Lawrence E. Mitchell, a professor of business law at George Washington University, argues in a recent paper that the “empirical evidence is clear that the American public stock market rarely has been a significant factor in financing industrial enterprises in the United States.  The only American business sector to rely upon public stock issuances as an important source of financing public activity is the financial industry itself.”  Based on data going back to 1955 and in some cases even earlier, Mitchell finds that “America’s economy is increasingly based on finance, and our public financial markets principally are financing finance.”  In fact, he concludes, “the data raises the question of why we incur the very substantial economic and social costs of a public stock market in the first place.”

It is a question worth asking in light of the large-scale collapse of the stock market—precipitated in significant part by the even larger collapse of the mortgage and credit markets.  The “market”—by which nearly everyone means the stock market—was supposed to make us all rich, but we seem to have forgotten that there should be some real value behind all that common stock.  The crisis indicates that when you build a market on value that everyone merely believes to be worth something—until they don’t—that market may not provide long-term stability.

It seems that when people have wanted to build a business that produces something—food, materials, other goods—they have had little need historically for the public markets.  When you want to sell financial snake oil, however, you “go public” and get investments from average Americans and their pension-fund managers seeking a quick profit.  Worse, obsessions with quarterly results and no-strings profits have made the market more volatile than ever before; most “investors” should be called “traders,” as the reason for holding stock is no longer to increase wealth over time at a rate greater than inflation but to turn it over quickly by selling as soon as the price rises.

Mitchell’s research comes out at a fortuitous time, as the federal government is pumping money into financial institutions to keep the markets going, in order to “avoid chaos.”  The major investment banks have either folded or turned themselves into normal, staid commercial banks.  As Mitchell’s paper implies, the government might have been better off lending our tax dollars to companies that actually build something—or, better yet, reducing our tax burden.

—Anonymous

This article first appeared in the January 2009 issue of Chronicles: A Magazine of American Culture (Cultural Revolutions).

The answer is complicated, especially in a system that discourages third parties.  Yet, while systemic barriers tell us part of the story, we must not discount the issue of judges.  Other than a dislike for the Democratic Party, control of the federal courts—especially the Supreme Court—has become the central issue that has garnered sizeable conservative and libertarian votes for Bush I, Bob Dole, Bush II, and now McCain.

In debates with fellow travelers about McCain, I often heard the following: “Sure, he’s not perfect, but if we get one more Roberts or Alito on the Supreme Court, we can rein in some of the real excesses of government and maybe even overturn Roe.”

Republicans have controlled the White House for 28 of the last 40 years and have nominated seven of the nine sitting Supreme Court justices.  (Actually, four years should be tacked on to the Republicans’ time of possession because Jimmy Carter had no opportunity to appoint a justice.)  Despite the GOP’s control of the Court, we have seen few watershed decisions curbing government power or protecting individual rights.  In fact, just the opposite has occurred.

For example, in Gonzales v. Raich (2005), a landmark Commerce Clause case, the Court decided that Congress’s power to regulate local, intrastate matters is boundless.  The question presented in Raich was whether Congress could prohibit the medicinal use of cannabis via the federal Controlled Substances Act when the cannabis at issue was grown using only soil, water, nutrients, tools, and supplies made or originating in a single state, never crossed state lines, and never was sold in the stream of commerce.  Even conservative lion Antonin Scalia concurred in the judgment.

Another example is Kelo v. City of New London (2005), in which the Court deleted the “public use” requirement from the Fifth Amendment and approved government taking and transfer of private property when the transferee promises to make a more productive use of it than the original owner did.

And let’s not forget Grutter v. Bol­linger (2003), in which the Court held that the Constitution does not prohibit the University of Michigan’s law school from using race in admission decisions to obtain “the educational benefits that flow from a diverse student body.”  So much for the color-blind Constitution.

Use of international law has also been on the rise in recent years.  When prohibiting the death penalty for murderers who are mildly mentally retarded, the Court, in Atkins v. Virginia (2002), cited a plethora of foreign decisions in support of its ruling.

Not so fast, a loyal Bush or McCain voter might say.  What about District of Columbia v. Heller (2008), in which the Court held that the plain language of the Second Amendment recognizes a personal right, belonging to “the people,” to possess firearms?  Without Dubya’s nominations of Roberts and Alito, the right to bear arms might be confined to service in state militias or the National Guard.

Undoubtedly, Heller was correctly decided, and President Bush’s two Supreme Court nominees seem to be excellent jurists.  But in the greater scheme of things, Heller has not made a difference in the lives of ordinary Americans.  Reasonable gun-control laws are still permissible; Heller simply struck down Washington, D.C.’s ridiculous ban on possession of usable handguns in the home.

Even if one considers Heller a home run, surely it cannot outweigh the multiple strikeouts from the Bush administration that have adversely affected millions of lives.  On the economic front, Bush gave Americans a ten-trillion-dollar national debt that is 70 percent of GDP, the highest percentage since 1955.  Good-paying manufacturing jobs continued to move overseas; America has lost three million of them since 2001.  For those who still have jobs, median incomes fell by $1,000 between 2000 and 2006.

With the signing of the Medicare Prescription Drug Modernization Act, President Bush set in motion the largest expansion of the welfare state since 1965.  The law is expected to cost $1.2 trillion over the next ten years.

The federal government’s power over local schools has also increased.  President Bush was a champion of the No Child Left Behind Act, which imposed outcome-based education in exchange for federal funding.

The USA PATRIOT Act of 2001 was a result of President Bush’s ongoing “War on Terror.”  Under this legislation, government investigators can more easily eavesdrop on our internet activity, and law-enforcement officers are now in the “domestic intelligence” business.  Precious civil liberties took a backseat to security.

Of course, the Bush measure that will have the most lasting effect is the Emergency Economic Stabilization Act of 2008, which authorizes the secretary of the treasury to spend billions to purchase and manage “troubled assets” from financial institutions.  This is the largest government intervention in the private economy in the history of the United States.  It makes FDR’s New Deal and Truman’s seizure of the steel mills look like small potatoes.

While the shaping of the judiciary is one issue a voter should weigh in casting a presidential ballot, it pays to remember that the Supreme Court is not the engine behind American government, nor is it a suitable vehicle to bring about long-term change.  The elected branches of government are the real seats of power and the mechanisms that reshape society.  Conservatives and libertarians who have voted in election after election for left-leaning GOP presidential candidates in hopes of controlling the courts have received a dismal return on their investment.  In so voting, they have turned a blind eye to the massive expansions of federal power and deleterious economic and social policies that GOP candidates and presidents have pushed.

The Obama presidency will be nothing new.  It represents the same opportunity that we’ve had all along, since Republicans haven’t changed the world through the appointment of judges—and were never going to.

This article first appeared in the January 2009 issue of Chronicles: A Magazine of American Culture (Cultural Revolutions).

After the first ground assault on September 3, which lasted several hours and involved two-dozen Navy Seals, the unanimous reaction of Pakistan’s democratically elected parliament was to call on its government to repel future U.S. incursions with military force.  Pakistan’s army chief, Gen. Ashfaq Kayani, agreed, declaring that his country’s territorial integrity “will be defended at all costs.”

Seeking to justify future incursions into Pakistan, President Bush announced on September 9 that Pakistan, Iraq, and Afghanistan were “all theaters in the same overall struggle.”  But when the U.S. military attempted another ground attack on September 15, employing armed helicopters, it was forced to retreat after coming under sustained fire from Pakistan’s army.  The next day, Pakistan’s military issued a press release announcing its policy on U.S. incursions: “The orders are clear . . . open fire.”

If war with a nonnuclear-armed Iran would be folly, war with a nuclear-armed Pakistan would be a disaster.  It would open a Pandora’s box of instability, crises, and conflicts that could engulf neighboring states.  It would undermine U.S. strategic interests abroad and further erode American liberties at home.  Yet the Bush administration has been laying the foundation for such a war for months, and Barack Obama has raised eyebrows with his tough talk about invading Pakistan in hopes of killing Osama bin Laden.

On January 25 of last year, the Washington Post reported that the Bush administration was building eight bases along the Afghan-Pakistan border from which to attack Islamic militants in Pakistan’s Northwest Frontier Province.  Defense Secretary Robert Gates stated that “The Pentagon is ‘ready, willing and able’ to send U.S. troops to conduct joint combat operations with Pakistan’s military against al-Qaeda sanctuaries in Pakistan’s tribal areas.”

Secretary Gates’ announcement was disingenuous, coming as it did after Pakistan had publicly rejected the idea of U.S. troops operating inside her borders.  This suggests that the Bush administration was considering unilateral military intervention despite warnings from the Pakistani government that “any unilateral action by the United States would be regarded as an invasion.”

Where would the money come from for a war with Pakistan?  The proposed military budget of the Department of Defense grew from $396 billion in 2003 to $440 billion in 2007; an additional 40 percent is now off the books, and this figure does not include the cost of the wars in Iraq and Afghanistan, which the Center for Arms Control and Non-Proliferation estimates at $700 billion.  Meanwhile, the U.S. economy has been battered by rising oil prices, a falling dollar, the subprime mortgage crisis, a credit crunch, a deteriorating housing market, layoffs, a volatile stock market, a mounting national debt and deficit, and a meltdown in its financial sector.

Where would the U.S. government get the necessary troops for such a war?  The U.S. military is already stretched to the breaking point in Iraq and Afghanistan.  Enlistments are down, and reinstating the draft would be politically unpopular and socially divisive.  In Iraq, approximately 156,000 troops still have not been able to defeat the insurgents, and plans to reduce troop levels have been suspended.  Washington is attempting to lower the level of violence against U.S. troops by bribing Sunni tribes to attack foreign jihadists.  While these Sunnis oppose the American occupation of their country, they eagerly accept U.S. money and weapons so they can defeat their political rivals and prepare for a future showdown with their benefactors.  In Afghanistan, the base for the proposed intervention in Pakistan, the United States lacks sufficient troops to roll back a resurgent Taliban that effectively controls the southern half of the country, the homeland of the Pushtuns.  Washington has been forced to call on NATO members for several thousand additional troops—a request not likely to be met.

Both sides of the Afghan-Pakistan border are inhabited by Pushtuns whose combined population of over 38 million is larger than that of Iraq.  In contrast, the number of U.S. troops in Afghanistan is estimated at only 25,500.  Pushtuns in Afghanistan form the backbone of the Taliban and are bound to their brethren in Pakistan by ties of blood, 60 major tribes and over 400 clans, custom and law, the Pushtunwali, and now an Islamic and nationalistic anti-Americanism.  Will the eight U.S. military bases along the Afghan-Pakistan border become eight Dien Bien Phus?

U.S. diplomatic policy toward Pakistan has been self-defeating.  Washington persuaded the Musharraf government to attack alleged Al Qaeda and Taliban militants hiding in the Northwest Frontier Province.  That destabilized the region, radicalized the tribal population, and resulted in the establishment of an Islamic Emirate of Waziristan, which Islamabad was forced to recognize to end the disastrous war.

The February 18, 2008, election resulted in a victory for the secular anti-Musharraf opposition, comprising the Pakistan Peoples Party and the Pakistan Muslim League.  However, hostility to U.S. military intervention is found across Pakistan’s political spectrum, government and opposition, Islamists and secularists, pro- and anti-American politicians.  Under these circumstances, how could Washington intervene without causing further damage to the international reputation and strategic interests of the United States?

Although Washington insists it wants a stable Pakistan free from Islamic radicalism, the policy it is pursuing in neighboring Iran is ensuring the opposite.  Endeavoring to promote “regime change” in Tehran, Washington is supporting ethnic secessionist groups in Iran.  Among them are the Baluch, who inhabit adjoining territory called Baluchistan, the largest province in Pakistan, accounting for 44 percent of the country’s area.  The Bush administration has enlisted, funded, and armed the Baluch in a Sunni fundamentalist army called Jundullah (Army of God).  From bases in Pakistan, Jundullah is waging a guerrilla war attacking installations and personnel inside Iran.

The Baluch of Pakistan have been fighting for decades for their independence from Islamabad.  By arming them to fight Iran, Washington is giving them the means to resume fighting Pakistan.  Such a policy is undermining Pakistani authority and political stability in Baluchistan.  It is making it more likely that the Baluch of Pakistan, not Iran, will be the ones to achieve their independence.  If Baluchistan breaks away, Sind and the Northwest Frontier Province will eventually secede as well.  The impact of any balkanization of Pakistan on India, Islamic radicalism, and nuclear proliferation would adversely affect U.S. strategic interests in South Asia.

U.S. diplomatic policy toward Pakistan is schizophrenic.  The Bush administration has demanded that Pakistan suppress Islamic fundamentalists among the Pushtuns in the north, but support Islamic fundamentalists among the Baluch in the south.  By sponsoring Jundullah, Washington is, in many ways, recreating the Mujahideen of the 1980’s from which Al Qaeda and the Taliban sprang.  This is potentially a greater threat to U.S. national security than the disintegration of Pakistan (though the two may go hand in hand).

The United Nations estimates Iraq’s population at 29 million and Afghanistan’s at 27 million.  Pakistan’s population is more than five-and-a-half times larger.  Washington may wish to fight only Islamic militants in the Northwest Frontier Province, but for all practical purposes it would be at war with 162 million people.  U.S. military operations would also be severely hampered by rugged terrain; limited air, road, and rail transportation; and financial constraints.

An attack on Iran has been prevented, to date, by Defense Secretary Gates and Commander of CENTCOM Admiral Fallon.  The United States has neither the manpower nor the resources for the job, and any attack would endanger U.S. troops in Iraq.  But in September, Secretary Gates said that the United States could have 10,000 more troops in place to intervene in Pakistan “in the spring and summer of 2009.”  Admiral Fallon has taken early retirement and has been replaced by David Petraeus, who had been commanding general of the Multi-National Force—Iraq.  Iran has a population of 71 million.  Pakistan’s population is more than twice as large.  Iran has one of the world’s largest paramilitaries, numbering over 11 million, but its active service strength is 420,000, with a reserve of 350,000.  Pakistan’s active service strength is 619,000, with a reserve of 528,000.

The U.S. military would quickly defeat the Pakistanis in a conventional war, but there would be American casualties, and the victory would be hollow, since those Pakistani soldiers who were not killed or captured would likely join the guerrillas in attacking U.S. troops, supplies, and installations.

Then there is Pakistan’s atomic bomb.  Would an intervention to eliminate Islamic militants in the Northwest Frontier Province require the U.S. military to seize Pakistan’s nuclear warheads to prevent them from falling into the hands of Islamic militants or disaffected Pakistani military officers?  If the U.S. military did not seize those warheads, would the government of India exploit a U.S. intervention to launch a surgical strike to seize or destroy the nuclear weapons of its political rival?

In February 2003, the U.S. Navy Center for Contemporary Conflict estimated Pakistan already had between 35 and 95 nuclear bombs.  These warheads have not been placed on missiles but are kept separate in a secure facility.  Pakistan has modified F-16 fighter jets to carry warheads.  Unless all warheads and modified F-16s are secured, the threat of a suicide pilot dropping the bomb on U.S. forces would be very real.  And, should India join in the intervention, New Delhi could also be targeted.

Even if the Indian government takes no action, it will still be perceived by many Muslims in India as an accomplice in Washington’s efforts to weaken and humiliate Pakistan.  India still has not recovered from the Muslim-Hindu bloodletting that occurred in Gujarat, an Indian state bordering Pakistan, in 2002.  A U.S. military intervention in Pakistan would mean an upsurge in radicalism among Muslims in India that would increase political volatility, outbreaks of communal violence, and economic difficulties for the country as a whole.

The U.S. military might be able to secure Pakistan’s nuclear weapons, but even if Washington could redeploy all U.S. forces to Pakistan, it would still be unable to occupy a country of 162 million hostile people.  Yet it would have to occupy the country in order to have a realistic chance of extricating Islamic militants.  Thus, any intervention would result in American casualties but would not achieve any desirable political ends.  It would only win converts for the cause of radical Islam; destabilize the subcontinent and much of the Middle East; ensure that anti-Americanism dominates popular passions in Iraq, Iran, Afghanistan, and Pakistan for the foreseeable future; cripple the U.S. military; weaken an already feeble U.S. economy; and play havoc with international markets.