Month in Review: May, 2016: Part 2, Breaking the blogger’s fourth wall

July 21, 2016 | Argentina, cadaster, China, Eurozone, Greece, Hedge funds, kayfabe, Land, Panama Papers, Personal, Sovereign bankruptcy, Speculation, Statistics, wrestling | No comments 64 views

By: David A. Smith

 

[Continued from yesterday’s Part 1]

In yesterday’s Part 1 of a content-additive review of my May posts, I introduced the concept of kayfabe to politics.  More precisely, I outed kayfabe as an essential ingredient of global politics these days, where communications cycles are so fast that truth isn’t even the first casualty, it’s an irrelevance to the battle for short-attention-span actors – such as the Eurocrats who decreed that Greece must promise to do ten hard things before the EU will print more Euros to keep the Greeks solvent, not noticing that while the promise may precede the printing, the performance will follow the printing … or won’t. 

printing_euros

Soon they won’t need even to print the euros, it’ll just be ones and zeroes in the ECB computer

I showed this at length in the ensuing four parts of the post, Part 2, What is forest, what is a house?, Part 3, Remarkably at ease with a level of irregularity, and also identified those who benefit from irregularity in Part 4, A union of illegal house owners, and those who arbitrage inefficiency in Part 5, Make their livings through constant haggling:

Four parts into this meticulous exploration of the challenges of establishing land ownership in Greece, using articles from both Reuters (18 October 2015) and the New York Times (26 May 2013; sepia font), we know that the problem of land irresolution is deep-seated, pervasive in both rural and urban environments, and so woven into the Greek culture and economy that its untangling would be worthy of Heraklion’s namesake, especially because many Greeks, including many Greek civil servants, like it dirty.

Over the years, I’ve twice before cited Mr. Papaconstantinou, and each time presented him as unequivocally one of the good guys, first for sounding the alarm on Greece in 2009 and seeking an orderly restructuring (partial writeoff or rescheduling) and later in 2015 for his efforts to clean up (streamline, improve, rationalize) tax collection in Greece.

 

greece_tax_delinquency

Is this any way to run a country?

 

– tried to speed up the exercise as environment minister in 2011 but ran into a wall of opposition.

 

As Mr. Papaconstantinou found, at the cost of a year in judicial purgatory, if delaying fail, the nomenklatura (low-level informal and corrupt public and private actors) will sabotage the reformers with means most foul, such as trumped-up charge of corruption (Guardian, March 24, 2015):

 

A tribunal exonerated Greece’s former finance minister George Papaconstantinou over his handling of the infamous Lagarde List of wealthy Greeks with secret bank accounts abroad.

 

[The recent revelation of the Panama Papers has spotlighted the extent to which prominent people, some of them in public office, have gone to conceal their wealth. – Ed.]

 

panama_paper_trail

Beyond scope for AHI, but sit back and get a bucket of popcorn

 

“This is as close to an acquittal as would be possible in the circumstances,” a court official told the Guardian.

It is typically Greek and bureaucratic to have an acquittal that represents not exoneration but simply abandonment of prosecution, illustrating that in many areas of reform, the only thing simple about them is to pretend they were never started, as completed in Part 6, No one dares to say ‘simple’, and Part 7, A special reservation for the vipers:

 

6. Obstruction has become a purpose in its own right

 

In fact, obstruction has become its own purpose.

 

Cadaster reform was started in 1995 –

 

Four years before the Euro currency was launched, with Greece as a founding Euro country.

 

– with EU funds that had to be returned to Brussels in 2003 because of misuse.

 

Way back then, nearly twenty years ago, those of us who doubted the Euro criticized it as an economic yoke intended as a political aspiration, faulting it not for its goals but for its decision sequence.  Political union has to precede economic union, because economic union without political union invites every sort of moral hazard, free rider, and principal-agent risk in the textbook.  But in the pre-millennial Euro-phoria that gripped the stronger nations’ capitals, all the weaker economies were invited in, on the premise that being in the club would reform their previously slothful ways. 

 

This state of affairs is particularly galling because Greece has thrown hundreds of millions of dollars at the problem over the past two decades, but has little to show for it.

 

Instead, we cynics were proven right: once in the club, not only did Greece and Italy continue in their spendthrift mezzogiorno ways, so too did Spain and France, because after all, what’s a budget deficit above 3% of GDP among friends?

 

van_gogh_sleeping_farmers

What’s a little budget deficit among sleeping friends?

 

By now, the selective incompetence that Greece has been showing in its inability to reform itself has undoubtedly worked – between the refugees streaming through the Balkansk, Brxit (didn’t see that coming, did Europe?), and Recep Erdogan’s turning WWE heel by ripping off the mask of respectability, I doubt anyone in Brussels is terribly concerned right now with toasting Greek tootsies. 

 

draghi_tsipras

Now look, Alex, the essence of kayfabe is that you pretend to comply, I pretend to believe you, and everyone else thinks it’s real – got it?

 

On the other hand, enforcement has its virtues, even if the enforcement is imposed by ostracizing the deadbeat, as I showed in Time to thank the vultures? Part 1, A crack in the wall of secrecy and Part 2, Any investigator anywhere in the world:

 

Are you glad the Panama Papers came to light?

 

With numerous governments already announcing probes into the Panama papers and others preparing to do so, Mossack Fonseca, the law firm from which the hoard of documents about offshore companies was leaked, will be receiving lots of inquiries in the coming months.  

 

Then you have an unlikely hero to thank, one hiding in plain sight:

 

john_doe_script

John Doe is one of the two unsung heroes of this story

 

I stumbled on it from the random juxtaposition of two stories, such as these in the Economist  (April 16, 2016dark red font) and the Economist (April 16, 2016; buff blue font):

 

cristina_angry

I’d have got away with it if not for those meddlesome hedge funds

 

As we glimpsed in yesterday’s Part 1, using the unwitting diptych of two Economist stories from the same April 16, 2016 issue, the first a sidelight on the Panama Papers, the second Economist (April 16, 2016; buff blue font), the best systems of governance and human organization set up systems where the single-minded pursuit of self-interest produces additionality as an ecosystemic byproduct.

 

That’s the political-theorist’s way of saying that Elliott Management’s obsessive pursuit of hidden Argentinian sovereign assets led it to crack open the wall of secrecy surrounding one of the world’s most underappreciated criminality-facilitating law firms, Mossack Fonseca, whose client list includes both those who earn their money in high-tax countries and those who earn it in no-rules countries.

 

mossack_offices

We’re everywhere a crook may want to be!

 

And puncturing the Mossack shell allows Elliott, and anyone who chooses to follow it, a global-secrecy endoscopy:

 

endoscopy

We know you swallowed the documents – now, where are they?

 

But [March 2015 Las Vegas court ruling]’s full significance is only now becoming apparent: it means that, under an American law about assisting with foreign legal proceedings, any investigator anywhere in the world can subpoena Mossack, through the Nevada subsidiary, for information that could be relevant to cases in any country.  

 

Meanwhile, the same Elliott that crowbarred open Mossack Fonseca was also instrumental in Cristina Fernandez de Kirchner’s downfall; Mr. Macri would never have been elected without the holdouts’ diligence in nailing shut any aperture to the capital markets.

 

While all this was going on, halfway through May, I embarked on what would prove to be six weeks all over the place (California, Washington, Jeddah, and Scotland), including an Actual Vacation, which led at least one concerned to write me, necessitating a reply that repots of my renunciation of blogging Are greatly exaggerated:

 

It is better to keep your mouth closed and let people think you are a fool than to open it and remove all doubt.

Mark Twain

 

genie_in_california

Can‘t be a genie without a turban, can you?

 

Explaining the rules to the three Visionaries: Red (Carol Ornelas, Visionary Homes), White (Michael Costa, Highridge Costa), and Blue (Robin Hughes, Abode Communities)

 

Last week, and much of this week, I was in California, first at the California Housing Consortium’s 2016 Policy Forum and California Housing Hall of Fame Awards, as the Genie offering three wishes to an All-American panel of visionaries red, white, and blue – with the winner decided by live votes of the roughly 350 people in attendance.

 

genie_three_wishes

Right here, direct from the lamp for your very much wish-fulfillment

 

So effective was the exercise of conjuring a genie and inviting panelists to conjure three wishes that its use as a brainstorming or art-of-the-possible-tool may become the subject of a future blog post – once, that is, that I’ve fully internalized being back in the one-a-day schedule of posting these. 

 

one_a_day_mens

A blog post a day keeps the boredom away

 

Thanks for your loyalty and your patience in this dark time!

Month in Review: May, 2016: Part 1, The world of kayfabe

July 20, 2016 | Argentina, cadaster, China, Eurozone, Greece, Hedge funds, kayfabe, Land, Panama Papers, Personal, Sovereign bankruptcy, Speculation, Statistics, wrestling | No comments 88 views

By: David A. Smith

 

Over the last few years, I have become consumed with the post-meta concept of kayfabe, the twenty-first century’s dominant mode of entertainment, as defined (in true kayfabe fashion) by Wikipedia’s entry on the subject, itself a kayfabe exercise in self-reference:

 

kayfabe_hat

Never break the kayfabe

 

In professional wrestling, kayfabe is the portrayal of staged events within the industry as ‘real’ or ‘true,’ specifically the portrayal of competition, rivalries, and relationships between participants as being genuine and not of a staged or pre-determined nature of any kind.  Kayfabe has also evolved to become a code word of sorts for maintaining this ‘reality’ within the direct or indirect presence of the general public.

 

Kayfabe is often seen as the suspension of disbelief that is used to create the non-wrestling aspects of promotions, such as feuds, angles, and gimmicks, in a manner similar to other forms of fictional entertainment. Since wrestling is performed in front of a live audience, whose interaction with the show is crucial to its success, kayfabe can be compared to the fourth wall in acting, since there is hardly any conventional fourth wall to begin with.

 

From initial geniuses like Andy Kaufman (as both the professional wrestler and the bizarre Tony Clifton character):

 

andy_kaufman_jerry_lawler

When the funny man becomes the unwitting straight man

 

Through Joaquin Phoenix on David Letterman, later revealed to be an extended prank:

joaquin_phoenix_letterman

 

joaquin_phoenix_still_here

 

Sasha Baron Cohen as Ali G:

 

ali_g_donald_trump

Pitching the idea of the ice cream glove

 

trump_leaves_ali_g

Sniffing out the kayfabe, and leaving

 

With the rise of social media, kayfabe has become the dominant mode of fame creation and maintenance, where the life soap opera makes the tweets that boost the clicks that sell the ads that pay for the fame merry-go-round:

 

i_heart_t_s_hug

Read your contract: it said, “I will wear the I © T S shirt”

 

tom_ryan_third_guy

I knew something was up when she said, “Oh, I’ve got a professional photographer coming”

 

Politicians are naturally angry about kayfabe’s breakout into the mainstream, because for so many years and decades they’ve had the kayfabe arena all to themselves, whether in creating a persona that they think will garner votes, or alternatively in creating factoids that support whatever narrative is being flogged on the public, as explored in Always look on the bright side … or else (dee doo): Part 1, Gloomy views and positive energy:

 

Some things in life are bad
They can really make you mad
Other things just make you swear and curse.


some_thing_are_bad

Some things in life are really bad

 

Some decades ago, back when hand-held calculators were the rage of high-tech, a team of psychologists interested in people’s deference to presumed technical authority invited their subjects to take what they were told was a test of their mathematical aptitude.  For this they were given a calculator the researchers had modified so that while its first few computations would be accurate, after a bit they would be wrong – with gradually increasing errors.  The researchers were unsurprised, as I am confident AHI blog readers will be unsurprised, that for people to question the calculator required absurd errors, the equivalent of 2+2 = 937. 

 

9_plus_10_21

For high values of 19 and low values of 21

 

That, as reported in the Wall Street Journal (May 3, 2016), is the Groucho-Marx position that both global and Chinese analysts now find themselves when seeking understanding of what in fact is occurring with China’s economy, capital flows, and financial sector, which I will juxtapose with an article from 3½ years earlier, from now-reforming and then-obstructing Argentina, published in Significance, the monthly journal of the Royal Statistical Society (December, 2012; Albiceleste font). 

 

With the benefit of hindsight, I drew clear evolutionary parallels between China today and Argentina five years ago, and while past performance is no guarantee of future results, it’s hard to bet against, particularly with recent Chinese behavior as reported in Part 2, anything but journalism these days, and Part 3, Afloat when they should sink:

 

As established in Parts 1 and 2 of this post comparing an unlikely pairing, Argentina and China, using as source material the Wall Street Journal (May 3, 2016) and Significance, December, 2012; Albiceleste font), we’ve seen that Argentina’s charismatic autocrat turned incipient dictator Cristina Fernandez de Kirchner used every means at her disposal to pressure Argentina’s national statistics agency to report what she wanted reported, rather than accurate statistics.

 

guillremo_moreno

Truth is what I tell you it is: Minister of economics Guillermo Moreno

 

When [Minister of Economics Guillermo] Moreno did not get the list from INDEC he began his own witch-hunt to find the establishments from which INDEC obtained price information. “For some sectors such as groceries the field is very large and identifying individual merchants was impossible. But for others, such as travel agencies, almost all of them were included in the INDEC sample.”

 

Whereas it took the Soviet Union 74 years to die (1917-1991), today’s worst dictators (Mugabe in Zimbabwe, the late Hugo Chavez in Venezuela and his even more sluggish successor) measure their reigns in decades or shorter.  Argentina, whose government was increasingly clumsy, used not the rapier but the cudgel:

 

In March 2011 seven companies were each fined 500,000 pesos – around $125,000 – for producing statistics the government said did not comply with “appropriate methodological requirements”.  In other words, for producing accurate, as opposed to cooked, statistics.

 

Bevacqua received the same fine. “The others are companies or foundations”, she says, “but we don’t have clients or assets. The only thing I own is my house where I live with my children.” She feared she would lose it.


Fear paralyzes.  As
demonstrated by recent events in Turkey, when an elected autocrat-turned-dictator-wannabe is looking to stifle dissent, squash democratic institutions, and consolidate personal power, it isn’t necessary to wipe out all the opposition: instead, the conspicuous mental torture of one hapless ordinary citizen will cow a hundred of the observant herd into self-censorship.

 

inflatable_herd

Why are we running?  Because everybody’s running!

 

There was even worse to come: criminal prosecution and the threat of jail. The charge, filed by Moreno last year [2011], was that Bevacqua and a colleague published two indices based on false technical information in order to cause price rises in the domestic market and distort the market. It carried a potential sentence of 2–6 years in prison.

 

The judiciary backed Ms. Bevacqua but the Administration appealed, and as far as I know the threat disappeared only with Cristina’s defeat.

 

While China is no Argentina, from heavy-handed order to suppression of democracy to uncontrollable dictatorship can be a slope very slippery, and the signs in China are ominous:

 

truth_shmooth

Don’t tell me things I don’t want to hear

 

“You can see they’re not happy when you tried to tell them foreign speculators are not your biggest problem,” said one of the officials who attended the meetings.

 

It’s always politically expedient to blame the speculators; they’re easy targets.

 

Then too, the best form of control is to prevent thoughts from propagating by ordering those with capacity not to think them.

 

In the financial hub of Shanghai, the city’s propaganda department recently instructed a local think tank to stop researching a planned debt-for-equity swap program aimed at helping big state companies reduce debt, according to economists familiar with the matter. 

 

The reason, these economists said, is that officials don’t want the research to turn up unfavorable evidence after Premier Li Keqiang and others have endorsed the swaps.

 

When the emperor has spoken, then it is so and must be so.

 

Until, that is, the day of market reckoning – because reality will not be fooled.

 

Life’s a laugh and death’s a joke, it’s true.
You’ll see it’s all a show
Keep ’em laughing as you go
Just remember that the last laugh is on you.

 

When it is not being used to protect the autocrat, enrich the powerful, or keep the populace in their subservient and placid place, government is a factory that produces only two products, laws and money.  Because of this (to a hammer, everything looks like a nail, or “When I’ve done what I can, the problem must be solved, right?”), elected officials have a tendency to assume that if they enact a law all will follow as the night the day. 

 

well_thats_done

The rest is just administrative

 

In fact, it’s a poor bureaucrat who can’t stall an unwelcome initiative so thoroughly that even its most ardent supporter would wish it simply gone, as revealed in a multi-part post about Dissecting the cadaster: Part 1, Typically Greek, delayed:

 

While Europe’s chattering classes concern themselves with this year’s Euro-bad-boy (Britain) who might actually think itself sovereign and vote to leave the club, from their minds has faded the memory of last year’s bad boy (Greece), now brought to heel and thus a solved problem, a good little Euro-land that sits quietly in place and has promised to be good:

 

alex_tsipras

I’ll keep using your currency if you’ll keep lending it to me

 

Greece will get a loan of €82-86 billion, which shall be handed to Greece gradually from 2015 until June 2018. In return, Greece will have to:

 

[Broken into enumerated list for clarity – Ed.]

 

1.      Increase the VAT.

2.      Reform the pension system.

3.      Assure the independence of ELSTAT [The statistics authority – Ed.]

 

My first time through the list I passed lightly over Point 3, the independence of the state statistics authority, but with the Argentinian and Chinese examples before us we can see how critical that is.

 

4.      Automatically cut public spending to get primary surpluses.

 

‘Primary surplus’ means direct expenditures (excluding debt service on previous government borrowing) are no greater than direct income.  Obviously you can’t hope to get your fiscal house in order if you’re losing money even assuming all past bad debt magically disappeared.

 

5.      Reform justice so decisions can be made faster.

6.      Follow the reforms proposed by the OECD.

7.      Revoke the laws passed by Tsipras (except for the one concerning the “humanitarian crisis”).

8.      Recapitalize the banks.

9.      Privatize €50 billion of state assets.

10.    Decrease the cost of the public sector.

 

There it is: the theoretical economist’s perfect list of chores.

 

chores_prizes

“Recapitalize banks” … €15 billion …

 

All this reminds me of Monty Python’s How To Do It.  Thanks, Jackie, great idea.

 

how_to_do_it

No, not that, not how to do thingy

 

In return, Greece would be given the Juncker package, €35 billion, which is meant to help the Greek economy to grow.

 

A great solution – on paper.  But in reality, it is a solution impossible of achievement and will gradually unravel, for reasons detailed in an innocuous article by Paul Taylor and Lefteris Papadimas from Reuters (18 October 2015):

 

Typically Greek, delayed land register is never-ending epic

 

Though my post focused mainly on Greece’s spaghetti legs (a child’s ability instantly to turn his legs to jello if pointed a direction he did not wish to go), in fact ‘reform justice so decisions can be made faster’ is bewilderingly hard to plan, much less to summon up the courage to do. 

 

[Continued tomorrow in Part 2]

Pre-municipal cities, four typologies: Part 4b, The factory company factory town

July 19, 2016 | Abbeys, castles, cathedrals, Cities, company town, Employer-assisted, Finance, History, Housing, Infrastructure, New Lanark, Robert Owen, Scotland, Speculation, Theory, Workforce housing | 1 comment 91 views

 

[Continued from the previous Part 4a and the preceding Part 1, Part 2, Part 3a, Part 3b, Part 3c, Part 3d, Part 3e, and Part 3f.]

 

By: David A. Smith

 

Our journey through pre-municipal urban living, begun on a rainy weekday morning with the Boss’s and my contemplation of the now-buried Roman fort Trimontium, has traveled through the twin medieval forms – the fortified castle and the sanctified monastic abbey – to the Enlightenment’s moral men, the communitarian philosophers including Robert Owen, who not only started a town to accommodate the workers in the enlightened factory mills he and his social-investor partners built, but also decided that creating a factory community was thinking in too small a scale:

 

robert_owen_1845

A lifetime of visioning gives you a sharp gaze

 

In 1826 Owen himself began a social experiment at New Harmony, Indiana, US, sold to him by George Rapp. 

 

The early nineteenth century seems to have been teeming with social reformers.

 

george_rapp

I made extra money posing for garden gnomes

 

After a year and a half, it failed, its inhabitants, in the words of Owen’s son, “a heterogeneous collection of radicals, enthusiastic devotees to principle, honest latitudinarians, and lazy theorists, with a sprinkling of unprincipled sharpers thrown in.

 

Blaming the failure on bad residents overlooks the owner’s role in resident selection and undermines the claim that New Harmony was in fact a community as opposed to a moral philosopher’s company town:

 

Josiah Warren, who was one of the participants in the New Harmony Society, asserted that community was doomed to failure due to a lack of individual sovereignty and personal property.

 

These concepts, favorites of the enlightenment, later find their way into the Constitution and into, for example, Roe v. Wade.

 

josiah_warren

Josiah was the master of his own person

 

He says of the community: “We had a world in miniature — we had enacted the French revolution over again with despairing hearts instead of corpses as a result. … It appeared that it was nature’s own inherent law of diversity that had conquered us … our “united interests” were directly at war with the individualities of persons and circumstances and the instinct of self-preservation …” (Periodical Letter II 1856)

 

warren_labor_for_labor

Labor for labor?  What if not all labor has the same value?

 

Today New Lanark is a historical open-air museum, its economic proposition gradually dissipated as industrialization and automation moved the jobs from Europe to America, from America to the emerging world, but the idea of the planned community of live-work-play-socialize continued onward.  George Pullman of railroad fame, another progressive who hired blacks when it was unusual to do so, built a benevolent company town, Pullman, Illinois, but “In 1898 the Supreme Court of Illinois ordered the Pullman Company to divest itself of the town, which was annexed and absorbed by Chicago.”

 

ipullmg001p1

No, George, you can’t have your own town any more

 

After the railroad towns came other intensive planned communities built to house the workers engaged in grand construction exercises, like building the Hoover Dam:

 

boulder_city_as_planned_1930

A town shaped like a dam to build the greatest dam in history:

Boulder City as planned in 1930

 

boulder_city_under_construction

First the workers, then the work: Boulder City under construction

 

Or winning World War II by refining uranium and plutonium:

 

oak_ridge_housing

Industrial building technology, 1940s style: note the modular construction

 

In many ways, the intensive-work place new towns were a synthesis of previous planned-community forms.  They had the castle’s bulwarks and secure perimeter:

 

oak_ridge_elza_gate

The Elza Gate at Oak Ridge

 

The monastic dedication to a higher purpose

 

oak_ridge_secret

Making the world safe for democracy

 

And Owenite communitarian principles – everyone eating together –

 

los_alamos_lunch

Lunch at Los Alamos

 

– And living together, all inside the security wire:

 

shift_change_oak_ridge_1945

Your commute is a walk but all within the gates

 

Each in its way was a company town with a benevolent liege lord, by this time typically the Federal government, and with the intention that wherever possible the new isolated community would gradually be absorbed into a wider

 

The romance of the harmonious community holds sway even now, even in remote Lanarkshire, Scotland, as illustrated by this little tale I found in Urban Realm (March 24, 2015)

 

Hometown Foundation attack ‘blinkered’ Owenstown dismissal

March 24 2015

 

The Hometown Foundation has expressed its ‘disappointment’ and ‘regret’ following the decision of Scottish Government reporter to reject their appeal against the refusal of planning in principle for a £500m new town in South Lanarkshire.

Owenstown would have seen 3,200 homes built on 400 acres of land in the Douglas Valley near Rigside; including offices, shops, restaurants, a hotel, schools, care home and industrial space.

Uniquely the project would have been run on a ‘co-operative basis’ by residents with revenue being reinvested in the town.

 

new_south_lan ark_vision

An Owenite vision in Owen’s original shire

Bill Nicol director of the Hometown Foundation, remarked: “This decision will mean the loss to local people of new homes, vital jobs, industrial units and an innovation center. There’s nothing else on the horizon of any consequence from South Lanarkshire Council and it’s a great pity for young people whose best hope may now be to emigrate.”

 

bill_nicol_owenstown_lanark

Nicol can’t imagine how the council cannot gasp ambitious, visionary, and morally right

 

Of perhaps greatest irony to our story, the proposed Owenstown, heir to a pre-municipal form of public-spirited urban living that could readily be developed entirely on its own resources, is being thwarted because there is a government present.

“This represents a massive loss to the area and Scotland as a whole. We have spoken to authorities in England, Wales and Ireland about the concept and they have no difficulty understanding its potential.”

 

“We will now be investigating the opportunities that exist in other less blinkered parts of the country.”

 

What we can’t understand is why our local and national elected representatives can’t grasp something which is ambitious, visionary and morally right – perhaps it’s because they didn’t think of it first.”

 

But to think that, Robert Owen might say, would be incharitable.

 

The pre-municipal city, Type 4:

The industrial-revolution factory town

 

·         Products or services.  (1) Textiles.  (2) Paper.

·         Higher level of authority.  The company, cradle to grave living.

·         Value proposition.  Better living in a safe, clean environment.

·         Revenue model.  (1) National or global shipment of quality affordable durable goods.

·         Natural features selected for.  (1) A steadily flowing river with good vertical drop.  (2) Available land to build a riverside campus.  (3) Convenient access to rail lines, roads.

·         Housing typology.  Dormitory, singles (separated by sex) and some family living.  

·         Household type.  ‘Geographical bachelors and spinsters’, sometimes young adults seeking to earn a living, then living dormitory style.  [Look up Lowell]

·         ‘Anchor tenant’ major capital asset.  The water-powered mill and lathe system.

·         Franchise models.  None that I can think of. 

·         Modern echoes.  (1) Port Sunlight, England.  (2) Company towns like Pullman, Chicago and Indian Hill-North Village, Massachusetts.  (3) Oak Ridge, Tennessee.  (4) Boulder City, Nevada.  (5) Amazon’s Christmas-shipping-worker RV parks.

Pre-municipal cities, four typologies: Part 4a, The manufacturing company town

July 18, 2016 | Abbeys, castles, cathedrals, Cities, company town, Employer-assisted, Finance, History, Housing, Infrastructure, New Lanark, Robert Owen, Scotland, Speculation, Theory, Workforce housing | No comments 94 views

 

[Continued from the previous Part 3f and the preceding Part 1, Part 2, Part 3a, Part 3b, Part 3c, Part 3d, and Part 3e.]

 

By: David A. Smith

 

Of the three pre-municipal urban typologies so far considered, their demise came in three distinct ways:

 

1.     Amortization of value proposition.  Roman forts either disappeared entirely (if the Romans withdrew) or slowly petrified into walled medieval towns.

2.     Technological and political ecosystem change.  Medieval castles survived until the combination of effective artillery and the rise of nations rendered the fortified-keep no longer a cost-effective investment.

3.     Expropriation and nationalization.  Abbeys and monasteries thrived until they were expropriated and nationalized, often via the English equivalent of a Chapter VII liquidation.

 

henry_8_holbein

You won’t like me when I’m angry

 

While I haven’t researched it, I’m confident that the demise of the monasteries coincided not only with the rise of the nation (as distinct from the dukedom or principality) as the dominant political unit, but also with the emergence of the sub-national urban city (led by the Italian city-states, but soon replicated in ports and centers of learning) as an autonomous sub-national political unit protected (at least for national defense) by the national sovereign. 

 

AHI posts on cities as a form of human congregation

 

June 19, 2008: Urbanizing requires formalization, 2 parts

February 19, 2009: Cities and privacy, 2 parts

April 21, 2011: Economic nitrogen fixing, 2 parts

April 1, 2014: Elevators, the vertical utility, 7 parts

 

Henceforth new town typologies could arise only if they were entirely beyond the jurisdiction of any law (say, Pitcairn Island) or with the tolerance if not explicit backing of the sovereign government. 

 

mutiny_hms_bounty

We’ll be setting up our own community somewhere else

 

[We will have a chance to create a new urban typology when humanity finally establishes a permanent colony on the Moon, but that’s some decades in the future. – Ed.] 

 

anno_2205

Yes, but where will the affordable housing go?

 

Yet with the emergence of national government came compensatory benefits – representative democracy, the Enlightenment, and the Industrial Revolution.  These gave rise to a new form of urbanist, the Utopian entrepreneur, such as Robert Owen (via Wikipedia):

 

A Welsh social reformer and one of the founders of utopian socialism and the cooperative movement. He worked in the cotton industry in Manchester before setting up a large mill at New Lanark in Scotland.

 

Like philosophers before him and social reformers since, Owen imagined a whole new benevolent community based on the Pelagian principle that humanity is inherently good and becomes evil only when warped by circumstances:

 

pelagius_v_augustine

It is only an illuminat9ing grace

 

At an early age, he [worked out] a belief system … that human character is formed by circumstances over which individuals have no control, and so cannot be properly praised or blamed…. The secret behind the correct formation of people’s characters is to place them under proper influences – physical, moral and social – from their earliest years.

 

4569_owen_charity_and_kindness

Charity and kindness admit of no exception

 

The principles of the irresponsibility of man and of the effect of early influences are the key to Owen’s system of education and social amelioration, embodied in his first work, A New View of Society, or Essays on the Principle of the Formation of the Human Character, the first of four essays to appear in 1813.

 

robert_owen_young

Portrait of the reformer as a young man

 

Owen made no bones about his thesis, announcing in in the first paragraph:

 

Any general character, from the best to the worst, from the most ignorant to the most enlightened, may be given to any community, even to the world at large, by the application of proper means; which means are to a great extent at the command and under the control of those who have influence in the affairs of men.

 

To put this into practice – doing well by doing good – Owen invested his and his wife’s fortune:

 

After falling in love with Caroline Dale, the daughter of the New Lanark mill’s proprietor David Dale, in 1799 Owen married Caroline and convinced his partners to buy New Lanark, founded in 1785 by Dale and Richard Arkwright and powered by the falls of the River Clyde.

 

4562_new_lanark_water_wheel

From the water, constant energy, from the constant energy revenue

 

He hoped to conduct New Lanark on higher principles than purely commercial ones.

 

For the creation of a new urban model, New Lanark was ideal: live, work, relax, learn, all in a compact campus.

 

new_lanark_layout

Mills along the Clyde, factories above the mills, housing above the factories

 

Then and now, that part of Scotland is rural, undulating, and forested, so everything for the community needed to be on-site, including retail amenities:

 

new_lanark_1800s

Every comfort that work people can desire

 

Owen opened a store where the people could buy goods of sound quality at little more than wholesale cost.  He sold quality goods and passed on the savings from the bulk purchase of goods to the workers.

 

But like the abbots centuries before, he implemented his own version of the Rule of Saint Benedict:

 

new_lanark_advertisement

Cleanly, industrious, and well behaved only

 

He placed the sale of alcohol under strict supervision.

 

As in the abbeys, education figured prominently on the routine of life:

 

new_lanark_rules

New Lanark’s Rules: employer-assisted housing at its most basic

 

Owen’s greatest success was in support of the young. He can be considered as the founder of infant child care in Britain, especially Scotland.

 

Like the abbeys, the New Lanark factory required substantial capital investment, and with debt still unavailable (municipal finance would not be invented for another half a century), the equity could not command a full market return, so the founder turned to philanthropy:

 

Tired of the restrictions imposed on him by men who wanted to conduct the business on the ordinary principles, Owen arranged in 1813 to have them bought out by new investors content to accept just £5,000 return on their capital, allowing Owen a freer scope for his philanthropy.

 

Naturally, the men who provided these program-related investments (PRIs) were moral philosophers themselves:

 

jeremy_bentham

Believing the highest blogging principle is the greatest good of the greatest number of blog readers

 

These included Jeremy Bentham and the well-known Quaker William Allen. 

 

william_allen

You can say I’m a dreamer, but I’m not the only one

 

Were he around to read our book on the subject, Robert Owen would doubtless accept the designation Mission Entrepreneurial Entity and over the ensuing century Owenite principles brought the mill ongoing employment and prosperity.  More than likely, the concessionary capital provided by the philanthropic shareholders helped New Lanark maintain up-to-date equipment and leading-edge social services, contributing to a happy and therefore productive workforce.

 

children_dancing_new_lanark

Charms to soothe the savage breast?  Music and dance at New Lanark School

 

Proving that employment reform was only part of a larger philosophy of social reform, Owen followed up his New Lanark development with an adventure in complete town planning:

 

new_harmony_vision_never_built

A fort, a monastery, a factory and a town, all on the Wabash River in Indiana

 

[Continued in Part 4b]

Pre-municipal cities, four typologies: Part 3f, The abbeys’ overreach and their destruction

July 14, 2016 | Abbeys, castles, cathedrals, Cities, Employer-assisted, Finance, History, Housing, Infrastructure, New Lanark, Roman Empire, Scotland, Speculation, Theory, Trimontium, Workforce housing | No comments 117 views

[Continued from the previous Part 3e and the preceding Part 1, Part 2, Part 3a, Part 3b, Part 3c, and Part 3d.]

 

By: David A. Smith

 

By now, to my astonishment and quite possibly yours, the exposition of the third pre-municipal typology of urbanization – the abbey campus headquartered by an abbey or cathedral church – has reached its fifth installment (and like the Middle Ages, it seems to be hanging around well beyond its expected useful life, while the fourth typology taps its toes in the temporary file cache). 

 

Fortunately, like the Middle Ages themselves, what came before sowed the seeds of its own demise, for all good blog posts must eventually end, and the abbeys’ dependency on donor-funded grant capitalization for serially funded campus expansion – the model used by most established universities, though not the new upstarts – positioned them for such immense economic success they became a takeover target.

 

The abbeys’ over-reach and their destruction

 

Though any institution that lasted effectively for five centuries deserves more praise than snark, in a blog post snark there must be –

 

hunting_snark_1876_holiday_snark_says_fudge

‘You must know’ – said the judge’ but the Snark exclaimed ‘Fudge!’

 

– and over that half a millennium the abbeys imperceptibly changed.  Founded as the isolated outposts of civilization amid the painted heathens, they became of commercial and intellectual activity, usually surrounded by towns that had grown up around or alongside their campus, spinning off secular business from the innovations the abbeys created, imported, or scaled.

 

As they did, the abbeys also shifted from being predominantly spiritual entities selling salvation as a byproduct of faith to diversified secular operating businesses providing products and services throughout the community.

 

fountains_abbey

Fountains Abbey, with its extension economic additions:

The Abbot’s House, its Great Hall, and support buildings

 

Agriculture led to viticulture which led to the invention of brandy:

 

monk_cellar_taster

I’m doing this solely because it’s my job

 

[The apex of monastic viticulture was champagne, invented by a monk, Dom Perignon. – Ed.]

 

dom_perignon

Yes, but this was long after the Counter-Reformation …

 

As monopolies are prone to do, complacency set in; instead of sleeping in the same dorter as everyone else, abbots began building their own houses on the campus.

 

abbots_lodging_new_abbey

The abbot’s house, New Abbey

 

jedburgh_abbots_lodging_visitors_center

Jedburgh Abbey, with the (excavated and renovated) Abbot’s Lodging, foreground, now the visitor center

 

After all, as the ultimate non-profit, the church should raise as much wealth as it can, for the salvation of the faithful and the greater glory of God – and if some of the money raised went into expanding the church, improving the cloister or the outbuildings, or even making the abbot’s lodgings more suitable to receiving merchants and nobles – that was all part of the never-ending capital campaign. 

 

capital_campaign_uses

It just keeps gushing

 

(Note the curious morally insidious way that a donor-funded model of capital expansion undermines the mission purpose; since the only way to build the campus is through grants, one must always be fundraising.  Fundraising becomes a purpose that comes to be seen as coequal with the mission, because without the fundraising, where would the mission be?

(Does this sound like any universities you know?)

 

campaign_flexible

Trust us, we’ll put it all to good use

 

Similarly, the role of the abbot as the abbey’s most important person gave way to a second chair – a prime minister to the king, as it were.  In fact the commendator (the lay administrator) was a combination of the owner’s representative and the Office of Inspector General, living and working on-site at the monastery, keeping an eye on the accounts and making sure that the abbey’s equivalent of UBTI (Unrelated Business Taxable Income) was remitted to the king.

 

argylls_lodging

Argyll’s Lodging in Stirling, sold to the Earl of Argyll by a commendator in 1559

 

Meanwhile, with the dominant monopoly came the short-cut knockoff products.  Why have monks praying hour after hour, when it can be much more economical (and therefore more profitable) to offer not salvation itself but reduction of penance requirements via indulgences:

 

indulgence is “a way to reduce the amount of punishment one has to undergo for sins which may reduce either or both of (1) the penance required after a sin has been forgiven, or (2) the temporal punishment after death (called Purgatory).

 

Perhaps unsurprisingly, given that the monasteries and church could raise only so much from appeals to faith, indulgences became the spiritual equivalent of paper money: they could be mass produced, sold in whatever denominations the market would bear, and even in some cases wholesaled. 

 

(On our vacation, I recall seeing, possibly in Mary Queen of Scots’ house in Jedburgh, an indulgence made out in favor of the local laird, for him to fill in the names of up to thirty people at his discretion.  Shades of the Letters of Transit!)

 

letter_of_transit_blank

You can fill in any other names you like, Rick

 

Having a license to print money (or its equivalent in sacred bearer bonds) was beneficial to the monasteries, and equally beneficial to the king, so the aims of Church and state found ready alignment:

 

With the permission of the Church, indulgences also became a way for Catholic rulers to fund expensive projects, such as Crusades and cathedrals, by keeping a significant portion of the money raised from indulgences in their lands. 

 

At the same time, and perhaps for the first time in human history, the indulgence market experienced the common risks of paper money – counterfeiting and hyperinflation:

 

There was a tendency to forge documents declaring that indulgences had been granted.  Indulgences grew to extraordinary magnitude, in terms of longevity and breadth of forgiveness.

1_hundred_trillion_zim

How many Zimbabwe dollars can dance on the face of a bank note?

 

By the late Middle Ages, the abuse of indulgences, mainly through commercialization, had become a serious problem which the Church recognized but was unable to restrain effectively.

 

‘Unable to’?  Or were indulgences, like congressional earmarks, an invention for patronage that many might decry but none were willing to foreswear?

 

jeorg_breu_elder_a_question_to_a_mintmaker_c1500

A Question to a Mintmaker, woodcut by Jörg Breu the Elder of Augsburg, circa 1530, presenting the Pope and [A] indulgences as one of three causes of inflation, the others being [B] minting of debased coinage and [C] cheating by merchants.

 

Indulgences were from the beginning of the Protestant Reformation a target of attacks by Martin Luther and all other Protestant theologians.

 

In business-model terms, indulgences not only set off runaway inflation, in so doing they severely cheapened the brand.  That, in turn, called into question the entire copyright protection, a dissatisfaction given voice through a new disruptive social medium.  The printing press enabled a blogger like Martin Luther could cut out the publishers and get his message directly to the customers.

 

luther_95_theses

Business-model disruption courtesy of technological and financial disruption

 

At the same time communication was being revolutionized, so too was finance.  Capitalization of enterprises no longer depended purely on grant funding or taxation: the voyages of discovery were creating new forms of capital aggregation, including limited partnerships, and commercial banking had been invented in the 1450s, giving rise to new forms of urbanized living: the city-state.  As all this continued, the rise of the nation-state – like Tudor England and Capetian France – rendered the abbey’s invisible shield against assault less valuable.  Now the sovereign did that, and the sovereign felt the crown, not the abbey, should be getting the revenue:

 

The desire to dissolve religious houses and appropriate their endowments for the use of the state was normally a policy demanded by secular authorities rather than the reformers themselves.

 

Within half a century, the Catholic Church lost its copyright protection, and with that, it lost its brands identify as the sole road to salvation.  The muckraking journalism of Luther and his ilk such as Scotland’s John Knox broke the church’s monopoly moral superiority – and rendered them tempting targets for acquisitive kings like Henry VIII:

 

In 1535 the Valor Ecclesiasticus was introduced by Thomas Cromwell. This was a comprehensive survey to ascertain how much property was owned by the Church in England and Wales. As well as assessing wealth, hand-picked commissioners enquired about the quality of religious life being maintained, assessed any superstitious religious observances such as the veneration of relics and looked for evidence of moral laxity.

 

Making money, deviating from the mission – sounds like the City of Boston trying to cancel a non-profit’s 501c3 exemption or its tax abatement.

 

boston_exempt_properties

Render unto Menino the taxes that are Menino’s?

 

The commissioners were also instructing establishments to strictly enforce the practice of common dining and cloistered living,

 

In 1535, Henry VIII nationalized the monasteries, and those that refused nationalization, his soldiers demolished.

 

glastonbury_abbey_model

Glastonbury Abbey before the dissolution

 

Thus endeth the abbey’ era of pre-municipal urbanization. 

 

glastonbury_abbey_after

And after Henry’s soldiers got through with it

 

And with its end, comes a lesson for modern day.

 

A cautionary tale

Imagine a campus that is:

 

·         A place-based center of moral education. 

·         Built from a founder’s vision. 

·         Selling an intangible product (say, education) with a brand-protected intellectual product.

·         Positioning itself out as the arbiter of morality.

·         Exempt from sovereign taxation.

·         Funded by gifts from grateful customers and those signaling their virtue. 

·         As a result, much richer than its neighbors. 

 

Wouldn’t it behoove such institution to stay on the right side of government?

 

top_10_endowments

Don’t lose your mission, lest you lose your tax exemption

 

The pre-municipal city, Type 3: The abbey

 

·         Products or services.  (1) Salvation.  (2) Moral comfort.  (3) Structured employment.  (4) Library/ archive. 

·         Higher level of authority.  God.  Hard to beat that.

·         Value proposition.  Come with us for eternal life; spurn us for eternal damnation and endless pain.

·         Revenue model.  (1) Gifts, tithes, and offerings.  (2) Fee-for-service (inter-cessionary prayer).  (3) Get-out-of-hell-free cards (indulgences.

·         Natural features selected for.  (1) Unclaimed but arable land.  (2) A steadily flowing stream (water source and drainage). 

·         Housing typology.  Campus-style layout.  Workforce dormitories divided into senior management (abbot’s lodging), management (monk’s dorter), and labor (lay brothers’ dorter).  

·         Household type.  ‘Geographical bachelors’: management and workers.  (While there were convents of nuns, men-only monasteries dominated.)

·         ‘Anchor tenant’ major capital asset.  The cathedral, whose building usually took decades.

·         Franchise models.  The Rule of Saint Benedict, a comprehensive code of conduct, principally as propagated through the Cistercian monasteries, particularly their monastic layout.

·         Modern echoes.  (1) Universities with dormitories (the product is a diploma).  (2) Hospital complexes. 

 

[Continued in Part 4]