, who was the executive secretary of the AFSD, and various members, newsletter subscribers, and political figures.  Also included are a variety of newspaper clippings, pamphlets related to legal conferences, and occasional responses from the Department of Foreign Affairs.

Though the AFSD maintained a moderate high profile membership, as their archives detail many such members chose to distance themselves from the petitions and press statements approved by Paddock; statements which some feared ineffectual or inflammatory.  Individuals such as John Dewey and Lewis Mumford expressed reservations concerning the timing or wording of Paddock’s letters, some of which were mailed to important government officials such as the Secretary of State Cordell Hull.

– Letter to Hull –

In a letter dated just days after the receipt of Paddock’s December 9, 1936 preliminary petition to Hull requesting signatures, Francis Biddle, then chairman of the National Labor Relations Board, who Franklin Roosevelt would later appoint Attorney General,[1] worried that his position could be compromised by participating in the petition.  Biddle replied politely, “I am a little shy of joining these group comments, and even doubt the wisdom, for me at least, of addressing such communications to the Secretary of State.”  Paddock sent mimeographs of his letter to each AFSD member for whose signature he requested approval, often in return receiving his own letter covered in scrawled corrections or suggestions from consenting signers.  Other replies, though consenting, often question the effectiveness of Paddock’s timing in sending a petition to the secretary of state, who was out of the country in December of 1936.

Dwight J. Bradley of the Andover Newton Theological School, though lending his signature to Paddock, expressed concern that Paddock’s petition would not receive adequate attention from Hull, and politely if not effectively questioned the “strategic value” of such a petition.  In fact, the letter did reach Hull’s office not too long after Paddock acquired twenty-six signatures plus his own, and unfortunately Bradley’s concerns proved valid as may be gleaned from the short but polite complete response from James Clement Dunn, the Chief of the Division of Western European Affairs under the Secretary of State:

I have received and read with interest the views expressed in your letter of December 9, 1936, with regard to the policy which you believe it desirable that this Government should follow in relation to the recognition of foreign governments.

A single sentence brushes aside the seven paragraphs of Paddock’s two-page letter, which outlined the proposed principles of American support for the Loyalist side in the war founded in U.S. policy toward Latin America, “to withhold recognition until it is clear beyond reasonable doubt that the will of the people is with any new government set up.”  Paddock’s letter expresses a fear that the United States government would legitimate the military government established by Nationalist General Francisco Franco based upon the apparent military dominance of the Nationalists over the Republican army.

For Paddock, as for many in the time, a fear of fascism lay beneath the principles of his argument, especially when the news that Nazi Germany and Fascist Italy supplied armaments and funding to the Nationalist cause.  Paddock contended in the petition that

The recognition by Germany and Italy of the so-called ‘government of General Franco’ in Spain raises at once the question of American policy.  Judged by every disinterested standard, the action of the two fascist dictatorships is premature…The action of Rome and Berlin falls within that category defined by Prof. John Bassett Moore when he says ‘premature recognition constitutes an act of intervention.

Many of the members whose correspondences are represented in the AFSD collection call for the express support of democratic principles, which most contend to be threatened the world over by the growth of fascism during the period.  As discussed by Paul Preston in 2006’s update of The Spanish Civil War, the political atmosphere in Europe following the 1917 Russian Revolution lent itself to rightist sympathies, which in many instances did not bear surface evidence of fascist tendencies, but instead furthered the ease by which extreme anti-communism became a saleable political platform, subtly easing masks on nationalist and conservative programs that were affiliated with fascist organizations.[2]

– Support and Partisanship –

The campaigns of the AFSD provide a localized example of the growing American confusion over the rise of fascism and communism at the time, especially concerning the extent to which the United States should become involved in the affairs of Europe.  In a postcard from Greencastle, Missouri, dated to September 28, 1936, Janet Delamore, apparently influenced by John Dewey who was also in Greencastle at the time,[3] requests a statement from the organization that will allow her to donate funds toward the war effort via the AFSD.  Delamore attested to the “cruelties of the Nationalists” observed during her travels through Linea, near Gibraltar, and though noting that she was too elderly to participate actively in the AFSD, she pledged future monetary contributions.

Janet Delamore was not alone in her concerns, and the AFSD received numerous requests for information and subscriptions from across the country from travelers recently returned from war torn Spain.  As the organization gained more attention through fruitful partnerships with other more well known aid organizations and popular public figures such as Hemingway, Dos Passos, and Upton Sinclair, the correspondence from private citizens increases in the collection—especially during 1937, which marks the start of Hemingway’s war correspondence published in the Nation, bringing the Spanish Civil War to a popular venue.[4] However, not all members remained content with the organization during its tenure, voicing the interesting complaint of polarization due to the inflammatory stances of certain prominent members accused of warmongering or even communist sympathies.

Dewey especially was target, accused contrarily both of using democracy as tool of a leftist agenda by several letter writers, and of antagonizing communist sympathizers in the United States.  Formerly the vice-chairman of the AFSD, in 1936 Dewey resigned from the post due to conflict in his schedule.  Though resigned, the AFSD kept his name on their letterhead, which Dewey permitted, though his participation was primarily as the provider of a high profile signature.  In a September 17, 1937 letter to Nancy Hankemeyer, Massachusetts located member Horace B. Davis promises to continue his contributions to the organization on the condition that the names of John Dewey and Charles Edward Russell are removed from the AFSD letterhead.  Davis asserts, “as long as you include in your sponsors such red-baiters and disruptors of the United Front activities…I do not feel I can spare you a cent.”  In response, Hankemeyer expresses the gratitude of the AFSD for Davis’s contributions; however, she contends that the organization will continue to accept members of all persuasions so long as their sympathy lies with the cause.  There is no evidence of Davis responding or further acting as a member; however, following 1937, most other letters from members expressed support instead of criticism, due in part, perhaps, to the greater stability of the AFSD administration following Dewey’s departure, marked by the involvement of Paddock and Baldwin with the MNCSD.

– The International Delegation –

In early 1937, following the international breaking news that German and Italian armaments were observed by the press during attacks on Madrid, a rush telegram was sent by the MNCSD to Natalie Hankemeyer inviting the AFSD to send members on a delegation organized by various European independent committees who would visit the battle sites.  Hankemeyer sent a telegram to Roger Baldwin who was in Paris on Business; however, at the time, most countries were not issuing passports to Spain and Baldwin himself was additionally unable to join the delegation due to prior obligations to the ACLU.  The exact purpose of the delegation, according to Hankemeyer’s telegram, was to bring notable public or social figures to the war zone to report on the actions of the Nationalists for periodicals back at home.  The MNCSD already had five Americans ready to leave and were waiting for a response from the AFSD.  At the time, according to several telegrams, no other Americans had been allowed into Spain, and the United States government had not sent an envoy into the country.  The February delegation, soon to be outshined by the arrival of Ernest Hemingway within weeks, would represent the first American representatives in the crisis.

Immediately, Paddock wrote his most prominent members requesting participation; however, most replies came back negative or uncertain.  In the end the AFSD only sent one official member, and two affiliated individuals who in the past acted as international correspondences in the newsletter.  Social philosopher Lewis Mumford rejected Paddock’s request advising the AFSD to focus less on researching the war, instead increasing the circulation of dramatic accounts in their newsletter.  The issue at stake, according to Mumford is the policy of neutrality, which injures the cause of the Loyalists, whose support through arms and funds is minimal.  Mumford writes:

By the time the committee reaches Spain or reports it may be too late.  This is not the moment for fact-finding but for spreading the alarm.  If I went to Spain at all, it would be with a gun.  Meanwhile, the best place for an “investigation committee” to work is Washington—and New York.

The Neutrality Act of 1935[5] illegalized trade of arms or monetary contributions to any warring countries, and future amendments passed under Roosevelt’s influence further specified what constituted an illegal situation.  As Mumford implies in his letter, the American people were already aware of the war in Spain and also aware of the American policy of neutrality.  An investigative committee would not increase the visibility of the war in the press; it was already visible.  Instead, the objective as advised by Mumford, would slowly tend toward overturning the Neutrality Act.

Dominic Tierney’s 2007 study on Roosevelt’s personal stance toward the war notes the president’s sympathy for the Republicans, which founded his efforts to convince Congress to alter national policy regarding involvement.  Biddle, by then a political ally, further supported Roosevelt’s stance; however, Congress would be unmoved despite diplomatic attempts at persuasion.[6] Numerous organizations initiated letter writing campaigns and petitions, often organized in conjunction with the MNCSD, which according to AFSD records was the leading non-for-profit organization working toward the cause.  Paddock kept records of numerous joint petitions between Protestant, some Catholic, and Jewish institutions sent to Congress, the President, and on one occasion in 1938 to the Vatican, requesting that the Church officially denounce the war and Franco’s military uprising.

– The End of Partisanship and the Pooling of Resources –

Increasingly, Paddock aligned his efforts with Bishop Francis J. McConnell of the Methodist Episcopal Church, who was also the chairman of the MNCSD, and the AFSD began to contribute to McConnell’s campaign, becoming far more effective than while operating independently.  The MNCSD had much more prominent members, including historian Charles Beard and Mary Woolley of Holyoke College, and with connections to a greater pool of religious and secular organizations from both ends of the political spectrum.  According to AFSD records, in 1936 Paddock was able to raise close to $10,000 dollars toward donations to Loyalist charities; by 1938, working with MNCSD and close to 20 other organizations, the combined efforts raised close to 200,000 dollars worth of monetary donations, food and clothing, which went to families in both Republican and Nationalist regions of Spain, also funding foster care for displaced or orphaned children.

The July, 1938 report for the MNCSD Conference in Paris itemizes monetary contributions and specifies the total organizations responsible for sponsoring the fundraiser.  The AFSD and Paddock are singled out in the report for raising more than $10, 000 dollars on their own, more so than any other participating organization.  In the months following the conference, the goals set out in the report are acted out through petitions to the president and secretary of state.  Namely, 95 petitioners sign a letter to Roosevelt requesting the end of neutrality policy, and the letter in entirety is printed in the New York Times, garnering special attention for the signatures of Beard, Helen Keller, Dewey, and Woolley, and both Paddock and Hemingway published response articles to the letter in various publications.

According to a December 1937 letter sent by Acting Secretary of State William Phillips, which was sent to various newspapers and both the MNCSD and AFSD, the department wished to further define the parameters of the Neutrality Act, to assuage fears that fundraising could be prosecuted as illegal contributions.  Essentially, Phillips contends that American policy dictates that it is illegal to trade arms or contribute money for arms to any country at war with another country.  War is defined as between two nations; therefore it is not illegal to contribute to factions within a country at civil war.  However, unofficial policy dictates that the United States remains uninvolved in all foreign affairs not directly affecting U.S. interests; to do so, Phillips remarks, is un-American, and not in the spirit of foreign diplomacy.

Phillips’ letter responds to an undated petition sent by the American Bar Association (ABA), which denounced the Neutrality Act as “contrary to the spirit of American Law.”  The ABA sent copies to sympathetic organizations, including the AFSD, and to the press.  The response of Phillips acted to anger many law professionals who felt slighted by his rejection of their stance, and both McConnell and Paddock became in involved the subsequent law conferences in the New York area.

Concerning the AFSD and MNCSD, however, Phillips letter—while shaking a finger at their political involvement—signaled affirmation of the groups’ activities, which no longer appeared perched precariously in the grey area between legal and illegal American activities.  In fact, as correspondences show, in 1938, many high profile members begin to take a more active participatory role, and contributions are steady.  It is unfortunate that by the time more timid members felt reassured that their participation would lead into trouble the Nationalist Army had already gained concrete control of Spain, and soon after, in 1939, Franco’s government was internationally recognized as the legitimate government of Spain.  With the recognition of Franco, the AFSD apparently was unofficially dissolved on the spot in 1939, and Bishop Paddock went officially into retirement.  All correspondence and documentation ends prior to Franco’s full seizure of power, and certain telegrams imply that Roger Baldwin either stepped down or left final administration to Paddock alone, sometime in early 1939.

It is hard to say whether the AFSD was actually successful in achieving their goals—the U.S. remained neutral, yet awareness was raised on the issue of fascism and the civil war, and the organization’s members certainly contributed to the discourse on American foreign policy.  In the end, Paddock and the AFSD achieved, more than anything else, a highly successful mediating body between stronger and more effective organizations, allowing itself to be absorbed into the MNCSD for the sake of the cause.

– Conclusion –

As a resource for a researcher of Americans involved in the Spanish American War the AFSD collection is a fascinating sample of the political atmosphere of the 1930’s, though not necessarily a complete portrayal of the times.

Paddock tended to affiliate with religious organizations, or groups whose sole aims were to provide aid in the civil war.  Other political organizations including labor unions and the communist Party were not involved or invited, and the AFSD had no official affiliation with these more politically minded groups until joining with the MNCSD in 1938, whose support derived in great part from affiliation with left-wing political and religious groups.  In fact, many—perhaps most—members of the AFSD already belonged to or were somehow affiliated with more liberal organizations either democratic or communist, however, their affiliations were never noted in their campaign actions.

Essentially, the AFSD was already a non-partisan organization comprised of individuals of various political persuasions; however, it took nearly two years for some members to overcome their dislike for the politics of other members.  The alliance of the AFSD with the MNCSD appears to have ironed out the remaining wrinkles of contention within the group by 1938, and the most die-hard members began to take roles of leadership within the organization.  It seems, perhaps, that by 1938, the fear of Spanish fascism overrode the political arguments of the day for those involved, and effective relief actions were undertaken in time, if not too late, for the end of the war.

Of course, the more well documented event of U.S. involvement at the time was the New York based Abraham Lincoln Brigade, which comprised of Americans who joined the Republican cause against the dictate of the U.S. government.  A further step in researching this broader topic would be to delve into the Lincoln Brigade archives stored at the Tamiment Library at New York University, which in conjunction with the documents presented in this paper should greatly illuminate the scope of American involvement and interest in the war in Spain.  New York City houses a surprising wealth of archival documentation of the various “Friends of” organizations who lobbied for American military or political involvement overseas, and many organizations such as the AFSD whose primary purpose was to raise awareness and support.  A more complete paper on the topic would include the AFSD perhaps, but more effectively would discuss the involvement of citizens in the greater New York area, and especially surrounding the Union Square political hotspots.

For the course Posthuman/Ethnographic with Hugh Raffles

March 11, 2009

Helmreich, Stefan.  2009.  Alien Ocean: Anthropological Voyages in Microbial Seas.  U of California P: California.

Mol, Annemarie.  2003.  The Body Multiple: Ontology in Medical Practice. Durham: Duke.

Jullien, François.  1999.  The Propensity of Things: Toward a History of Efficacy in China, trans. Janet Lloyd.  New York: Zone.

Sebald, W.G.  2002.  Austerlitz, trans. Anthea Bell.  New York: Pantheon.

Deleuze wrote of Proust’s treatment of memory: “the quality is inseparable from a chain of subjective associations, which we are not free to experiment with the first time we experience it” (109).  Memory in Proust, for Deleuze, does not adhere to human cosmological expectations of the real world; instead, the conception is of a fugue, as used in musical orchestrations, variations and departures of a theme, expressing the same or similar singular subject through focus upon the many pieces that comprise its whole, yet alone also represent the whole.  This is a concept of association, of connectivity.

The above works by Helmreich, Mol, Jullien, and Sebald lend themselves to the study of a reordered cosmology—Sebald perhaps more so through fiction; however, the other works perform as ethnographic and more philosophical academic treatments.  Common amongst the four works is the discussion of life and objects as inseparable from developed notions of their intrinsic nature, yet actually constructed by those subject to the presence and experience of the object or life form.  The value of those qualities then surmount to a point of departure to yet another link in the chain of association.

As Helmreich writes in Alien Ocean about microbes, the organisms possess “pluripotentiality” describing the relationship of multiple uses or actions of microorganisms to the greater functions of the ocean and human world (14).  Connectivity is thus implicit between the sea and land as a whole, as parallel facets of the Earth.  For Helmreich, microbes can inform both human ecologies and technologies, and their translation from environment to use exposes the blurred line between life and creativity where the object necessitates the life form and the life form embodies the function of the technology.  According to Helmreich, who quotes Latour, the pluripotentiality of microbes “might be installed…as ‘obligatory points of passage’…in nascent networks of research about the ocean and its relation to human welfare” (Helmreich, 14).  Essentially, microbial life as a subject represents the alteration of scientific cosmologies, which must sublimate categories into differently inclusive strata in order to validate the ecological agency and technological influence of the microbe.

Similar to Helmreich’s discussion of pluripotentialities, in The Body Multiple Mol addresses the surface understanding of an object’s presence or life form’s being as a “multiplicity.”  Mol writes that “no object, no body, no disease, is singular.  If it is not removed from the practices that sustain it, reality is multiple” (6).  Whereas the pluripotentiality of an object in Helmreich is its transferability of abilities or uses while remaining the same essential object, a multiplicity represents the multiple imaginings or perceptions of that object, which at first instance may appear to be a fragmented or singular representation in itself, yet more accurately represents the object as a whole, understood through the unchanging identity of that object determined by the practices through which identity is defined.  People are necessary for this to occur, to interpret, to perceive and give value.

For Mol, the subject is the diagnosis, appearance, and representation of Atherosclerosis.  The disease is understood through an established set of symptoms and diagnoses that physicians use as identifying markers; yet, with technological advances and new understandings of the disease and its symptoms, Atherosclerosis is perceived and examined through different and changing practices.  The disease remains the same, but once identified is “enacted,” as Mol writes, meaning that the disease as a category acquires an institutional foothold, by which further advances are precipitated.

Mol, like Helmreich, refers the theory behind her methodology to Latour, specifically the idea of an “active entity” whose actions or influence is the agent of the chain of associations that constitute the entirety of an identity or representation (62-63).  For Latour (as interpreted by Mol), the example is the success of Pasteur as derived from direct interaction with farmers, creating a network of social connections through which farmers discussed the value of livestock vaccination.  These entities possess pluripotentiality, capable of altering the heterogeneity of both practice and association within the network through their actions (or lack thereof).  Integral in this, is the provision of both a space and purpose for action, which necessitates association.

Moreover, when objects are the active entities along with people, as in Jullien’s The Propensity of Things, the dynamic remains the same because the network includes associations of objects as influential actors.  Jullien discusses the Chinese concept of “shi” as the “disposition” or potential of an object at rest, which in motion may fulfill an expected function; however, the fulfillment of an object’s potential depends upon the associations of other objects or forms that concomitantly facilitate the potential of the object.  For Jullien potentiality, or propensity, is comparable to Helmreich’s similar conception of pluripotentialities in that objects or life forms have certain expected functions, the knowledge of which increases as the fulfillment of the object’s potential uncovers otherwise unexpected potential actions or uses of the object. Additionally, change is crucial to efficacy.  As noted by Jullien, alteration of potentials or representations increases the breadth of connectivity, as new connections change the course of action taken by participants, and thus, the conception of the object (139).  As Jullien writes, “according to the Chinese view, actualization is completely dependent on potentiality; potentiality implies actualization” (254).  Therefore, what Jullien describes as an object’s efficacy is that object’s ability to establish it’s “being” through the capability to either succeed or fail in its potential.

This positioning of potential implies a construction of meaning through the association of accumulated dispositions, which when repeated within particular contexts take on a new singular identity—a conceptual commodification—by which the composite structure of an object is rendered invisible.  As Latour recently remarked, “the more objects are turned into things – that is, the more matters of facts are turned into matters of concern – the more they are rendered into objects of design through and through” (2008, 2).  Essentially, as the object embodies a singular identity its symbolic meaning is superficially divested of its multiplicity.  Moreover, if objects are perceived through design, the association of an intrinsic value or quality is lost.  As with Proust’s narrator from In Search of Lost Time the significance of multiplicities lies in the experience of presences that transcend time and space; for instance, the narrator’s touch leads him on a mental journey in the famous scene of memory activated by touching the petite madeleine (47).  In this instance the present precipitates the past in an inversion of chronology embedded within the qualities of objects and places.  The object enacts the memory and the memory enacts the object.  Consequently, the object then exists as inseparable from the memory, and its design is dissolved down to the object’s underlying dispositions.

In this vein, the continuous narrative of Sebald’s stream of consciousness styled Austerlitz, interspersed with photographs and prints, lacking paragraph organization, is the visual equivalent of the Proustian memory action.  Subject and style reveal the chain of association within an individual’s experience, similar to Deleuze’s inverted cosmology; the entirety marks the rejection of the singular and linear for the cumulative, a layered reality of experience and absorption of objects into a plurality of self and other as one.  Time consequently may be perceived concomitantly with the object’s presence or location yet does not imbue its presence with any practical qualities.  For example Sebald writes:

“In the end the impossibility of seeing anything more closely in those pictures, which seemed to dissolve even as they appeared, said Austerlitz, gave me the idea of having a slow-motion copy of this fragment Theresienstadt made, one which would last a whole hour, and indeed once the scant document was extended to four times its original length, it did reveal previously hidden objects and people, creating, by default as it were, a different sort of film altogether, which I have since watched over and over again.”  (247)

The image of film in slow motion, multiple frames simultaneously visible for moments exposing otherwise superfluous images within each frame, mirrors the structure of the novel, in which each frame represents a single necessary image of the whole reel.  As with Jullien’s discussion of Chinese painting, in which reality is depicted as an “unceasing,” “unfolding” process (138-139), the passage of reality in Austerlitz is constantly unfolding, constantly self-referential.  The presence of the objects on film is the same at both slow and normal speeds; however, their visual duration is altered.  The qualities that define their presence, though, have not changed.

The perception of an object’s presence implicitly involves the imagining of that object’s “propensities,” as Jullien might say, which when understood as changeable illuminates human involvement and “design.”  However, the design is not of the object but of its conception, and the qualities that inform the object’s expected potential incorporate into the image of the object as singular.  If the image is thus understood as an experience of reality, then all four authors share yet another theme:  the world is perceived through its images that are used as means of injecting experience between practice and action, perceiving both objects and life as systemically involved.  In consequence, reality is conceived and lived as an effect of this conception.  In this way all things, whether life or object, provide cross-validation and imbue each other with social qualities that demarcate a chain of associations.  This becomes the lived human world, for of course we do not know if other animals would perceive as much, or even desire to do so.  As written by Proust, “perhaps the immobility of the things around us is imparted on them by our certainty that they are themselves and not anything else, by the immobility of our mind confronting them” (6).

Works Cited

Deleuze, Gilles.  2000.  Proust and Signs [1964], trans. Richard Howard.  Minnesota: U of Minnesota P.

Latour, Bruno.  2008.  “A Cautious Prometheus?  A Few Steps Toward a Philosophy of Design (with Special Attention to Peter Sloterdijk).”  Sept. 3, Keynote Lecture, Design History Society Networks of Design Conference. Cornwall.  Find at: http:// www.bruno latour.fr/articles/article/112-DESIGN-CORNWALL.pdf.

Proust, Marcel.  2002.  In Search of Lost Time: Swann’s Way [1913, Eng. Trans. 1922], trans. Lydia Davis.  London: Penguin.

For the course Classical Political Theory with Philip Green at the New School for Social Research

October 23, 2008

Hegel, G.W.F. 1967. Philosophy of Right [1821], trans. T.M. Knox. New York: Oxford UP.

“When reflection is brought to bear on impulse, they are imaged, estimated, compared with one another, with their means of satisfaction and their consequences, etc., and with a sum of satisfaction (i.e. with happiness).  In this way reflection invests this material with abstract universality and in this external manner purifies it from its crudity and barbarity.  This growth of the universality of thought is the absolute value in education.”

[Hegel, Philosophy of Right, p.29, para. 20]

“In happiness thought has already a mastery over the natural force of impulses, since the thinker is not content with the momentary but requires happiness in the whole.  This requirement is connected with education in that it is education which vindicates a universal.  In the ideal of happiness, however, there are two moments: (i) a universal which is above all particularity; but (ii) since the content of this universal is still only universal pleasure, there appears here once again the singular, the particular, i.e. something finite, and a return must therefore be made to impulse.  Since the content of happiness lies in everyone’s subjectivity and feeling, this universal end is for its part particular, and consequently there is still not present in it any genuine unity of form and content.”

[Hegel, Philosophy of Right, p. 231, Additions, para. 15]

When we attempt to examine in Paragraph 20 of what Hegel calls “impulses,” our comprehension of them appears to be contingent upon relative common contexts of the impulses—the ways in which they are related, are thought to act upon our lives, or facilitate each other’s perception by individuals—and the way impulses actually do act upon our lives.  This examination that Hegel calls “reflection,” provides a basic objective—Hegel’s “abstract universality”—pure concept, unfettered by human motivation, a natural response predicating the dilemma of choice.  The dialectic issued forth by reflection results in what Hegel calls the “arbitrary will.”  Furthermore, Hegel believes that the ability to reflect and derive abstraction is the purpose and derivative of education—to learn without preconceptions and further reflect upon what has been learned.

The concept of arbitrary will is derived from the dialectical process of thesis vs. antithesis = synthesis, outlined in hisScience of Logic.  In the introduction of Philosophy of Right the idea of the free will is discussed and its concept defined as “the natural will…an immediately existing content, i.e. as the impulses desires, inclinations, whereby the will finds itself determined in the course of nature (p.25, para. 11).”  The impulse/urge is thus sudden and occurs before doubt and without external influences such as opinions.  The antithesis is the finite will, described by Hegel as “the self-reflecting, independent, and infinite ego, stands over its content, i.e. its various impulses, and also over the further separate ways in which these are actualized and satisfied (p. 27, para. 14).”  The impulse is contextualized by the mind concerning situation and prior experience, allowing for doubt and hesitation toward the impulse, hence the finite aspect of this will; doubt occurs within a structured set of anticipated consequences.  The dialectic exercised in the process is Natural will vs. Finite will = Arbitrary will.

The arbitrary will is the product of Hegel’s dialectic, in which the impulse and its contradiction—doubt or hesitation—are considered as oppositional plots of logical action upon the impulse.  The judgment seeks to derive a conclusion informed by both impulse and contradiction (impulse vs. contradiction = decisive action/conclusion).  Dialectical reflection is thus the source of intellectual discovery and the recognitive processing of information becoming knowledge.  Thus, the arbitrary will is the source of intellectual decisive action, separate from impulsive actions performed without forethought for consequences.  A lack of reflection would indicate immaturity of thought to Hegel, which is how he regarded unreasoned actions (p. 27, para. 15).

The arbitrary will in a logical—meaning intellectually mature, as far as Hegel is concerned—society is thus the source societal “happiness,” as Hegel implies in the paragraph 15 of the Addition to paragraph 20.  To Hegel, happiness is the driving force behind decisions, primarily because he believes that rational individuals will seek results that benefit a greater happiness than is afforded by momentary impulse response, longer lasting, and more satisfying to the intellect. This relates to education in that a successful educating process results from well-balanced reflection upon ideas and already established knowledge.  Happiness with regard to a greater good would appear to be arrived at through the educated, rational society, which understands the pure sensation of happiness as separate from how and where happiness will occur, and to what consequence.

To contemplate relation to a greater good, the sensation and reflection upon happiness is succeeded by Hegel’s process of impulse to action—arbitrary will.  This process is individualized and highly subjective, universal so far as it is necessary for proceeding in a logical, dialectical pattern of acquiring knowledge and acting with decisive responsibility to the whole.