“Stercus accidit”*…
As we try to understand the rifts afflicting our nation and world, many turn to Marx and his framework of class. But in a provocative essay, Catherine Nichols suggests that it was David Hume (in an 1752 essay that identified the unfethering of wealth from land) who identified the origin of our political divisions…
Describing the political map in terms of Left and Right is an accepted convention all over the world, almost to the point of cliché. Yet it is surprisingly complicated to explain whose interests lie on each side of this spectrum. For example, if the Left supports the interests of workers over the interests of employers, why are Left-leaning regions of the United States and elsewhere in the world among the richest? When Japan and South Korea sought to become economic powerhouses in the later 20th century, they adopted Leftist policies such as strong public education, universal healthcare and increased gender equality – if countries seeking to compete in capitalist arenas adopt broadly Leftist policies, then how do we explain why Leftists are always talking about overthrowing capitalism? And if the Left is somehow both the party of workers’ rights and the party of material wealth, then whose interests are supported by the Right? Given such contradictions, how did these terms become so central to modern politics?
The terms ‘left’ and ‘right’ come from the seating arrangements in the National Assembly during the French Revolution, where the combatants used the medieval estate groupings to define their battle lines. According to their writings, land-owning aristocrats (the Second Estate) were the party of the Right, while the interests of nearly everyone else (the Third Estate) belonged to the Left. This Third Estate included peasants working for the landowners but also every other kind of business owner and worker. Decades later, Karl Marx offered a different analysis of capitalism: he put owners of both land and businesses together on one side (the bourgeoisie), while grouping workers from fields and factories on the other side (the proletariat) in a single, world-wide class struggle. The trouble with both these ways of parsing Left and Right is that voting patterns never seem to line up with class. Both historic analyses leave us with questions about the contemporary world – and not just the paradox of why so many Left-leaning places are so rich. Why, for example, do working-class conservatives appear to vote against their material interests, year in and year out, across generations?
The 18th-century philosopher and political theorist David Hume had answers to these questions, though he was writing decades before the French Revolution. While his essay ‘Of Public Credit’ (1752) was a warning about the dangers of Britain’s increasing reliance on debt financing, his apocalyptic vision of the future turned out to describe some features of our current political map surprisingly well. Hume was writing because he believed that debt financing had the power to upend Europe’s traditional power structure and culture by creating a new source of money divorced from tradition or responsibility: stocks and bonds. Unlike land, anyone with some cash could buy war bonds and get an immediate passive income in the form of interest. This was the thin end of the wedge caused by the debt financing that Hume believed was destroying every part of society. The governments of antiquity, Hume argued, saved money to use in battle and then waged wars in self-defence, or else to expand their territory. But the British had invented a new form of warfare that Hume saw no precedent for, even in the merchant states of Nicollò Machiavelli’s Italy: war for trade, funded with money borrowed from private stockholders…
[Nichols unpacks Hume’s observations (centrally, that three groups with stakes in the status quo, heretability, and the sanctity of “family and family hierarchy”tradition”– landowners, aging parents, and want to preserve old power structures, including the family– and traces their relevance, from Hume’s time to ours…]
… There are many reasons for people aligning Right or Left, which is why analyses of class and material interests fall short of describing the realities of people’s politics. Hume foresaw that these specific groups would resent the economic sea-change of the 18th century – and he was correct. Many people would rather have land and power than money and liberty.
Still, the power of the Right hasn’t doomed the Left – no more than the Spanish Inquisition doomed the rise of the Left in 18th-century England and France. As long as governments want to keep the value of their currencies from falling, someone in their ranks will be using the methods of the Left and inventiveness that brought us everything from our banking system to gay marriage. We don’t need to resurrect communism or focus narrowly on class, following Marx. The experiments are far from over, and we should remember that the Left is generally where money comes from in modern times. We give away too much power when we forget it…
Rethinking Right and Left: “Landholder vs stockholder,” from @catherinenichols.bsky.social in @aeon.co.
As for how it’s going at the moment (and further to Hume and the quote in this post’s title), see: “MAGA’s Betrayal of Small Business,” from @pkrugman.bsky.social.
* “shit happens”– often attributed to David Hume, reflecting his skeptical view that human understanding, particularly of cause-and-effect, is limited to habitual belief from experience, implying that unforeseen, messy outcomes (“shit”) inevitably occur in life despite our reasoning.
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As we sort the Whigs from the Tories, we might recall that it was on this date 1656 that Blaise Pascal (writing under the pseudonym Louis de Montalte) published the first of his Provential Letters (Lettres provinciales), a series of eighteen polemical letters using humor to attack Jesuits for their use of casuistry and their moral laxity. Though the Letters were a popular success, they had little immediate effect on politics or the clergy. But they influenced later French writers like Voltaire and Jean-Jacques Rousseau and ultimately persuaded Pope Alexander to condemn “laxity” in the church and order a revision of casuistic texts.
“Early modern society created – and we have inherited – that paradoxical thing: a tradition of radical innovation”*…
A University of Chicago economist with a specialty in the economics of creativity, David Galenson, with an argument that the Impressionists contributed more than their works to the story of art…
Since the 1960s the art world has become accustomed to the arrival of startling new works by contemporary artists, from Yves Klein’s anthropometries created by nude models covered with blue paint, Piero Manzoni’s canned feces, and Andy Warhol’s silkscreened portraits, through Andres Serrano’s crucifix in urine, Damien Hirst’s sectioned animals in formaldehyde, and Tracey Emin’s soiled bed, to Maurizio Cattelan’s duct-taped banana. Yet few art experts understand that these radical works are only the most recent consequences of a fundamental change in the structure of art markets that occurred more than a century ago. And the artists who initiated this change are today so venerated that few people realize how radical they were in their own time…
Art historians have long recognized that a radical change occurred in the appearance of fine art during the late 19th and early twentieth centuries, but they have failed to explain why this happened when it did. The answer lies in a change in the structure of the market for art, initiated by Claude Monet and a small group of his friends. The Impressionist group exhibitions of 1874–86 effectively ended the official Salon’s monopoly of the ability to certify artists as qualified professionals, and began a new regime in which small independent group exhibitions competed for attention. The result was a new era of artistic freedom, as painters no longer had to satisfy the conservative Salon jury, and new styles challenged for leadership of the art world. The heightened demand for originality favored conceptual artists, who could innovate conspicuously and decisively. So ironically, Monet and his fellow experimental Impressionists came under attack from the supporters of Seurat, van Gogh, Gauguin, and other young conceptual artists. The growing independence of private galleries, which further contributed to fostering competition, would allow Matisse, Picasso, and their peers to consolidate this revolution early in the next century. And the products of this perpetual revolution have included such later works as Warhol’s silkscreened portraits, Hirst’s sectioned animals, and Cattelan’s duct-taped banana. Art historians have described the transformation of modern art in great detail, but have failed to recognize the causal role of economic forces, as the shift from monopsony to a competitive market gave artists a new freedom to innovate, and made the modern era a time of continuing radical innovation…
Fascinating: “Marketing modern art: how the impressionists started a perpetual revolution,” from @jcultecon.bsky.social.
Bay Area readers can peek at the process in motion at The MFA’s Legion of Honor in the “Manet & Morisot” exhibition, up through March 1.
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As we divvy up the difference, we might send avant-garde birthday greetings to a beneficiary of this emergent cultural mechanism, Francis Picabia; he was born on this date in 1879. A French avant-garde painter, poet, and typographist, Picabia experimented with Impressionism and Pointillism before becoming a Cubist. He then became one of the early major figures of the Dada movement in the United States and in France, and was later briefly associated with Surrealism.
See his work at the record of a major retrospective hung at the Museum of Modern Art in New York in 2017 on their web site.
“Money is a servant to politicians and the country. But, if the politicians and the country become the servant of the money, the politicians have failed.”*…
Given all that’s going on in the current adminsitration, it’s hard to keep track of the havoc. Here, an update on a drama playing out in the legislature (with heavy White House involvement).
Crypto interests came after the local banker last week in a bitter Congressional fight. As Matt Stoller explains, they didn’t win, but it’s not over…
… [Last] Thursday, the Senate Banking Committee abruptly canceled its meeting, known as a mark-up, to write little-noticed legislation to deregulate the financial system. And the reason is that two of the more powerful forces in D.C. – the banking lobby and the new MAGA-powered crypto world – came into conflict. The result, so far, is a stalemate.
I haven’t written about crypto for a few years, because there’s not much to say beyond “they did a lot of bribes in a bribe-prone system.” But depending on what happens next, we could be looking at the end of an iconic American figure, the local banker, and his or her replacement with something very different. The context of the legislative fight is, as you see in lots of other areas, the decline of the productive institutional fabric of America.
Culturally speaking, banks have a weird place in America, as they are the institutions that control permission to use resources. The endless number of bank heist movies, often with plucky burglars as heroic figures telling bank customers they needn’t worry because it’s not their money at risk, suggests that there’s a lot of skepticism of financial power in general. But there are two types of bankers, the generous local elite and the extractive beancounter. These represent a traditional populist vs oligarch framework.
Take the holiday classic film It’s a Wonderful Life. It’s about a small town banker named George Bailey, played by Jimmy Stewart. Bailey’s help financing useful things in Bedford Falls, like houses and businesses, contrasts with the avaricious Harry Potter, who is a stand-in for Wall Street.
There’s a reason for these cultural totems. Americans have always understood that distant control of credit is dangerous, the theme of movies such as Wall Street, Margin Call, and The Big Short. They also see that local control of credit and payments is key to self-sufficiency. Local banks uses to be, and to some extent still are, the powerhouse of American cities and towns.
That said, there have always been a variety of financial institutions to serve different kinds of customers, including large corporations. There are three kinds of banks in America, the small bank, the regional bank spanning a few states, and a few dozen national mega-banks. Local banks, a la George Bailey, are more efficient with better service and more commercial lending. According to the Institute for Local Self-Reliance, roughly half of U.S. assets were held in small banks, which did most of the productive lending. In 2020, small and regionals held just 17% of industry assets, but offered 46% of bank lending to new and growing businesses.
In the post-war era, this mix of banking was relatively stable, with roughly fourteen thousand local banks and thrifts serving as mortgage and commercial lenders, and check clearing institutions. But in the early 1980s, policymakers sought to consolidate the sector, enacting a series of deregulatory laws to encourage bank failures and mergers. The result is that today we have fewer than four thousand banks, and by the end of the Trump administration, we may have fewer than a thousand.
Of course, the world isn’t the same as it was forty five years ago. Since the 1980s, finance has changed. We are a capital markets driven economy, not a bank-driven one, and we use credit cards not checks, apps and ATMs more than branches. Bailouts have replaced proactive regulation, and we now have four giant Too Big to Fail banks that span multiple lines of business from investment banking to brokerage services. But local economies still depend on local banks, and there are fewer and fewer of them…
… Banking is a great business, because mostly you pay customers a small amount for the use of their money, and get the government to guarantee you a profit. You can make more if you actually do the work to lend money, but you don’t have to.
In return for this easy profit via a government safety net, bankers accept regulation. As the brilliant scholar Saule Omarova notes, the best way to understand banks is as franchises from the government. Bankers safeguard the nation’s money and payments system, and are well-paid for it, but it’s fundamentally a public and not a private duty. That’s why there are banking charters from the state.
The rise of crypto parallels the consolidation and corruption of banking. From the 1980s onward, small town bankers, like everyone else during the neoliberal era, became heavily oriented around removing rules against speculation and froth. The low interest rate environment of the New Deal gave way to a high interest rate world, and that put enormous pressure on the balance sheets of bankers who had lent money more cheaply. That, plus the turn of the Democrats away from protecting small towns in favor of consumer rights, led to a sharp anti-government sentiment among local bankers…
[Stoller unpacks the history of banking the last few decades and then turns to crypto…]
… While anti-monopolists argued for a renewal of public institutions to tamp down on concentrations of wealth and power, the crypto world went the opposite way, arguing that it was the very existence and power of public institutions that led to the crisis in the first place.
Crypto was ideological, at first framed around utopian rhetoric and the blockchain. Unfortunately, there were no actual real use cases for productive ends, it was entirely a way of scamming or speculating without rules. During the 2010s, when the Federal Reserve kept interest rates at zero and engineered a set of bubbles, crypto was one of the more prominent ones. In 2021, I wrote an article titled “Cryptocurrencies: A Necessary Scam” describing the ideological goal of crypto.
Fortunately, regulators kept crypto hived off from the real economy, so as the bubble blew up, it didn’t much matter. In 2022, when Sam Bankman-Fried and a host of crypto institutions collapsed in an orgy of fraud and leverage and money laundering and sanctions evasions, crypto seemed to be over. But it wasn’t, because of the power of the banking lobby, the weakness of Joe Biden’s administration, and the general pro-deregulation consensus in Congress…
… After Biden, the crypto industry had immense political leverage over a supine Congress and a friendly administration. Concerns over things like consumer protection ended, of course, but even more “serious” things like worries over national security and sanctions evaporated. Trump pardoned the Binance CEO Changpeng Zhao, and no one cared any longer that crypto was used to funnel money to Hamas and Venezuela.
The narrative around crypto changed, as crypto proponents dropped their naive ideological arguments. Industry proponents no longer argued there’s anything innovative, or that crypto is important for payments or any other purpose. It’s purely a mechanism to speculate. And the industry ended its commitment to a stateless approach. The trading side of crypto attacked stock market regulations, while the banking side demanded access to the banking franchise, including bank charters, access to the Federal Reserve safety net, and so forth. They started claiming they are bank-like, only better, and that the current banking order is lazy and protected by regulation.
And that brings us to the legislative fight last week. A few months ago, Congress did its first set of favors for the crypto industry, passing the Genius Act, which allowed for companies to issue “stablecoins,” which is to say, they can take dollar deposits as long as they back those deposits with actual dollars. However, they were mostly barred from paying interest on stablecoins. And the payment of interest on deposits is really key, because that’s what would allow stablecoin issuers and crypto exchanges to compete with banks over those cheap customer deposits that enable profits. It is an existential problem, not for the JP Morgan’s of the world, as they are so big it doesn’t matter, but for the rest of the banking sector, the local and community guys.
The most aggressive crypto firm, Coinbase, sort of offers interest on deposits, with what are called “rewards.” By calling them rewards instead of interest, Coinbase is trying to create a loophole in the Genius Act. But it’s a grey area, at best, and regulators could crack down.
The next piece of legislation pushed by the crypto world was called the Clarity Act, which has a number of elements, some of them involving rules around speculation. If it passes, we can expect very little regulation of the stock market, anti-money laundering, or insider trading going forward. But the fight that led to the cancelation of the markup of the Clarity Act is whether “rewards,” aka interest on deposits, are legal. Enter the banking lobby.
Community and regional bankers are not used to fighting with conservatives, because they haven’t had to. They did block liberal lawyer Omarova from becoming the bank regulator at the Office of Comptroller of the Currency. But they certainly aren’t used to dealing with feral and weird crypto MAGA online influencers with billions of dollars. That doesn’t make sense to them. And it should have been obvious that they were in the crosshairs of the crypto industry; the Federal Reserve just launched a rulemaking to give crypto a mini bank charter, which should scare the hell out of the local banks.
But they finally have started to get in gear, pointing to a Treasury report saying that $6.6 trillion of deposits might leave the banking system if crypto companies could pay interest on stablecoins. The Independent Community Bankers Association, the trade group for local bankers, mobilized its members against stablecoin rewards.
Much of the crypto world doesn’t care about stablecoins or banking; they are interested in removing the rules regulating speculation and gambling. For them, it’s a securities law matter. But for Coinbase, which makes roughly a billion dollars in revenue with stablecoins, that part of the bill does matter. And so Brian Armstrong pulled his support for the bill on the eve of the markup. There’s something a bit odd about Coinbase’s opposition, since they got 95% of what they wanted, and everyone else is fine with the legislation. But I don’t want to speculate too much on motivations, the point is Armstrong was unhappy with the final bill.
It’s not clear what happens now. The Senate Banking Committee has put enormous time and effort into this legislation, at the behest of crypto donors. But it really is an zero sum fight. If crypto exchanges can pay interest or rewards on stablecoins, then local banks lose their deposit base. If crypto exchanges can’t, then they won’t get access to cheap deposits. While Senators are desperate for some sort of compromise, it doesn’t look like there is one. Someone has to win and someone has to lose.
This battle is one where there is no good guy, but if there’s someone who is less bad, it would be the local bankers. They at least do lend into communities, and are subject to real regulation. Crypto is a disaster, and if we integrate crypto into the real economy, they will eventually demand their own bailout. But the critique that banks don’t pay much in interest on accounts is accurate. Furthermore, the credit card business is a bloated monopolistic mess. Still, those problems are largely about the Too Big to Fail banks, not the local guys, and the TBTF banks will be fine regardless.
Honestly, I’m exhausted by the question that we are forced to answer in this fight. Should credit allocation and payments be controlled by a set of lazy right-wing bankers who hate government, or a hungrier and deeply corrupt group of crypto scammers? It would be nice to have an alternative to those two interest groups. And eventually, we will, since it’s becoming clear that the state will have to take a much bigger role in credit allocation. But for now, the fact that crypto finally got stopped, at least temporarily, by the banking lobby, well at least it’s funny. And it does show how checks and balances are useful even when everyone involved is deeply flawed.
At this moment, I’ll take what I can get…
The end of an era? “The Slow Death of Banking in America,” from @mattstoller.skystack.xyz.
Pair with Molly White‘s “They’ve bought themselves a Congress” (“Coinbase calls the shots in the Senate…”) and from Matt Levine: “Stablecoin Narrow Banking” (“one solution here is to allow stablecoins to pay interest (like banks) but also impose capital requirements (like banks). I would not bet on that happening though…”) “Memecoin Venture Capital,” (“… today I want to talk about the fourth category, tokens promising no rights…”)
* Oliver Kemper
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As we hollow out our mattresses, we might send painless birthday greetings to Felix Hoffman; he was born on this date in 1868. A chemist for the German chemical and pharmaceutical company Bayer, he sythesized both acetylsalicylic acid (ASA), which Bayer marketed as “aspirin,” and diamorphine, which was popularized under the Bayer trade name “heroin.”
“A Wikipedia article is a process, not a product”*…
A quarter of a century ago Jimmy Wales, Wikipedia‘s founder, articulated its vision– one into which it has impressively grown: “Imagine a world in which every single person on the planet is given free access to the sum of all human knowledge. That’s what we’re doing.”
On the ocassion of its birthday this month, Caitlin Dewey takes stock…
Happy birthday to Wikipedia, which is now old enough to rent a car without extra charges … but faces new (and newly urgent) threats from AI and political polarization. As a palate cleanser, should those bum you out (the second, in particular, is very grim/good), may I then suggest this “entirely non-comprehensive list of life principles” learned from 20 years of editing Wikipedia. [Scientific American / Financial Times / The Wikipedian]…
From her wonderful newsletter, Links I Would Gchat You If We Were Friends. All three are eminently worth reading.
* Clay Shirky, who went on to observe that “Wikipedia is forcing people to accept the stone-cold bummer that knowledge is produced and constructed by argument rather than by divine inspiration,” but at the same time that: “We have lived in this world where little things are done for love and big things for money. Now we have Wikipedia. Suddenly big things can be done for love.”
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As we treasure– and support— treasures, we might recall that it was on this date in 1885 that LaMarcus Adna Thompson received the first patent for a true “switchback railroad”– or , as we know it, a roller coaster. Thompson had designed the ride in 1881, and opened it on Coney Island in 1884. (The “hot dog” had been invented, also at Coney Island, in 1867, so was available to trouble the stomachs of the very first coaster riders.)
“Gotta have opposites, light and dark and dark and light, in painting. It’s like in life. Gotta have a little sadness once in awhile so you know when the good times come.”…
Bob Ross’ The Joy of Painting ran on PBS (and the CBC) from 1983 to 1994. Reruns continue around the world, including the non-commercial digital subchannel network Create and the streaming service Hulu. As part of its launch of Twitch Creative, Twitch streamed every episode over a nine-day period starting on October 29, 2015 – what would have been Ross’s 73rd birthday– and scored 5.6 million viewers. So they created a weekly rebroadcast of all 31 seasons of The Joy of Painting to air, with episodes in order, on Twitch each Monday from November 2015 onward, and a marathon of episodes each October 29. In the United Kingdom, the BBC re-ran episodes during the COVID-19 pandemic while most viewers were in lockdown at home.
Ross is estimated to have pained 30,000 canvases during his lifetime. But as those paintings are scarce on the art market, sale prices of the paintings average in the thousands of dollars and frequently topping $10,000. Lately, they’ve done even better– and for an important cause.
Starting last November, auction house Bonhams has been offering what will be a total of 30 Ross oils to benefit the public broadcasting system that made him famous…
Bonhams has revealed the next works by the beloved US television painter Bob Ross it will offer for sale, with auction proceeds going toward public television following devastating funding cuts by president Donald Trump’s administration. More than $1bn in federal funding previously allocated to support public broadcasters was slashed by the Republican-controlled congress last year.
Last year, Bonhams announced it would sell 30 Ross paintings donated by Bob Ross Inc to benefit public television. The first three paintings from the group went up for sale in November and fetched a combined total of $662,000 with fees. Ross’s painting Winter’s Peace (1993) sold for $318,000 with fees, setting an auction record for the artist. Just weeks later, that record was shattered again when his painting Cabin at Sunset (1987) sold for more than $1m in an online charity auction for the Public Media Bridge Fund initiative [see here], organised by the television host John Oliver. [One more reason to love John Oliver.]
Three more Ross paintings will be part of the “Americana: Crafting a Nation: Art, History & Legacy” auction on 27 January at Bonhams in Massachusetts, and could fetch as much as $155,000 collectively, according to the auction house’s estimates.
Valley View (1990) is estimated to sell for between $30,000 and $50,000, and was the first work completed for the 21st volume of Ross’s Joy of Painting instructional book. Change of Seasons (1990) comes with an estimate of $40,000 to $60,000, and was completed live on air in 1990, on the 11th episode of the 20th season of his The Joy of Painting television series. In that episode, Ross describes the scene as “just a beautiful little painting”.
Babbling Brook (1993), a unique oval-shaped painting, is estimated to fetch between $25,000 and $45,000. It was completed during filming for the first episode of the 30th season of The Joy of Painting. Ross often let the subject in his landscapes develop as he went along, encouraging viewers to add spontaneous details as they saw fit. While painting Babbling Brook, Ross said, “I see something!” and painted in a waterfall, adding: “Let your imagination take you to any world that you want to go to.”
An additional 24 Ross works will be sold throughout this year across Bonhams salesrooms in New York, Boston and Los Angeles, the auction house says…
Giving back: “More Bob Ross paintings head to auction to benefit US public television” from @theartnewspaper.bsky.social.
* Bob Ross
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As we “don’t make mistakes, just happy little accidents,” we might note that Ross’ rough contemporary and fellow “popular” painter, Thomas Kinkade was born on this date in 1958. While Ross was concerned with communicating the joy of creating and was opposed to his paintings becoming “financial instruments,” Kinkade was focused on capitalizing on his creations.
Kinkade, who described himself as a “master of light” (putting himself in the company of Rembrandt and Caravaggio), achieved success during his lifetime via the mass marketing of his work as printed reproductions and other licensed products through the Thomas Kinkade Company (according to which, at one point one in every 20 American homes owned a copy of one of his paintings).
Ross died in 1995 of complications from lymphoma (which he’d had for several years). KInkade died in 2012 of acute intoxication from alcohol and diazepam.
“Darkness cannot drive out darkness: only light can do that. Hate cannot drive out hate: only love can do that”
Happy Martin Luther King Jr. (MLK) Day
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