Learn how to distinguish truth from illusion that so often force investors

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Learn how to distinguish truth from illusion that so often force investors

The development of the information sector and technologies has opened for private investors an amazing world of financial trading. At the moment, almost everyone can become a participant in trading in the currency or stock market, even such an innovative direction as trading crypto-currencies is open to any user. However, on this background of popularization, many do not profit, but lose money, and the reason lies in the plane of stereotypes and myths that private investors peck at when choosing the sphere of activity and trading tools. In our material, we decided to analyze the main myths of online trading, which are often imposed on users.

So, almost every potential player in the financial market with the question – how you became a trader, can answer that he learned about this area either from a fascinating thematic film or advertisement! Yes, strangely enough, these sources are the main means of attracting investors to trading platforms. And this is the main problem that forms the first and, perhaps, the main myth of trading in financial markets.

Myth # 1 – financial trading is very profitable and easy!

The first thing that a potential online trader encounters when acquainting with the financial market is advertising a specialized trading platform, in which the profitability and simplicity of this occupation are extolled in every way. Different success stories, in which they say how a simple guy or a girl has earned hundreds of thousands, and sometimes millions of dollars, just by trading on currency pairs. Of course, the ignorant philistine does not see in this the pitfalls, but only the possible end result in the form of huge profits and benefits that can be afforded by trading on Forex or platforms for over-the-counter fixed-term contracts. So, we completely debunk this illusion!

First, on our planet simply there are no simple directions of human activity, which would bring a huge increase in profits. Each job requires effort and special skills. Financial trading – this is mostly not trade in the truest sense of this concept. Financial trading is primarily a complex analysis of quotations and the determination of possible market movements in a particular situation. To become a professional in this matter, it is not enough to read thematic articles or study several textbooks on trading. It is impossible to become a successful trader without professional training and practical skills in working with finance. Yes, you can meet many investors with good results, which are self-taught, but this is rather an exception to the general mass. Analyzing the statistics of the main platforms for financial trading, you can clearly say that only 10% of all users were able to profit from trading in financial assets. The rest of the mass of investors have lost their money or belong to the cohort that only seek to take their place in this field.

Secondly, even large investors and financial funds with a huge army of analysts do not get crazy profit indicators here. In general, any institutional investor or investment bank with a worldwide reputation can not boast a profit above the level of 5% per year! Yes, imagine that the most advanced specialists and professional traders can not receive more than 5% of revenues per year! Given the volume of their working capital, a fairly large amount is obtained, and what to do with a private investor with a minimum investment capital is to be content with copecks.

Third, in order for a trader’s investment account to grow steadily, a trade participant should receive on average more than 60% of profitable trading positions – and this when working with futures contracts with clear indicators of profitability and loss. When trading Forex, the calculation of risks and profitability indicators has an even more complicated algorithm. For this reason, in the field of financial trading, it is often referred to as a “Negative expectation” of generating income. The fact is that the risks of loss of funds or the difference between the level of profitability and loss of trade position initially set a certain level of losses in trading which, if the strategy of actions is wrong or investors fail, leads to the complete destruction of investment capital.

Given these factors and the technical difficulties that accompany online trading, it is impossible to call trading in the financial market a simple occupation. We pass to the second error.

Myth # 2 – invest 10 dollars and earn a million!

The second and most common misconception that is very actively imposed on investors is the opportunity to receive a large income with minimal investment of funds! Yes, marketers in this case tried to glory! The bulk of companies providing financial services for online trading offer potential investors to start their operations on a minimum account. Conceived is from 10-20 $ of initial investments. A perfectly acceptable amount for any active person. But the problem is not this – luring customers, companies say that such a volume of funds gives the full range of opportunities to maximize profits! This is certainly confirmed by the success stories of traders working on the company’s platform and bright clips with millionaires! Only a few people in this advertising madness say that with such investments to earn even $ 1000 is almost impossible! We have already touched on the issue of trading profitability in the financial markets, we will expand the analysis of this indicator a little. So, the average indicator of the profitability of an online trader with excellent skills and experience in trade is no more than 20% per year! When investing $ 10 of initial investment, you will get a $ 2 increase at the very best. About millions do not even come! Therefore, considering trade as the main mode of income generation, be prepared for large initial investments.

The latter fact led to the appearance in online trading of such a derivative of hedge funds as PAMM-accounts. This is a collective investment managed by a professional trader, and the profit is divided among all participants in the projection by the amount of investments. Only in this issue there are several problems:

– The PAMM account manager does not bear any responsibility to investors for their actions, which can lead to loss of capital of all participants of the account. Therefore, today this type of activity is considered by many experienced investors as negative
– PAMM accounts were actively used by fraudsters to deceive users, which further damaged the reputation of this trading regime
– And, of course, the level of profitability of this type of investment is minimal for each financial player participating in collective investment

Thus, the myth of the amazing profitability of financial trading has nothing to do with reality.

Myth # 3 – Online trading – divorce!

In contrast to marketers who promote online trading of financial assets on the network, there are a lot of skeptics and outspoken opponents of this field. These users categorically declare that trading in the network is one of the biggest fraudulent schemes. It should be noted right away that most of these citizens are traders who have failed in this field and left the market. Therefore, when analyzing this myth, it is necessary to be skeptical of such statements.

The problem in this issue certainly exists, and it consists in a huge number of scammers, who, copying the activities of large trading platforms, deceive traders and trite the investors’ funds. It was this that caused great reputational harm, the consequences of which we can now observe in the network. However, trading can not be called fraud! Cooperating with a licensed company, trading in efficient trading systems, being a professional in the analysis of quotations, you can make a profit!

In order not to fall into the clutches of swindlers, there are a number of simple and logical recommendations that, by the way, allow not only to save their investments, but also open the opportunity to significantly increase the effectiveness of their trade:

› Carefully choose a trading platform
› Use only licensed companies in your country
› When choosing a terminal, study the responses of traders and specialized ratings
› Do not mess with services that impose unnecessary services and tools on you, especially be careful with PAMM accounts and personal analysts
› Continually analyze your actions in the market and financial services of a trading partner company

In this simple way, you avoid troubles and financial losses when trading on financial assets.

Myth # 4 – Do you trade on global exchanges?

We came to the direct technique of trading on online platforms, which is now offered to private investors. The bulk of novice traders is imposed such a delusion: having issued a trading position in the market, and no matter what tool, it draws up a contract on the world exchange platform, that is, becomes a participant in the global financial system! Gentlemen, do not believe it! In our region, companies do not work, which enable them to conduct real exchange transactions in the financial market – this is possible only on the services of American and European companies that provide financial services for online trading. And in this respect, jurisdiction is very important. In addition, for real financial transactions in the market will require large capital – at least $ 10,000. By these means, few people can take a chance today, they agree!

The second point is that all traders in the derivatives market, Forex and other online trading formats work only on their trading services and their positions are not listed anywhere. Simply put, you work against a company you work with or other players like you. At the initial stage of the advent of online trading – it was a problem. The fact is that the client base of the companies was minimal, and bankruptcies were often observed here, which led to a loss of funds by investors. Today, online trade is so global and has become so widespread that over-the-counter contracts and a variety of derivatives from classic trading instruments are often called alternative exchange trades. Today, professionals no longer call the problem work on a particular service, the main thing is that the partner company is licensed, and therefore safe!

Myth # 5 – The existence of the Grail!

Against the backdrop of the popularization of online trading, many “experts” began to appear, who actively began to promote their own trading strategies or robots and bots in the analysis of the market and trade. And of course each of them speaks of their system as the Grail of financial trading. Here you can often find statements about a 100% efficiency strategy or a robot that does not open unprofitable contracts. This is primarily aimed at beginners and non-professionals with minimal experience in trade. Every more or less advanced trader knows that the existence of a Graal strategy is impossible for many reasons. Here it is necessary to talk about both the purely technical complexities of trade and market analysis, and the psychological factors of working in the market. If you can not figure it out for yourself, study the work of the recognized trading guru B. Williams “Trading chaos”, which clearly describes the investor’s possibilities in terms of performing effective analysis and forecasting market movements.

Choosing a trading system, you should pay attention not to how the author praises her, but on specific technical indicators:

› Asset type for evaluation
› Trading time
› Trading tool
› Market evaluation period
› Duration of the forecast
› Risk indicators

And of course, independently evaluate the effectiveness of the proposed system by testing, only so you can find for yourself the best format for working in the market. But in any case, remember, there are no strategies with an efficiency level of 100%!


A beginner of financial online trading in order to achieve success requires an extremely large preparatory work. Here, every aspect of working in the market is very important. But the main thing is training and choosing a professional partner for work. Studying the myths and marketing misconceptions that the network imposes on you, you discover for yourself the opportunity to make a right and professional start in the market, which means you will necessarily become a successful investor.

“General Risk Warning: Binary options and cryptocurrency trading carry a high level of risk and can result in the loss of all your funds.”

Force and Opinion

Noam Chomsky

Z Magazine, July-August, 1991

In his study of the Scottish intellectual tradition, George Davie identifies its central theme as a recognition of the fundamental role of “natural beliefs or principles of common sense, such as the belief in an independent external world, the belief in causality, the belief in ideal standards, and the belief in the self of conscience as separate from the rest of one.” These principles are sometimes considered to have a regulative character; though never fully justified, they provide the foundations for thought and conception. Some held that they contain “an irreducible element of mystery,” Davie points out, while others hoped to provide a rational foundation for them. On that issue, the jury is still out.

We can trace such ideas to 17th century thinkers who reacted to the skeptical crisis of the times by recognizing that there are no absolutely certain grounds for knowledge, but that we do, nevertheless, have ways to gain a reliable understanding of the world and to improve that understanding and apply it — essentially the standpoint of the working scientist today. Similarly, in normal life a reasonable person relies on the natural beliefs of common sense while recognizing that they may be parochial or misguided, and hoping to refine or alter them as understanding progresses.

Davie credits David Hume with providing this particular cast to Scottish philosophy, and more generally, having taught philosophy the proper questions to ask. One puzzle that Hume posed is particularly pertinent today. In considering the First Principles of Government, Hume found “nothing more surprising” than “to see the easiness with which the many are governed by the few; and to observe the implicit submission with which men resign their own sentiments and passions to those of their rulers. When we enquire by what means this wonder is brought about, we shall find, that as Force is always on the side of the governed, the governors have nothing to support them but opinion. ‘Tis therefore, on opinion only that government is founded; and this maxim extends to the most despotic and most military governments, as well as to the most free and most popular.”

Hume was an astute observer, and his paradox of government is much to the point. His insight explains why elites are so dedicated to indoctrination and thought control, a major and largely neglected theme of modern history. “The public must be put in its place,” Walter Lippmann wrote, so that we may “live free of the trampling and the roar of a bewildered herd,” whose “function” is to be “interested spectators of action,” not participants. And if the state lacks the force to coerce and the voice of the people can be heard, it is necessary to ensure that that voice says the right thing, as respected intellectuals have been advising for many years.

Hume’s observation raises a number of questions. One dubious feature is the idea that force is on the side of the governed. Reality is more grim. A good part of human history supports the contrary thesis put forth a century earlier by advocates of the rule of Parliament against the King, but more significantly against the people: that “the power of the Sword is, and ever hath been, the Foundation of all Titles to Government.” Force also has more subtle modes, including an array of costs well short of overt violence that attach to refusal to submit. Nevertheless, Hume’s paradox is real. Even despotic rule is commonly founded on a measure of consent, and the abdication of rights is the hallmark of more free societies — a fact that calls for analysis.

The Harsher Side

The harsher side of the truth is highlighted by the fate of the popular movements of the past decade. In the Soviet satellites, the governors had ruled by force, not opinion. When force was withdrawn, the fragile tyrannies quickly collapsed, for the most part with little bloodshed. These remarkable successes have elicited some euphoria about the power of “love, tolerance, nonviolence, the human spirit, and forgiveness,” Vaclav Havel’s explanation for the failure of the police and military to crush the Czech uprising. The thought is comforting, but illusory, as even the most cursory look at history reveals. The crucial factor is not some novel form of love and nonviolence; no new ground was broken here. Rather, it was the withdrawal of Soviet force, and the collapse of the structures of coercion based upon it. Those who believe otherwise may turn for guidance to the ghost of Archbishop Romero and countless others who have tried to confront unyielding terror with the human spirit.

The recent events of Eastern and Central Europe are a sharp departure from the historical norm. Throughout modern history, popular forces motivated by radical democratic ideals have sought to combat autocratic rule. Sometimes they have been able to expand the realms of freedom and justice before being brought to heel. Often they are simply crushed. But it is hard to think of another case when established power simply withdrew in the face of a popular challenge. No less remarkable is the behavior of the reigning superpower, which not only did not bar these developments by force as in the past, but even encouraged them, alongside of significant internal changes.

The historical norm is illustrated by the dramatically contrasting case of Central America, where any popular effort to overthrow the brutal tyrannies of the oligarchy and the military is met with murderous force, supported or directly organized by the ruler of the hemisphere. Ten years ago, there were signs of hope for an end to the dark ages of terror and misery, with the rise of self-help groups, unions, peasant associations, Christian base communities, and other popular organizations that might have led the way to democracy and social reform. This prospect elicited a stern response by the United States and its clients, generally supported by its European allies, with a campaign of slaughter, torture, and general barbarism that left societies “affected by terror and panic,” “collective intimidation and generalized fear” and “internalized acceptance of the terror,” in the words of a Church-based Salvadoran human rights organization. Early efforts in Nicaragua to direct resources to the poor majority impelled Washington to economic and ideological warfare, and outright terror, to punish these transgressions by destroying the economy and social life.

Enlightened Western opinion regards such consequences as a success insofar as the challenge to power and privilege is rebuffed and the targets are properly chosen: killing prominent priests in public view is not clever, but rural activists and union leaders are fair game — and of course peasants, Indians, students, and other low-life generally. Shortly after the murder of the Jesuit priests in El Salvador in November 1989, the wires carried a story by AP correspondent Douglas Grant Mine entitled “Second Salvador Massacre, but of Common Folk,” reporting how soldiers entered a working class neighborhood, captured six men, lined them up against a wall and murdered them, adding a 14-year-old boy for good measure. They “were not priests or human rights campaigners,” Mine wrote, “so their deaths have gone largely unnoticed” — as did his story, which was buried.

“The same week the Jesuits were killed,” Central America correspondent Alan Nairn writes, “at least 28 other civilians were murdered in similar fashion. Among them were the head of the water works union, the leader of the organization of university women, nine members of an Indian farming cooperative, ten university students,…. Moreover, serious investigation of the Salvadoran murders leads directly to Washington’s doorstep.” All “absolutely appropriate,” hence unworthy of mention or concern. So the story continues, week after grisly week.

The comparison between the Soviet and U.S. domains is a commonplace outside of culturally deprived sectors of the West, as illustrated in earlier Z articles. Guatemalan journalist Julio Godoy, who fled when his newspaper, La Epoca, was blown up by state terrorists (an operation that aroused no interest in the United States; it was not reported, though well-known), writes that Eastern Europeans are, “in a way, luckier than Central Americans”: “while the Moscow-imposed government in Prague would degrade and humiliate reformers, the Washington-made government in Guatemala would kill them. It still does, in a virtual genocide that has taken more than 150,000 victims… [in what Amnesty International calls] a `government program of political murder’.” That, he suggested, is “the main explanation for the fearless character of the students’ recent uprising in Prague: the Czechoslovak Army doesn’t shoot to kill…. In Guatemala, not to mention El Salvador, random terror is used to keep unions and peasant associations from seeking their own way” — and to ensure that the press conforms, or disappears, so that Western liberals need not fret over censorship in the “fledgling democracies” they applaud.

Godoy quotes a European diplomat who says, “as long as the Americans don’t change their attitude towards the region, there’s no space here for the truth or for hope.” Surely no space for nonviolence and love.

One will search far to find such truisms in U.S. commentary, or the West in general, which much prefers largely meaningless (though self-flattering) comparisons between Eastern and Western Europe. Nor is the hideous catastrophe of capitalism in the past years a major theme of contemporary discourse, a catastrophe that is dramatic in Latin America and other domains of the industrial West, in the “internal Third World” of the United States, and the “exported slums” of Europe. Nor are we likely to find much attention to the fact, hard to ignore, that the economic success stories typically involve coordination of the state and financial-industrial conglomerates, another sign of the collapse of capitalism in the past 60 years. It is only the Third World that is to be subjected to the destructive forces of free market capitalism, so that it can be more efficiently robbed and exploited by the powerful.

Central America represents the historical norm, not Eastern Europe. Hume’s observation requires this correction. Recognizing that, it remains true, and important, that government is typically founded on modes of submission short of force, even where force is available as a last resort.

The Bewildered Herd And Its Shepherds

In the contemporary period, Hume’s insight has been revived and elaborated, but with a crucial innovation: control of thought is more important for governments that are free and popular than for despotic and military states. The logic is straightforward. A despotic state can control its domestic enemy by force, but as the state loses this weapon, other devices are required to prevent the ignorant masses from interfering with public affairs, which are none of their business. These prominent features of modern political and intellectual culture merit a closer look.

The problem of “putting the public in its place” came to the fore with what one historian calls “the first great outburst of democratic thought in history,” the English revolution of the 17th century. This awakening of the general populace raised the problem of how to contain the threat.

The libertarian ideas of the radical democrats were considered outrageous by respectable people. They favored universal education, guaranteed health care, and democratization of the law, which one described as a fox, with poor men the geese: “he pulls off their feathers and feeds upon them.” They developed a kind of “liberation theology” which, as one critic ominously observed, preached “seditious doctrine to the people” and aimed “to raise the rascal multitude…against all men of best quality in the kingdom, to draw them into associations and combinations with one another…against all lords, gentry, ministers, lawyers, rich and peaceable men” (historian Clement Walker). Particularly frightening were the itinerant workers and preachers calling for freedom and democracy, the agitators stirring up the rascal multitude, and the printers putting out pamphlets questioning authority and its mysteries. “There can be no form of government without its proper mysteries,” Walker warned, mysteries that must be “concealed” from the common folk: “Ignorance, and admiration arising from ignorance, are the parents of civil devotion and obedience,” a thought echoed by Dostoevsky’s Grand Inquisitor. The radical democrats had “cast all the mysteries and secrets of government…before the vulgar (like pearls before swine),” he continued, and have “made the people thereby so curious and so arrogant that they will never find humility enough to submit to a civil rule.” It is dangerous, another commentator ominously observed, to “have a people know their own strength.” The rabble did not want to be ruled by King or Parliament, but “by countrymen like ourselves, that know our wants.” Their pamphlets explained further that “It will never be a good world while knights and gentlemen make us laws, that are chosen for fear and do but oppress us, and do not know the people’s sores.”

These ideas naturally appalled the men of best quality. They were willing to grant the people rights, but within reason, and on the principle that “when we mention the people, we do not mean the confused promiscuous body of the people.” After the democrats had been defeated, John Locke commented that “day-labourers and tradesmen, the spinsters and dairymaids” must be told what to believe: “The greatest part cannot know and therefore they must believe.”

Like John Milton and other civil libertarians of the period, Locke held a sharply limited conception of freedom of expression. His Fundamental Constitution of Carolina barred those who “speak anything in their religious assembly irreverently or seditiously of the government or governors, or of state matters.” The constitution guaranteed freedom for “speculative opinions in religion,” but not for political opinions. “Locke would not even have permitted people to discuss public affairs,” Leonard Levy observes. The constitution provided further that “all manner of comments and expositions on any part of these constitutions, or on any part of the common or statute laws of Carolines, are absolutely prohibited.” In drafting reasons for Parliament to terminate censorship in 1694, Locke offered no defense of freedom of expression or thought, but only considerations of expediency and harm to commercial interests. With the threat of democracy overcome and the libertarian rabble dispersed, censorship was permitted to lapse in England, because the “opinion-formers…censored themselves. Nothing got into print which frightened the men of property,” Christopher Hill comments. In a well-functioning state capitalist democracy like the United States, what might frighten the men of property is generally kept far from the public eye — sometimes, with quite astonishing success.

Such ideas have ample resonance until today, including Locke’s stern doctrine that the common people should be denied the right even to discuss public affairs. This doctrine remains a basic principle of modern democratic states, now implemented by a variety of means to protect the operations of the state from public scrutiny: classification of documents on the largely fraudulent pretext of national security, clandestine operations, and other measures to bar the rascal multitude from the political arena. Such devices typically gain new force under the regime of statist reactionaries of the Reagan-Thatcher variety. The same ideas frame the essential professional task and responsibility of the intellectual community: to shape the perceived historical record and the picture of the contemporary world in the interests of the powerful, thus ensuring that the public keeps to its place and function, properly bewildered.

In the 1650s, supporters of Parliament and the army against the people easily proved that the rabble could not be trusted. This was shown by their lingering monarchist sentiments and their reluctance to place their affairs in the hands of the gentry and the army, who were “truly the people,” though the people in their foolishness did not agree. The mass of the people are a “giddy multitude,” “beasts in men’s shapes.” It is proper to suppress them, just as it is proper “to save the life of a lunatique or distracted person even against his will.” If the people are so “depraved and corrupt” as to “confer places of power and trust upon wicked and undeserving men, they forfeit their power in this behalf unto those that are good, though but a few.”

The good and few may be the gentry or industrialists, or the vanguard Party and the Central Committee, or the intellectuals who qualify as “experts” because they articulate the consensus of the powerful (to paraphrase one of Henry Kissinger’s insights). They manage the business empires, ideological institutions, and political structures, or serve them at various levels. Their task is to shepherd the bewildered herd and keep the giddy multitude in a state of implicit submission, and thus to bar the dread prospect of freedom and self-determination.

Similar ideas have been forged as the Spanish explorers set about what Tzvetan Todorov calls “the greatest genocide in human history” after they “discovered America” 500 years ago. They justified their acts of terror and oppression on the grounds that the natives are not “capable of governing themselves any more than madmen or even wild beasts and animals, seeing that their food is not any more agreeable and scarcely better than that of wild beasts” and their stupidity “is much greater than that of children and madmen in other countries” (professor and theologian Francisco de Vitoria, “one of the pinnacles of Spanish humanism in the sixteenth century”). Therefore, intervention is legitimate “in order to exercise the rights of guardianship,” Todorov comments, summarizing de Vitoria’s basic thought.

When English savages took over the task a few years later, they naturally adopted the same pose while taming the wolves in the guise of men, as George Washington described the objects that stood in the way of the advance of civilization and had to be eliminated for their own good. The English colonists had already handled the Celtic “wild men” the same way, for example, when Lord Cumberland, known as “the butcher,” laid waste to the Scottish highlands before moving on to pursue his craft in North America.

One hundred and fifty years later, their descendants had purged North America of this native blight, reducing the lunatics from 10 million to 200,000 according to some recent estimates, and they turned their eyes elsewhere, to civilize the wild beasts in the Philippines. The Indian fighters to whom President McKinley assigned the task of “Christianizing” and “uplifting” these unfortunate creatures rid the liberated islands of hundreds of thousands of them, accelerating their ascent to heaven. They too were rescuing “misguided creatures” from their depravity by “slaughtering the natives in English fashion,” as the New York described their painful responsibility, adding that we must take “what muddy glory lies in the wholesale killing til they have learned to respect our arms,” then moving on to “the more difficult task of getting them to respect our intentions.”

This is pretty much the course of history, as the plague of European civilization devastated much of the world.

On the home front, the continuing problem was formulated plainly by the 17th century political thinker Marchamont Nedham. The proposals of the radical democrats, he wrote, would result in “ignorant Persons, neither of Learning nor Fortune, being put in Authority.” Given their freedom, the “self-opinionated multitude” would elect “the lowest of the People” who would occupy themselves with “Milking and Gelding the Purses of the Rich,” taking “the ready Road to all licentiousness, mischief, mere Anarchy and Confusion.” These sentiments are the common coin of modern political and intellectual discourse; increasingly so as popular struggles did succeed, over the centuries, in realizing the proposals of the radical democrats, so that ever more sophisticated means had to be devised to reduce their substantive content.

Such problems regularly arise in periods of turmoil and social conflict. After the American revolution, rebellious and independent farmers had to be taught by force that the ideals expressed in the pamphlets of 1776 were not to be taken seriously. The common people were not to be represented by countrymen like themselves, that know the people’s sores, but by gentry, merchants, lawyers, and others who hold or serve private power. Jefferson and Madison believed that power should be in the hands of the “natural aristocracy,” Edmund Morgan comments, “men like themselves” who would defend property rights against Hamilton’s “paper aristocracy” and from the poor; they “regarded slaves, paupers, and destitute laborers as an ever-present danger to liberty as well as property.” The reigning doctrine, expressed by the Founding Fathers, is that “the people who own the country ought to govern it” (John Jay). The rise of corporations in the 19th century, and the legal structures devised to grant them dominance over private and public life, established the victory of the Federalist opponents of popular democracy in a new and powerful form.

Not infrequently, revolutionary struggles pit aspirants to power against one another though united in opposition to radical democratic tendencies among the common people. Lenin and Trotsky, shortly after seizing state power in 1917, moved to dismantle organs of popular control, including factory councils and Soviets, thus proceeding to deter and overcome socialist tendencies. An orthodox Marxist, Lenin did not regard socialism as a viable option in this backward and underdeveloped country; until his last days, it remained for him an “elementary truth of Marxism, that the victory of socialism requires the joint efforts of workers in a number of advanced countries,” Germany in particular. In what has always seemed to me his greatest work, George Orwell described a similar process in Spain, where the Fascists, Communists, and liberal democracies were united in opposition to the libertarian revolution that swept over much of the country, turning to the conflict over the spoils only when popular forces were safely suppressed. There are many examples, often influenced by great power violence.

This is particularly true in the Third World. A persistent concern of Western elites is that popular organizations might lay the basis for meaningful democracy and social reform, threatening the prerogatives of the privileged. Those who seek “to raise the rascal multitude” and “draw them into associations and combinations with one another” against “the men of best quality” must, therefore, be repressed or eliminated. It comes as no surprise that Archbishop Romero should be assassinated shortly after urging President Carter to withhold military aid from the governing junta, which, he warned, will use it to “sharpen injustice and repression against the people’s organizations” struggling “for respect for their most basic human rights.”

The threat of popular organization to privilege is real enough in itself. Worse still, “the rot may spread,” in the terminology of political elites; there may be a demonstration effect of independent development in a form that attends to the people’s sores. Internal documents and even the public record reveal that a driving concern of U.S. planners has been the fear that the “virus” might spread, “infecting” regions beyond.

This concern breaks no new ground. European statesmen had feared that the American revolution might “lend new strength to the apostles of sedition” (Metternich), and might spread “the contagion and the invasion of vicious principles” such as “the pernicious doctrines of republicanism and popular selfrule,” one of the Czar’s diplomats warned. A century later, the cast of characters was reversed. Woodrow Wilson’s Secretary of State Robert Lansing feared that if the Bolshevik disease were to spread, it would leave the “ignorant and incapable mass of humanity dominant in the earth”; the Bolsheviks, he continued, were appealing “to the proletariat of all countries, to the ignorant and mentally deficient, who by their numbers are urged to become masters, …a very real danger in view of the process of social unrest throughout the world.” Again it is democracy that is the awesome threat. When soldiers and workers councils made a brief appearance in Germany, Wilson feared that they would inspire dangerous thoughts among “the American negro [soldiers] returning from abroad.” Already, he had heard, negro laundresses were demanding more than the going wage, saying that “money is as much mine as it is yours.” Businessmen might have to adjust to having workers on their boards of directors, he feared, among other disasters, if the Bolshevik virus were not exterminated.

With these dire consequences in mind, the Western invasion of the Soviet Union was justified on defensive grounds, against “the Revolution’s challenge…to the very survival of the capitalist order” (John Lewis Gaddis). And it was only natural that the defense of the United States should extend from invasion of the Soviet Union to Wilson’s Red Scare at home. As Lansing explained, force must be used to prevent “the leaders of Bolshevism and anarchy” from proceeding to “organize or preach against government in the United States”; the government must not permit “these fanatics to enjoy the liberty which they now seek to destroy.” The repression launched by the Wilson administration successfully undermined democratic politics, unions, freedom of the press, and independent thought, in the interests of corporate power and the state authorities who represented its interests, all with the general approval of the media and elites generally, all in self-defense against the “ignorant and mentally deficient” majority. Much the same story was re-enacted after World War II, again under the pretext of a Soviet threat, in reality, to restore submission to the rulers.

When political life and independent thought revived in the 1960s, the problem arose again, and the reaction was the same. The Trilateral Commission, bringing together liberal elites from Europe, Japan, and the United States, warned of an impending “crisis of democracy” as segments of the public sought to enter the political arena. This “excess of democracy” was posing a threat to the unhampered rule of privileged elites — what is called “democracy” in political theology. The problem was the usual one: the rabble were trying to manage their own affairs, gaining control over their communities and pressing their political demands. There were organizing efforts among young people, ethnic minorities, women, social activists, and others, encouraged by the struggles of benighted masses elsewhere for freedom and independence. More “moderation in democracy” would be required, the Commission concluded, perhaps a return to the days when “Truman had been able to govern the country with the cooperation of a relatively small number of Wall Street lawyers and bankers,” as the American rapporteur commented.

The fears expressed by the men of best quality in the 17th century have become a major theme of intellectual discourse, corporate practice, and the academic social sciences. They were expressed by the influential moralist and foreign affairs adviser Reinhold Niebuhr, who was revered by George Kennan, the Kennedy intellectuals, and many others. He wrote that “rationality belongs to the cool observers” while the common person follows not reason but faith. The cool observers, he explained, must recognize “the stupidity of the average man,” and must provide the “necessary illusion” and the “emotionally potent oversimplifications” that will keep the naive simpletons on course. As in 1650, it remains necessary to protect the “lunatic or distracted person,” the ignorant rabble, from their own “depraved and corrupt” judgments, just as one does not allow a child to cross the street without supervision.

In accordance with the prevailing conceptions, there is no infringement of democracy if a few corporations control the information system: in fact, that is the essence of democracy. The leading figure of the public relations industry, Edward Bernays, explained that “the very essence of the democratic process” is “the freedom to persuade and suggest,” what he calls “the engineering of consent.” If the freedom to persuade happens to be concentrated in a few hands, we must recognize that such is the nature of a free society.

Bernays expressed the basic point in a public relations manual of 1928: “The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society… It is the intelligent minorities which need to make use of propaganda continuously and systematically.” Given its enormous and decisive power, the highly class conscious business community of the United States has been able to put these lessons to effective use. Bernays’ advocacy of propaganda is cited by Thomas McCann, head of public relations for the United Fruit Company, for which Bernays provided signal service in preparing the ground for the overthrow of Guatemalan democracy in 1954, a major triumph of business propaganda with the willing compliance of the media.

The intelligent minorities have long understood this to be their function. Walter Lippmann described a “revolution” in “the practice of democracy” as “the manufacture of consent” has become “a self-conscious art and a regular organ of popular government.” This is a natural development when public opinion cannot be trusted: “In the absence of institutions and education by which the environment is so successfully reported that the realities of public life stand out very sharply against self-centered opinion, the common interests very largely elude public opinion entirely, and can be managed only by a specialized class whose personal interests reach beyond the locality,” and are thus able to perceive “the realities.” These are the men of best quality, who alone are capable of social and economic management.

It follows that two political roles must be clearly distinguished, Lippmann goes on to explain. First, there is the role assigned to the specialized class, the “insiders,” the “responsible men,” who have access to information and understanding. Ideally, they should have a special education for public office, and should master the criteria for solving the problems of society: “In the degree to which these criteria can be made exact and objective, political decision,” which is their domain, “is actually brought into relation with the interests of men.” The “public men” are, furthermore, to “lead opinion” and take the responsibility for “the formation of a sound public opinion.” “They initiate, they administer, they settle,” and should be protected from “ignorant and meddlesome outsiders,” the general public, who are incapable of dealing “with the substance of the problem.” The criteria we apply to government are success in satisfying material and cultural wants, not whether “it vibrates to the self-centered opinions that happen to be floating in men’s minds.” Having mastered the criteria for political decision, the specialized class, protected from public meddling, will serve the public interest — what is called “the national interest” in the webs of mystification spun by the academic social sciences and political commentary.

The second role is “the task of the public,” which is much more limited. It is not for the public, Lippmann observes, to “pass judgment on the intrinsic merits” of an issue or to offer analysis or solutions, but merely, on occasion, to place “its force at the disposal” of one or another group of “responsible men.” The public “does not reason, investigate, invent, persuade, bargain, or settle.” Rather, “the public acts only by aligning itself as the partisan of someone in a position to act executively,” once he has given the matter at hand sober and disinterested thought. It is for this reason that “the public must be put in its place.” The bewildered herd, trampling and roaring, “has its function”: to be “the interested spectators of action,” not participants. Participation is the duty of “the responsible man.”

These ideas, described by Lippmann’s editors as a progressive “political philosophy for liberal democracy,” have an unmistakeable resemblance to the Leninist concept of a vanguard party that leads the masses to a better life that they cannot conceive or construct on their own. In fact, the transition from one position to the other, from Leninist enthusiasm to “celebration of America,” has proven quite an easy one over the years. This is not surprising, since the doctrines are similar at their root. The critical difference lies in an assessment of the prospects for power: through exploitation of mass popular struggle, or service to the current masters.

There is, clearly enough, an unspoken assumption behind the proposals of Lippmann and others: the specialized class are offered the opportunity to manage public affairs by virtue of their subordination to those with real power — in our societies, dominant business interests — a crucial fact that is ignored in the self-praise of the elect.

Lippmann’s thinking on these matters dates from shortly after World War I, when the liberal intellectual community was much impressed with its success in serving as “the faithful and helpful interpreters of what seems to be one of the greatest enterprises ever undertaken by an American president” ( New Republic ). The enterprise was Woodrow Wilson’s interpretation of his electoral mandate for “peace without victory” as the occasion for pursuing victory without peace, with the assistance of the liberal intellectuals, who later praised themselves for having “impose[d] their will upon a reluctant or indifferent majority,” with the aid of propaganda fabrications about Hun atrocities and other such devices. They were serving, often unwittingly, as instruments of the British Ministry of Information, which secretly defined its task as “to direct the thought of most of the world.”

Fifteen years later, the influential political scientist Harold Lasswell explained in the Encyclopaedia of the Social Sciences that when elites lack the requisite force to compel obedience, social managers must turn to “a whole new technique of control, largely through propaganda.” He added the conventional justification: we must recognize the “ignorance and stupidity [of] …the masses” and not succumb to “democratic dogmatisms about men being the best judges of their own interests.” They are not, and we must control them, for their own good. The same principle guides the business community. Others have developed similar ideas, and put them into practice in the ideological institutions: the schools, the universities, the popular media, the elite journals, and so on. A challenge to these ideas arouses trepidation, sometimes fury, as when students of the 1960s, instead of simply bowing to authority, began to ask too many questions and to explore beyond the bounds established for them. The pretense of manning the ramparts against the onslaught of the barbarians, now a popular pose, is scarcely more than comical fraud.

The doctrines of Lippmann, Lasswell, and others are entirely natural in any society in which power is narrowly concentrated but formal mechanisms exist by which ordinary people may, in theory, play some role in shaping their own affairs — a threat that plainly must be barred.

The techniques of manufacture of consent are most finely honed in the United States, a more advanced business-run society than its allies and one that is in important ways more free than elsewhere, so that the ignorant and stupid masses are more dangerous. But the same concerns arise in Europe, as in the past, heightened by the fact that the European varieties of state capitalism have not yet progressed as far as the United States in eliminating labor unions and other impediments to rule by men (and occasionally women) of best quality, thus restricting politics to factions of the business party. The basic problem, recognized throughout, is that as the state loses the capacity to control the population by force, privileged sectors must find other methods to ensure that the rascal multitude is removed from the public arena. And the insignificant nations must be subjected to the same practices as the insignificant people. Liberal doves hold that others should be free and independent, but not free to choose in ways that we regard as unwise or contrary to our interests, a close counterpart to the prevailing conception of democracy at home as a form of population control.

A properly functioning system of indoctrination has a variety of tasks, some rather delicate. One of its targets is the stupid and ignorant masses. They must be kept that way, diverted with emotionally potent oversimplifications, marginalized, and isolated. Ideally, each person should be alone in front of the TV screen watching sports, soap operas, or comedies, deprived of organizational structures that permit individuals lacking resources to discover what they think and believe in interaction with others, to formulate their own concerns and programs, and to act to realize them. They can then be permitted, even encouraged, to ratify the decisions of their betters in periodic elections. The rascal multitude are the proper targets of the mass media and a public education system geared to obedience and training in needed skills, including the skill of repeating patriotic slogans on timely occasions.

For submissiveness to become a reliable trait, it must be entrenched in every realm. The public are to be observers, not participants, consumers of ideology as well as products. Eduardo Galeano writes that “the majority must resign itself to the consumption of fantasy. Illusions of wealth are sold to the poor, illusions of freedom to the oppressed, dreams of victory to the defeated and of power to the weak.” Nothing less will do.

The problem of indoctrination is a bit different for those expected to take part in serious decision-making and control: the business, state, and cultural managers, and articulate sectors generally. They must internalize the values of the system and share the necessary illusions that permit it to function in the interests of concentrated power and privilege or at least be cynical enough to pretend that they do, an art that not many can master. But they must also have a certain grasp of the realities of the world, or they will be unable to perform their tasks effectively. The elite media and educational systems must steer a course through these dilemmas, not an easy task, one plagued by internal contradictions. It is intriguing to see how it is faced, but that is beyond the scope of these remarks.

For the home front, a variety of techniques of manufacture of consent are required, geared to the intended audience and its ranking on the scale of significance. For those at the lowest rank, and for the insignificant peoples abroad, another device is available, what a leading turn-of-the-century American sociologist, Franklin Henry Giddings, called “consent without consent”: “if in later years, [the colonized] see and admit that the disputed relation was for the highest interest, it may be reasonably held that authority has been imposed with the consent of the governed,” as when a parent disciplines an uncomprehending child. Giddings was referring to the “misguided creatures” that we were reluctantly slaughtering in the Philippines, for their own good. But the lesson holds more generally.

As noted, the Bolshevik overtones are apparent throughout. The systems have crucial differences, but also striking similarities. Lippmann’s “specialized class” and Bernays’ “intelligent minority,” which are to manage the public and their affairs according to liberal democratic theory, correspond to the Leninist vanguard of revolutionary intellectuals. The “manufacture of consent” advocated by Lippmann, Bernays, Niebuhr, Lasswell and others is the Agitprop of their Leninist counterparts. Following a script outlined by Bakunin over a century ago, the secular priesthood in both of the major systems of hierarchy and coercion regard the masses as stupid and incompetent, a bewildered herd who must be driven to a better world — one that we, the intelligent minority, will construct for them, either taking state power ourselves in the Leninist model, or serving the owners and managers of the state capitalist systems if it is impossible to exploit popular revolution to capture the commanding heights.

Much as Bakunin had predicted long before, the Leninist “Red bureaucracy” moved at once to dismantle organs of popular control, particularly, any institutional structures that might provide working people with some influence over their affairs as producers or citizens.

Not surprisingly, the immediate destruction of the incipient socialist tendencies that arose during the ferment of popular struggle in 1917 has been depicted by the world’s two great propaganda systems as a victory for socialism. For the Bolsheviks, the goal of the farce was to extract what advantage they could from the moral prestige of socialism; for the West, the purpose was to defame socialism and entrench the system of ownership and management control over all aspects of economic, political, and social life. The collapse of the Leninist system cannot properly be called a victory for socialism, any more than the collapse of Hitler and Mussolini could be described in these terms; but as in those earlier cases, it does eliminate a barrier to the realization of the libertarian socialist ideals of the popular movements that were crushed in Russia in 1917, Germany shortly after, Spain in 1936, and elsewhere, often with the Leninist vanguard leading the way in taming the rascal multitude with their libertarian socialist and radical democratic aspirations.

Hume posed his paradox for both despotic and more free societies. The latter case is by far the more important. As the social world becomes more free and diverse, the task of inducing submission becomes more complex and the problem of unraveling the mechanisms of indoctrination, more challenging. But intellectual interest aside, the case of free societies has greater significance for us, because here we are talking about ourselves and can act upon what we learn. It is for just this reason that the dominant culture will always seek to externalize human concerns, directing them to the inadequacies and abuses of others. When U.S. plans go awry in some corner of the Third World, we devote our attention to the defects and special problems of these cultures and their social disorders — not our own. Fame, fortune, and respect await those who reveal the crimes of official enemies: those who undertake the vastly more important task of raising a mirror to their own societies can expect quite different treatment. George Orwell is famous for Animal Farm and 1984, which focus on the official enemy. Had he addressed the more interesting and significant question of thought control in relatively free and democratic societies, it would not have been appreciated, and instead of wide acclaim, he would have faced silent dismissal or obloquy. Let us nevertheless turn to the more important and unacceptable questions.

Keeping to governments that are more free and popular, why do the governed submit when force is on their side? First, we have to look at a prior question: to what extent is force on the side of the governed? Here some care is necessary. Societies are considered free and democratic insofar as the power of the state to coerce is limited. The United States is unusual in this respect: Perhaps more than anywhere else in the world, the citizen is free from state coercion, at least, the citizen who is relatively privileged and of the right color, a substantial part of the population.

But it is a mere truism that the state represents only one segment of the nexus of power. Control over investment, production, commerce, finance, conditions of work, and other crucial aspects of social policy lies in private hands. Unwillingness to adapt to this structure of authority and domination carries costs, ranging from state force to the costs of privation and struggle; even an individual of independent mind can hardly fail to compare these to the benefits, however meager, that accrue to submission. Meaningful choices are thus narrowly limited. Similar factors limit the range of ideas and opinion in obvious ways. Articulate expression is shaped by the same private powers that control the economy. It is largely dominated by major corporations that sell audiences to advertisers and naturally reflect the interests of the owners and their market. The ability to articulate and communicate one’s views, concerns, and interests — or even to discover them — is thus narrowly constrained as well.

Denial of these truisms about effective power is at the heart of the structure of necessary illusion. Thus, a media critic, reviewing a book on the press in the New York Times, refers without argument to the “traditional Jeffersonian role” of the press “as counterbalance to government power.” The phrase encapsulates three crucial assumptions, one historical, one descriptive, one ideological. The historical claim is that Jefferson was a committed advocate of freedom of the press, which is false. The second is that the press in fact functions as a counterbalance to government rather than as a faithful servant, presented here as doctrine, thus evading any need to face the massive array of detailed documentation that refutes this dogma. The ideological principle is that Jeffersonian libertarianism (considered abstractly, apart from its realization in practice) would demand that the press be a counterbalance to government power. That is incorrect. The libertarian conception is that the press should be independent, hence a counterbalance to centralized power of any form. In Jefferson’s day, the powers that loomed large were the state, the church, and feudal structures. Shortly after, new forms of centralized power emerged in the world of corporate capitalism. A Jeffersonian would hold, then, that the press should be a counterbalance to state or corporate power, and critically to the state-corporate nexus. But to raise this point carries us into forbidden ground.

Apart from the general constraints on choice and articulate opinion inherent in the concentration of private power, it also set narrow limits on the actions of government. The United States has again been unusual in this respect among the industrial democracies, though convergence toward the U.S. pattern is evident elsewhere. The United States is near the limit in its safeguards for freedom from state coercion, and, also in the poverty of its political life. There is essentially one political party, the business party, with two factions. Shifting coalitions of investors account for a large part of political history. Unions, or other popular organizations that might offer a way for the general public to play some role in influencing programs and policy choices, scarcely function apart from the narrowest realm. The ideological system is bounded by the consensus of the privileged. Elections are largely a ritual form. In congressional elections, virtually all incumbents are returned to office, a reflection of the vacuity of the political system and the choices it offers. There is scarcely a pretense that substantive issues are at stake in the presidential campaigns. Articulated programs are hardly more than a device to garner votes, and candidates adjust their messages to their audiences as public relations tacticians advise. Political commentators ponder such questions as whether Reagan will remember his lines, or whether Mondale looks too gloomy, or whether Dukakis can duck the slime flung at him by George Bush’s speech writers. In the 1984 elections, the two political factions virtually exchanged traditional policies, the Republicans presenting themselves as the party of Keynesian growth and state intervention in the economy, the Democrats as the advocates of fiscal conservatism; few even noticed. Half the population does not bother to push the buttons, and those who take the trouble often consciously vote against their own interest.

The public is granted an opportunity to ratify decisions made elsewhere, in accord with the prescriptions of Lippmann and other democratic theorists. It may select among personalities put forth in a game of symbolic politics that only the most naive take very seriously. When they do, they are mocked by sophisticates. Criticism of President Bush’s call for “revenue enhancement” after having won the election by the firm and eloquent promise not to raise taxes is a “political cheap shot,” Harvard political scientist and media specialist Marty Linsky comments under the heading “Campaign pledges — made to be broken.” When Bush won the election by leading the public in the “read my lips — no new taxes” chant, he was merely expressing his “world view,” making “a statement of his hopes.” Those who thought he was promising no new taxes do not understand that “elections and governing are different ball games, played with different objectives and rules.” “The purpose of elections is to win,” Linsky correctly observes, expressing the cynicism of the sophisticated; and “the purpose of governing is to do the best for the country,” he adds, parroting the necessary illusions that respectability demands.

Even when issues arise in the political system, the concentration of effective power limits the threat. The question is largely academic in the United States because of the subordination of the political and ideological system to business interests, but in democracies to the south, where conflicting ideas and approaches reach the political arena, the situation is different. As is again familiar, government policies that private power finds unwelcome will lead to capital flight, disinvestment, and social decline until business confidence is restored with the abandonment of the threat to privilege; these facts of life exert a decisive influence on the political system (with military force in reserve if matters get out of hand, supported or applied by the North American enforcer). To put the basic point crassly, unless the rich and powerful are satisfied, everyone will suffer, because they control the basic social levers, determining what will be produced and consumed, and what crumbs will filter down to their subjects. For the homeless in the streets, then, the primary objective is to ensure that the rich live happily in their mansions. This crucial factor, along with simple control over resources, severely limits the force on the side of the governed and diminishes Hume’s paradox in a well-functioning capitalist democracy in which the general public is scattered and isolated.

Understanding of these basic conditions — tacit or explicit — has long served as a guide for policy. Once popular organizations are dispersed or crushed and decision-making power is firmly in the hands of owners and managers, democratic forms are quite acceptable, even preferable as a device of legitimation of elite rule in a business-run “democracy.” The pattern was followed by U.S. planners in reconstructing the industrial societies after World War II, and is standard in the Third World, though assuring stability of the desired kind is far more difficult there, except by state terror. Once a functioning social order is firmly established, an individual who must find a (relatively isolated) place within it in order to survive will tend to think its thoughts, adopt its assumptions about the inevitability of certain forms of authority, and in general, adapt to its ends. The costs of an alternative path or a challenge to power are high, the resources are lacking, and the prospects limited. These factors operate in slave and feudal societies — where their efficacy has duly impressed counterinsurgency theorists. In free societies, they manifest themselves in other ways. If their power to shape behavior begins to erode, other means must be sought to tame the rascal multitude.

When force is on the side of the masters, they may rely on relatively crude means of manufacture of consent and need not overly concern themselves with the minds of the herd. Nevertheless, even a violent terror state faces Hume’s problem. The modalities of state terrorism that the United States has devised for its clients have commonly included at least a gesture towards “winning hearts and minds,” though experts warn against undue sentimentality on this score, arguing that “all the dilemmas are practical and as neutral in an ethical sense as the laws of physics.” Nazi Germany shared these concerns, as Albert Speer discusses in his autobiography, and the same is true of Stalinist Russia. Discussing this case, Alexander Gerschenkron observes that “Whatever the strength of the army and the ubiquitousness of the secret police which such a government may have at its disposal, it would be naive to believe that those instruments of physical oppression can suffice. Such a government can maintain itself in power only if it succeeds in making people believe that it performs an important social function which could not be discharged in its absence. Industrialization provided such a function for the Soviet government…, [which] did what no government relying on the consent of the governed could have done… But, paradoxical as it may sound, these policies at the same time have secured some broad acquiescence on the part of the people. If all the forces of the population can be kept engaged in the processes of industrialization and if this industrialization can be justified by the promise of happiness and abundance for future generations and — much more importantly — by the menace of military aggression from beyond the borders, the dictatorial government will find its power broadly unchallenged.”

The thesis gains support from the rapid collapse of the Soviet system when its incapacity to move to a more advanced stage of industrial and technological development became evident.

The Pragmatic Criterion

It is important to be aware of the profound commitment of Western opinion to the repression of freedom and democracy, by violence if necessary. To understand our own cultural world, we must recognize that advocacy of terror is clear, explicit, and principled, across the political spectrum. It is superfluous to invoke the thoughts of Jeane Kirkpatrick, George Will, and the like. But little changes as we move to “the establishment left,” to borrow the term used by Foreign Policy editor Charles William Maynes in an ode to the American crusade “to spread the cause of democracy.”

Consider political commentator Michael Kinsley, who represents “the left” in mainstream commentary and television debate. When the State Department publicly confirmed U.S. support for terrorist attacks on agricultural cooperatives in Nicaragua, Kinsley wrote that we should not be too quick to condemn this official policy. Such international terrorist operations doubtless cause “vast civilian suffering,” he conceded. But if they succeed “to undermine morale and confidence in the government,” then they may be “perfectly legitimate.” The policy is “sensible” if “cost-benefit analysis” shows that “the amount of blood and misery that will be poured in” yields “democracy,” in the conventional sense already discussed.

As a spokesperson for the establishment left, Kinsley insists that terror must meet the pragmatic criterion; violence should not be employed for its own sake, merely because we find it amusing. This more humane conception would readily be accepted by Saddam Hussein, Abu Nidal, and the Hizbollah kidnappers, who, presumably, also consider terror pointless unless it is of value for their ends. These facts help us situate enlightened Western opinion on the international spectrum.

Such reasoned discussion of the justification for terror is not at all unusual, which is why it elicits no reaction in respectable circles just as there is no word of comment among its left-liberal contributors and readers when the New Republic, long considered the beacon of American liberalism, advocates military aid to “Latin-style fascists…regardless of how many are murdered” because “there are higher American priorities than Salvadoran human rights.”

Appreciation of the “salutary efficacy” of terror, to borrow John Quincy Adams’s phrase, has been a standard feature of enlightened Western thought. It provides the basic framework for the propaganda campaign concerning international terrorism in the 1980s. Naturally, terrorism directed against us and our friends is bitterly denounced as a reversion to barbarism. But far more extreme terrorism that we and our agents conduct is considered constructive, or at worst insignificant, if it meets the pragmatic criterion. Even the vast campaign of international terrorism launched against Cuba by the Kennedy administration, far exceeding anything attributed to official enemies, does not exist in respected academic discourse or the mainstream media. In his standard and much respected scholarly study of international terrorism, Walter Laqueur depicts Cuba as a sponsor of the crime with innuendos but scarcely a pretense of evidence, while the campaign of international terrorism against Cuba merits literally not a word; in fact, Cuba is classed among those societies “free from terror.”

The guiding principle is clear and straightforward: their terror is terror, and the flimsiest evidence suffices to denounce it and to exact retribution upon civilian bystanders who happen to be in the way; our terror, even if far more extreme, is merely statecraft, and therefore does not enter into the discussion of the plague of the modern age. The practice is understandable on the principles already discussed.

Huge massacres are treated by much the same criteria: theirs are crimes, ours statecraft or understandable error. In a study of U.S. power and ideology a decade ago, Edward Herman and I reviewed numerous examples of two kinds of atrocities, “benign and constructive bloodbaths” that are acceptable or even advantageous to dominant interests, and “nefarious blood-baths” perpetrated by official enemies. The reaction follows the same pattern as the treatment of terrorism. The former are ignored, denied, or sometimes even welcomed; the latter elicit great outrage and often large-scale deceit and fabrication, if the available evidence is felt to be inadequate for doctrinal requirements.

Such devices as mass starvation have always been considered entirely legitimate, if they meet the pragmatic criterion. As director of the humanitarian program providing food to starving Europeans after World War II, Herbert Hoover advised President Wilson that he was “maintaining a thin line of food” to guarantee the rule of anti-Bolshevik elements. In response to rumors of “a serious outbreak on May Day” in Austria, Hoover issued a public warning that any such action would jeopardize the city’s sparse food supply. Food was withheld from Hungary under the Communist Bela Kun government, with a promise that it would be supplied if he were removed in favor of a government acceptable to the U.S. The economic blockade, along with Rumanian military pressure, forced Kun to relinquish power and flee to Moscow. Backed by French and British forces, the Rumanian military joined with Hungarian counter-revolutionaries to administer a dose of White terror and install a right-wing dictatorship under Admiral Horthy, who collaborated with Hitler in the next stage of slaying the Bolshevik beast. The threat of starvation was also used to buy the critical Italian elections of 1948 and to help impose the rule of U.S. clients in Nicaragua in l990, among other noteworthy examples.

A review of the debate over Central America during the past decade reveals the decisive role of the pragmatic criterion. Guatemala was never an issue, because mass slaughter and repression appeared to be effective. Early on, the Church was something of a problem, but, as Kenneth Freed comments in the Los Angeles Times, when “14 priests and hundreds of church workers were killed in a military campaign to destroy church support for social gains such as higher wages and an end to the exploitation of Indians,” the church was intimidated and “virtually fell silent.” “The physical intimidation ceased,” the pragmatic criterion having been satisfied. Terror increased again as the U.S. nurtured what it likes to call “democracy.” “The victims,” a European diplomat observes, “are almost always people whose views or activities are aimed at helping others to free themselves of restraints placed by those who hold political or economic power,” such as “a doctor who tries to improve the health of babies” and is therefore “seen as attacking the established order.” The security forces of the “fledgling democracy,” and the death squads associated with them, appeared to have the situation reasonably well in hand, so there was no reason for undue concern in the United States, and there has been virtually none.

Throughout this grim decade of savagery and oppression, liberal humanists have presented themselves as critical of the terror states maintained by U.S. violence in Central America. But that is only a facade, as we see from the demand, virtually unanimous in respectable circles, that Nicaragua must be restored to “the Central American mode” of the death squad regimes, and that the U.S. and its murderous clients must impose the “regional standards” of El Salvador and Guatemala on the errant Sandinistas.

Returning to Hume’s principles of government, it is clear that they must be refined. True, when force is lacking and the standard penalties do not suffice, it is necessary to resort to the manufacture of consent. The populations of the Western democracies — or at least, those in a position to defend themselves — are off limits. Others are legitimate objects of repression, and in the Third World, large-scale terror is appropriate, though the liberal conscience adds the qualification that it must be efficacious. The statesman, as distinct from the ideological fanatic, will understand that the means of violence should be employed in a measured and considered way, just sufficient to achieve the desired ends.

The Range of Means

The pragmatic criterion dictates that violence is in order only when the rascal multitude cannot be controlled in other ways. Often, there are other ways. Another RAND corporation counterinsurgency specialist was impressed by “the relative docility of poorer peasants and the firm authority of landlords in the more `feudal’ areas… [where] the landlord can exercise considerable influence over his tenant’s behavior and readily discourage conduct inconsistent with his own interests.” It is only when the docility is shaken, perhaps by meddlesome priests, that firmer measures are required.

One option short of outright violence is legal repression. In Costa Rica, the United States was willing to tolerate social democracy. The primary reason for the benign neglect was that labor was suppressed and the rights of investors offered every protection. The founder of Costa Rican democracy, Jose Figueres, was an avid partisan of U.S. corporations and the CIA, and was regarded by the State Department as “the best advertising agency that the United Fruit Company could find in Latin America.” But the leading figure of Central American democracy fell out of favor in the 1980s, and had to be censored completely out of the Free Press, because of his critical attitude towards the U.S. war against Nicaragua and Washington’s moves to restore Costa Rica as well to the preferred “Central American mode.” Even the effusive editorial and lengthy obituary in the New York Times lauding this “fighter for democracy” when he died in June 1990 were careful to avoid these inconvenient deviations.

In earlier years, when he was better behaved, Figueres recognized that the Costa Rican Communist Party, particularly strong among plantation workers, was posing an unacceptable challenge. He therefore arrested its leaders, declared the party illegal, and repressed its members. The policy was maintained through the 1960s, while efforts to establish any working class party were banned by the state authorities. Figueres explained these actions with candor: it was “a sign of weakness. I admit it, when one is relatively weak before the force of the enemy, it is necessary to have the valor to recognise it.” These moves were accepted in the West as consistent with the liberal concept of democracy, and indeed, were virtually a precondition for U.S. toleration of “the Costa Rican exception.”

Sometimes, however, legal repression is not enough; the popular enemy is too powerful. The alarm bells are sure to ring if they threaten the control of the political system by the business-landowner elite and military elements properly respectful of U.S. interests. Signs of such deviation call for stronger measures, as in Central America through the past decade. The broader framework was sketched by Father Ignacio Martin-Baro, one of the Jesuit priests assassinated in November 1989 and a noted Salvadoran social psychologist, in a talk he delivered in California on “The Psychological Consequences of Political Terrorism,” a few months before he was murdered. He stressed several relevant points. First, the most significant form of terrorism, by a large measure, is state terrorism, that is, “terrorizing the whole population through systematic actions carried out by the forces of the state.” Second, such terrorism is an essential part of a “government-imposed socio-political project” designed for the needs of the privileged. To implement it, the whole population must be “terrorized by an internalized fear.” Third, the sociopolitical project and the state terrorism that helps implement it are not specific to El Salvador, but are common features of the Third World domains of the United States. The reasons are deeply rooted in Western culture, institutions, and policy planning, and fully in accord with the values of enlightened opinion. But terror is constrained by the pragmatic criterion. Thus, Martin-Baro observes, the “massive campaign of political terrorism” in El Salvador declined when “there was less need for extraordinary events, because people were so terrorized, paralyzed.”

In a paper on mass media and public opinion in El Salvador which he was to deliver at an International Congress in December 1989, the month after he was assassinated, Martin-Baro wrote that the U.S. counterinsurgency project “emphasized merely the formal dimensions of democracy,” and that the mass media must be understood as a mechanism of “psychological warfare.” The small independent journals in El Salvador, mainstream and pro-business but still too undisciplined for the rulers, had been taken care of by the security forces a decade earlier in the usual efficacious manner — kidnapping, assassination, and physical destruction, events considered here too insignificant even to report. As for public opinion, Martin-Baro’s unread paper reports a study showing that among workers, the lower-middle class, and the poor, less than 20 percent feel free to express their opinions in public, a figure that rose to 40 percent for the rich — another tribute to the salutary efficacy of terror, and another result that “all Americans can be proud of,” to borrow George Schultz’s words of self-praise for our achievements in El Salvador.

When Antonio Gramsci was imprisoned after the Fascist takeover of Italy, the government summed up its case by saying: “We must stop this brain from functioning for twenty years.” Our current favorites leave less to chance: the brains must be stopped from functioning forever, and we agree that their thoughts about such matters as state terrorism had best not be heard.

The results of U.S. military training are evident in abundance in the documentation by human rights groups and the Salvadoran Church. They are graphically described by Rev. Daniel Santiago, a Catholic priest working in El Salvador, in the Jesuit journal America. He reports the story of a peasant woman, who returned home one day to find her mother, sister, and three children sitting around a table, the decapitated head of each person placed carefully on the table in front of the body, the hands arranged on top “as if each body was stroking its own head.” The assassins, from the Salvadoran National Guard, had found it hard to keep the head of an 18-month-old baby in place, so they nailed the hands onto it. A large plastic bowl filled with blood was tastefully displayed in the center of the table.

Rev. Santiago writes that macabre scenes of the kind he recounts are designed by the armed forces for the purpose of intimidation. “People are not just killed by death squads in El Salvador — they are decapitated and then their heads are placed on pikes and used to dot the landscape. Men are not just disemboweled by the Salvadoran Treasury Police; their severed genitalia are stuffed into their mouths. Salvadoran women are not just raped by the National Guard; their wombs are cut from their bodies and used to cover their faces. It is not enough to kill children; they are dragged over barbed wire until the flesh falls from their bones while parents are forced to watch.” “The aesthetics of terror in El Salvador is religious.” The intention is to ensure that the individual is totally subordinated to the interests of the Fatherland, which is why the death squads are sometimes called the “Army of National Salvation” by the governing ARENA party, whose members (including President Cristiani) take a blood oath to the “leader-for-life,” Roberto d’Aubuisson.

It has been a constant lament of U.S. government officials that the Latin American countries are insufficiently repressive, too open, too committed to civil liberties, unwilling to impose sufficient constraints on travel and dissemination of information, and in general reluctant to adhere to U.S. social and political standards, thus tolerating conditions in which dissidence can flourish and can reach a popular audience.

At home, even tiny groups may be subject to severe repression if their potential outreach is perceived to be too great. During the campaign waged by the national political police against The Black Panthers — including assassination, instigation of ghetto riots, and a variety of other means — the FBI estimated the “hard core members” of the targeted organization at only 800, but added ominously that “a recent poll indicates that approximately 25 per cent of the black population has a great respect for the [Black Panther Party], including 43 per cent of blacks under 21 years of age.” The repressive agencies of the state proceeded with a campaign of violence and disruption to ensure that the Panthers did not succeed in organizing as a substantial social or political force — with great success, as the organization was decimated and the remnants proceeded to self-destruct. FBI operations in the same years targeting the entire New Left were motivated by similar concerns. The same internal intelligence document warns that “the movement of rebellious youth known as the `New Left,’ involving and influencing a substantial number of college students, is having a serious impact on contemporary society with a potential for serious domestic strife.” The New Left has “revolutionary aims” and an “identification with Marxism-Leninism.” It has attempted “to infiltrate and radicalize labor,” and after failing “to subvert and control the mass media,” has established “a large network of underground publications which serve the dual purpose of an internal communication network and an external propaganda organ.” It thus poses a threat to “the civilian sector of our society,” which must be contained by the state security apparatus.

We can learn a good deal by attention to the range of choices. Keeping just to Latin America, consider the efforts to eliminate the Allende regime in Chile. There were two parallel operations. Track II, the hard line, aimed at a military coup. This was concealed from Ambassador Edward Korry, a Kennedy liberal, whose task was to implement Track I, the soft line; in Korry’s words, to “do all within our power to condemn Chile and the Chileans to utmost deprivation and poverty, a policy designed for a long time to come to accelerate the hard features of a Communist society in Chile.” The soft line was an extension of the long-term CIA effort to control Chilean democracy. One indication of its level is that in the 1964 election, the CIA spent twice as much per Chilean voter to block Allende as the total spent per voter by both parties in the U.S. elections of the same year. Similarly in the case of Cuba, the Eisenhower administration planned a direct attack while Vice-President Nixon, keeping to the soft line in a secret discussion of June 1960, expressed his concern that according to a CIA briefing, “Cuba’s economic situation had not deteriorated significantly since the overthrow of Batista,” then urging specific measures to place “greater economic pressure on Cuba.”

To take another informative case, in 1949 the CIA identified “two areas of instability” in Latin America: Bolivia and Guatemala. The Eisenhower administration pursued the hard line to overthrow capitalist democracy in Guatemala but chose the soft line with regard to a Bolivian revolution that had the support of the Communist Party and radical tin miners, had led to expropriation, and had even moved towards “criminal agitation of the Indians of the farms and mines” and a pro-peace conference, a right-wing Archbishop warned. The White House concluded that the best plan was to support the least radical elements, expecting that U.S. pressures, including domination of the tin market, would serve to control unwanted developments. Secretary of State John Foster Dulles urged that this would be the best way to contain the “Communist infection in South America.” Following standard policy guidelines, the U.S. took control over the Bolivian military, equipping it with modern armaments and sending hundreds of officers to the “school of coups” in Panama and elsewhere. Bolivia was soon subject to U.S. influence and control. By 1953, the National Security Council noted improvement in “the climate for private investment,” including “an agreement permitting a private American firm to exploit two petroleum areas.”

A military coup took place in 1964. A 1980 coup was carried out with the assistance of Klaus Barbie, who had been sent to Bolivia when he could no longer be protected in France, where he had been working under U.S. control to repress the anti-fascist resistance, as he had done under the Nazis. According to a recent UNICEF study, one out of three Bolivian infants dies in the first year of life, so that Bolivia has the slowest rate of population growth in Latin America along with the highest birth rate. The FAO estimates that the average Bolivian consumes 78 percent of daily minimum calorie and protein requirements and that more than half of Bolivian children suffer from malnutrition. Of the economically active population, 25 percent are unemployed and another 40 percent work in the “informal sector” (e.g., smuggling and drugs). The situation in Guatemala we have already reviewed.

Several points merit attention. First, the consequences of the hard line in Guatemala and the soft line in Bolivia were similar. Second, both policy decisions were successful in their major aim: containing the “Communist virus,” the threat of “ultranationalism.” Third, both policies are evidently regarded as quite proper, as we can see in the case of Bolivia by the complete lack of interest in what has happened since (apart from possible costs to the U.S. through the drug racket); and with regard to Guatemala, by the successful intervention under Kennedy to block a democratic election, the direct U.S. participation in murderous counterinsurgency campaigns under Lyndon Johnson, the continuing supply of arms to Guatemala through the late 1970s (contrary to illusory claims) and the reliance on our Israeli mercenary state to fill any gaps when congressional restrictions finally took effect, the enthusiastic U.S. support for atrocities that go well beyond even the astonishing Guatemalan norm in the 1980s, and the applause for the “fledgling democracy” that the ruling military now tolerates as a means to extort money from Congress. We may say that these are “messy episodes” and “blundering” (which in fact succeeded in its major aims), but nothing more (Stephen Kinzer). Fourth, the soft line and the hard line were adopted by the same people, at the same time, revealing that the issues are tactical, involving no departure from shared principle. All of this provides insight into the nature of policy, and the political culture in which it is formed.

The Untamed Rabble

Hume’s paradox of government arises only if we suppose that a crucial element of essential human nature is what Bakunin called “an instinct for freedom.” It is the failure to act upon this instinct that Hume found surprising. The same failure inspired Rousseau’s classic lament that people are born free but are everywhere in chains, seduced by the illusions of the civil society that is created by the rich to guarantee their plunder. Some may adopt this assumption as one of the “natural beliefs” that guide their conduct and their thought. There have been efforts to ground the instinct for freedom in a substantive theory of human nature. They are not without interest, but they surely come nowhere near establishing the case. Like other tenets of common sense, this belief remains a regulative principle that we adopt, or reject, on faith. Which choice we make can have large-scale effects for ourselves and others.

Those who adopt the common sense principle that freedom is our natural right and essential need will agree with Bertrand Russell that anarchism is “the ultimate ideal to which society should approximate.” Structures of hierarchy and domination are fundamentally illegitimate. They can be defended only on grounds of contingent need, an argument that rarely stands up to analysis. As Russell went on to observe 70 years ago, “the old bonds of authority” have little intrinsic merit. Reasons are needed for people to abandon their rights, “and the reasons offered are counterfeit reasons, convincing only to those who have a selfish interest in being convinced.” “The condition of revolt,” he went on, “exists in women towards men, in oppressed nations towards their oppressors, and above all in labour towards capital. It is a state full of danger, as all past history shows, yet also full of hope.”

Russell traced the habit of submission in part to coercive educational practices. His views are reminiscent of 17th and 18th century thinkers who held that the mind is not to be filled with knowledge “from without, like a vessel,” but “to be kindled and awaked.” “The growth of knowledge [resembles] the growth of Fruit; however external causes may in some degree cooperate, it is the internal vigour, and virtue of the tree, that must ripen the juices to their just maturity.” Similar conceptions underlie Enlightenment thought on political and intellectual freedom, and on alienated labor, which turns the worker into an instrument for other ends instead of a human being fulfilling inner needs — a fundamental principle of classical liberal thought, though long forgotten, because of its revolutionary implications. These ideas and values retain their power and their pertinence, though they are very remote from realization, anywhere. As long as this is so, the libertarian revolutions of the 18th century remain far from consummated, a vision for the future.

One might take this natural belief to be confirmed by the fact that despite all efforts to contain them, the rabble continue to fight for their fundamental human rights. And over time, some libertarian ideals have been partially realized or have even become common coin. Many of the outrageous ideas of the 17th century radical democrats, for example, seem tame enough today, though other early insights remain beyond our current moral and intellectual reach.

The struggle for freedom of speech is an interesting case, and a crucial one, since it lies at the heart of a whole array of freedoms and rights. A central question of the modern era is when, if ever, the state may act to interdict the content of communications. As noted earlier, even those regarded as leading libertarians have adopted restrictive and qualified views on this matter. One critical element is seditious libel, the idea that the state can be criminally assaulted by speech, “the hallmark of closed societies throughout the world,” legal historian Harry Kalven observes. A society that tolerates laws against seditious libel is not free, whatever its other virtues. In late 17th century England, men were castrated, disemboweled, quartered, and beheaded for the crime. Through the 18th century, there was a general consensus that established authority could be maintained only by silencing subversive discussion, and “any threat, whether real or imagined, to the good reputation of the government” must be barred by force (Leonard Levy). “Private men are not judges of their superiors… [for] This wou’d confound all government,” one editor wrote. Truth was no defense: true charges are even more criminal than false ones, because they tend even more to bring authority into disrepute.

Treatment of dissident opinion, incidentally, follows a similar model in our more libertarian era. False and ridiculous charges are no real problem: it is the unconscionable critics who reveal unwanted truths from whom society must be protected.

The doctrine of seditious libel was also upheld in the American colonies. The intolerance of dissent during the revolutionary period is notorious. The leading American libertarian, Thomas Jefferson, agreed that punishment was proper for “a traitor in thought, but not in deed,” and authorized internment of political suspects. He and the other Founders agreed that “traitorous or disrespectful words” against the authority of the national state or any of its component states was criminal. “During the Revolution,” Leonard Levy observes, “Jefferson, like Washington, the Adamses, and Paine, believed that there could be no toleration for serious differences of political opinion on the issue of independence, no acceptable alternative to complete submission to the patriot cause. Everywhere there was unlimited liberty to praise it, none to criticize it.” At the outset of the Revolution, the Continental Congress urged the states to enact legislation to prevent the people from being “deceived and drawn into erroneous opinion.” It was not until the Jeffersonians were themselves subjected to repressive measures in the late 1790s that they developed a body of more libertarian thought for self-protection — reversing course, however, when they gained power themselves.

Until World War I, there was only a slender basis for freedom of speech in the United States, and it was not until 1964 that the law of seditious libel was struck down by the Supreme Court. In 1969, the Court finally protected speech apart from “incitement to imminent lawless action.” Two centuries after the revolution, the Court at last adopted the position that had been advocated in 1776 by Jeremy Bentham, who argued that a free government must permit “malcontents” to “communicate their sentiments, concert their plans, and practice every mode of opposition short of actual revolt, before the executive power can be legally justified in disturbing them.” The 1969 Supreme Court decision formulated a libertarian standard which, I believe, is unique in the world. In Canada, for example, people are still imprisoned for promulgating “false news,” recognized as a crime in 1275 to protect the King.

In Europe, the situation is still more primitive. France is a striking case, because of the dramatic contrast between the self-congratulatory rhetoric and repressive practice so common as to pass unnoticed. England has only limited protection for freedom of speech, and even tolerates such a disgrace as a law of blasphemy. The reaction to the Salman Rushdie affair, most dramatically on the part of self-styled “conservatives,” was particularly noteworthy. Rushdie was charged with seditious libel and blasphemy in the courts, but the High Court ruled that the law of blasphemy extended only to Christianity, not Islam, and that only verbal attack “against Her Majesty or Her Majesty’s Government or some other institution of the state” counts as seditious libel. Thus the Court upheld a fundamental doctrine of the Ayatollah Khomeini, Stalin, Goebbels, and other opponents of freedom, while recognizing that English law protects only domestic power from criticism. Doubtless many would agree with Conor Cruise O’Brien, who, when Minister for Posts and Telegraphs in Ireland, amended the Broadcasting Authority Act to permit the Authority to refuse to broadcast any matter that, in the judgment of the minister, “would tend to undermine the authority of the state.”

We should also bear in mind that the right to freedom of speech in the United States was not established by the First Amendment to the Constitution, but only through dedicated efforts over a long period by the labor movement, the civil rights and anti-war movements of the 1960s, and other popular forces. James Madison pointed out that a “parchment barrier” will never suffice to prevent tyranny. Rights are not established by words, but won and sustained by struggle.

It is also worth recalling that victories for freedom of speech are often won in defense of the most depraved and horrendous views. The 1969 Supreme Court decision was in defense of the Ku Klux Klan from prosecution after a meeting with hooded figures, guns, and a burning cross, calling for “burning the nigger” and “sending the Jews back to Israel.” With regard to freedom of expression there are basically two positions: you defend it vigorously for views you hate, or you reject it in favor of Stalinist/Fascist standards.

Whether the instinct for freedom is real or not, we do not know. If it is, history teaches that it can be dulled, but has yet to be killed. The courage and dedication of people struggling for freedom, their willingness to confront extreme state terror and violence, is often remarkable. There has been a slow growth of consciousness over many years and goals have been achieved that were considered utopian or scarcely contemplated in earlier eras. An inveterate optimist can point to this record and express the hope that with a new decade, and soon a new century, humanity may be able to overcome some of its social maladies; others might draw a different lesson from recent history. It is hard to see rational grounds for affirming one or the other perspective. As in the case of many of the natural beliefs that guide our lives, we can do no better than to choose according to our intuition and hopes.

The consequences of such a choice are not obscure. By denying the instinct for freedom, we will only prove that humans are a lethal mutation, an evolutionary dead end: by nurturing it, if it is real, we may find ways to deal with dreadful human tragedies and problems that are awesome in scale.

Learn how to distinguish truth from illusion that so often force investors

Man is troubled not by events, but by the meaning he gives them. . What, then, is to be done? To make the best of what is in our power, and take the rest as it naturally happens. ‒Epictetus Discourses 1.1.17

What mindset underlies successful investment? How does an investor worthy of the name respond to sudden and sharp falls, as well as extended contractions, of individual stocks’ prices and overall markets’ levels? I ask these questions in order to make a vital point: investment – and particularly successful investment – is primarily a matter of character and only secondarily of cleverness. In his Preface to The Intelligent Investor, Warren Buffett wrote:

To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework. This book precisely and clearly prescribes the proper framework. You must supply the emotional discipline.

Benjamin Graham elaborated this point: an investor’s results presuppose a particular temperament. Graham recalled William Shakespeare’s Julius Caesar:

The investor’s chief problem – and even his worst enemy – is likely to be himself. (“The fault, dear investor, is not in our stars – and not in our stocks – but in ourselves” …) [Hence] by arguments, examples and exhortation … we hope to aid our readers to establish the proper mental and emotional attitudes toward their investment decisions. We have seen much more money made and kept by “ordinary people” who were temperamentally well suited for the investment process than by those who lacked this quality, even though they lacked an extensive knowledge of finance, accounting, and stock-market lore (The Intelligent Investor, p. 8; see also pp. 120-121).

In an interview with Hartman Butler in the early 1970s (“An Hour with Mr Graham,” reprinted in Janet Lowe, The Rediscovered Benjamin Graham: Selected Writings of the Wall Street Legend, John Wiley & Sons, 1999), Graham added:

The main point is to have the right general principles and the character to stick to them. … There are two requirements for success in Wall Street. One, you have to think correctly; and secondly, you have to think independently.(1)

Perhaps because neither The Intelligent Investor nor Security Analysis (1934 and subsequent editions) used the term, and these days few people would properly understand it if they had, investors don’t recognise how much Stoicism influenced Graham. This ancient philosophy mitigates the influence of passion upon thought and action. (As we’ll see, Stoics’ definition of “passion,” among other things, differs greatly from the contemporary one.) Stoicism encourages the self-control that reasonable decisions – as well as responses to unexpected developments such as panics, crises and bear markets – presuppose. By embracing reason and reducing emotion’s scope to overwhelm it, a Stoical approach increases the likelihood (assuming that the investor also adopts Graham’s and Buffett’s framework) that over time the investor will think and act sensibly. “Individuals who cannot master their emotions,” goes one insight commonly attributed to Graham, “are ill-suited to profit from the investment process.” In investment as well as theology, Gnosticism is nonsense. In other words, there simply is no secret; nor is there an easy path or shortcut. Discounting and ignoring others’ opinions (unless you’ve carefully assessed them and no matter the confidence with which prominent and influential people express them), conducting your own analyses and drawing your own conclusions – these habits of mind underpin both Stoic temperament and Graham’s conception of sensible investing.

Stoicism has spiritual underpinnings: indeed, it and atheism are incompatible. Some of its foundations are in some respects similar to Christianity’s (and, for that matter, Islam’s and Judaism’s). Hence Christianity and Stoicism overlap in some significant respects.(2) Accordingly, throughout the centuries influential Christians ranging from St Ambrose to St Thomas Aquinas to Pope John Paul II have praised Stoic writings such as the Meditations of Marcus Aurelius. Be they Christians (or Jews, Hindus, Muslims, etc.) or even agnostics, an appreciation of Stoicism can greatly benefit investors – indeed, all people in many aspects of their everyday lives. Stoics understood that if negative emotions such as anger, envy, greed, fear and grief plague your life, then soundness and peace of mind will elude you. Serenity in the midst of adversity – which is hardly the same thing as the modern, Western and secular notion of “happiness” – is a necessary condition of a well-lived life. Hence many of us should consider Stoics’ practical techniques to reconsider negative thoughts and abate disruptive emotions.

Stoics don’t attempt – as extreme Calvinists once did and “positive thinkers” now do – somehow to block or extinguish certain thoughts and emotions. Stoics recognise that damaging thoughts and upsetting emotions reflect our flawed human nature: hence they affect all people (albeit some more than others). Stoics show us how to reconsider our hostile reactions to certain events. In their view, harmful emotions (including fear of bear markets and recessions, the panic that occurs during financial crises, etc.) stem from illogical thinking. Once you understand that these emotions are unfounded, you’ll cease to think so unfavorably about the events that prompt them – and these happenings will less frequently and deeply disturb your equanimity.

Unlike today’s “positive thinkers,” Stoics don’t reject negative thoughts. Indeed, the modern stereotype of Stoicism is diametrically incorrect: Stoics DON’T try to suppress particular emotions. Instead, through dispassionate analysis they reassess from negative to neutral, neutral to positive – and sometimes negative to positive – their reactions to events. In his Meditations, Marcus Aurelius counseled: “Remember too on every occasion which leads thee to vexation to apply this principle: not that this is a misfortune, but that to bear it nobly is good fortune.” In one of The Intelligent Investor’s numerous Stoic passages, Graham advised (p. 203):

The true investor … is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits [him], and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines … is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if … stocks had no market quotation after all, for he would then be spared the mental anguish caused him by other persons’ mistakes of judgment [second set of italics in the original].(3)

And on p. 206 he added:

The investor with a portfolio of sound stocks should expect their prices to fluctuate and should neither be concerned by sizeable declines nor become excited by sizeable advances.

Investors or not, Stoics don’t suddenly force themselves to erect a serene countenance; instead, they gradually and voluntarily disassemble the artificial (unsettled) temperament that usually surrounds and otherwise obscures our natural (calm) one. Precisely because Stoics think negatively – that is, they regularly and rationally ponder the myriad “bad” things that at one time or another inevitably happen to us – they become cheerful, peaceful and thankful. They aren’t killjoys: they appreciate and even relish the many good things – the best of which are non-material – that life offers. Yet they don’t regard leisure, luxury, wealth, etc., as good things per se; hence they neither crave (if they don’t have them) nor cling to these things (if they do), and they certainly don’t let material pleasures enslave them.

What Is Stoicism?

These days, “stoical” means indifferent to “bad” emotions (such as anger, envy or guilt) or events (like the death of a spouse) as well as “good” actions (such as generosity, forgiveness or repentance) or occurrences (such as the birth of a child). The stoic allegedly represses all feelings. This modern usage, to which I’ll refer with a lower-case “s,” first – and not coincidentally – appeared in the late-16 th century. The term’s ancient usage (which I’ll denote with an upper-case “S”) is quite different. Stoicism is a school of Hellenistic philosophy. Although its pedigree is Greek, we must necessarily view it through Roman lenses.(4) Zeno of Citium (now Larnaka) in Cyprus founded Stoicism. In Athens in the third century BC, Zeno taught philosophy at the Stoa Poikile (“painted colonnade” or “painted porch,” from which the school’s name derives). Three propositions encapsulate the ethics of Stoicism: first, errors of judgment produce destructive emotions; second, a sage (i.e., person of “moral and intellectual perfection”) neither commits such errors nor suffers such adverse consequences; third, and accordingly, everybody can and should adopt the sage as his model.

Stoicism is not merely an abstract system of idle speculation: it’s also a practical guide to productive action. In particular, Stoics such as Seneca(5) and Epictetus(6) emphasised that because “virtue is sufficient for happiness” and “virtue is nothing else than right reason,” misfortune does not affect the sage. From the start, Stoicism was popular in Athens; later, it spread across ancient Greece; and eventually it became the foremost philosophy of the educated йlite throughout the Hellenistic world and Roman Empire. Marcus Aurelius (121-180, Emperor 161-180)(7) was perhaps its most influential and certainly its most prominent adherent.

Tenets of Stoicism

Stoicism provides a three-part and unified account of the world. Formal logic, non-dualistic physics and naturalistic ethics(8) comprise this account; of these, and particularly among later (i.e., Roman) Stoics, ethics is its focus. Stoics devised various metaphors to clarify the interrelationships among the three pillars of their philosophy. They drew an analogy, for example, between their philosophy and a fertile field: “logic being the encircling fence, ethics the crop, physics the soil” (see A.A. Long, Epictetus: A Stoic and Socratic Guide to Life, Clarendon Press, 2002, p. 20). As this metaphor implies, ethics plays a central and practical role: for why tend the soil, erect a fence and sow seeds unless they produce a crop?

Following Socrates, Stoics contend that an individual’s misery stems from his vices; his corruptions, in turn, derive either from his ignorance or defiance of reason, nature and God.(9) “Begin each day,” Marcus famously advised in his Discourses, “by telling yourself: ‘today I shall be meeting with interference, ingratitude, insolence, disloyalty, ill-will, and selfishness – all of them due to the offenders’ ignorance of what is good or evil.’” Stoicism teaches that virtues can surmount vices and that reason can master ignorance; specifically, it lauds reason and fortitude as means to overcome destructive actions (such as theft and violence) and the emotions (such as fear and greed) that underlie them. The four cardinal virtues of Stoicism, which reflect the teachings of Plato, are wisdom (Sophia), courage (Andreia), justice (Dikaiosyne) and temperance (Sophrosyne).

How to develop these virtues? The key is the recognition that virtues do – and vices don’t – conform to the natural (that is, divinely-created) order of things. “Virtue consists in a will that is in agreement with Nature,” said Bertrand Russell in his analysis of Stoicism (A History of Western Philosophy, George Allen & Unwin, 1960, p. 254); accordingly, to improve one’s ethical well-being is to conform one’s thinking and behaviour more closely to reason, nature and God (Stoics, in diametric contrast to atheists such as Russell, regard these three things as real and virtually synonymous).(10) This principle also applies to personal relationships. Not only do Stoics desire to liberate themselves from anger, envy and jealousy: they also seek release from feelings of inferiority and superiority vis-а-vis other people. Hence they accept all men – including slaves – as “equals of other men, because all men alike are products of Nature.”(11) In his Lectures, Musonius Rufus added that both men and women “have received from the gods the same reasoning power.”

By harnessing mankind’s innate – that is, God-given – capacity to reason, the individual can acquire knowledge. In principle, a man can distinguish empirical truth and logical validity from falsehood and fallacy – even if in practice he can only approximately delineate the boundary between truth and falsehood, and draw provisional conclusions about whether a given statement belongs on this or that side of the boundary. In a risky (or, depending upon your assumptions, uncertain) world, even the Stoic sage must therefore plot his course humbly.(12) That’s doubly so for the rest of us: we must constantly strive to detect and gradually weaken our many faulty premises, pretentions, etc. “It’s not what a man don’t know that makes him a fool,” wisely noted “Josh Billings,” the pen name of American humorist Henry Wheeler Shaw (1818-1885), “but what he does ‘know’ that ain’t so.”(13) If you reason validly from true assumptions, say Stoics, then you can understand – perhaps “glimpse incompletely” expresses their position more accurately – logos. And if you comprehend and practice reason and appreciate truth then, if you put your mind to it, you can become more virtuous.

Straight thinking, in other words, is a necessary condition of virtue. Cleanthes(14) contended that the wicked man, who succumbs to destructive emotions, is “like a dog tied to a cart, and compelled to go wherever it goes.” The problem, noted Diogenes of Sinope, is that “bad men obey their lusts as servants obey their masters.” Because they fail to control (or even abate) their desires, their lusts control them. The wicked man acknowledges that in important respects his body must conform to the natural order; he readily agrees, for example, that he cannot violate the law of gravitation, that he is mortal, etc. Yet he emphatically denies that his actions must submit to some external ethical standard; instead, he asserts, he can devise his own morals. And in one sense he’s right: he possesses free will. But from this truth the evil man invalidly infers that he can successfully resist logos; accordingly, he invariably struggles unsuccessfully against it.

In contrast, the Stoic surrenders his mind and body to nature, reason and God. “From Apollonius,” recounted Marcus Aurelius in his Meditations, “I learnt freedom of will and undeviating steadiness of purpose; and to look to nothing else, not even for a moment, except to reason.” As a result, and in the words of Epictetus (and echoing St Paul and in diametric contrast to the modern stereotype), the Stoic is “[physically] sick and yet [temperamentally] joyful, in peril and yet joyful, dying and yet joyful, in exile and joyful, in disgrace and joyful.” Epictetus posited that the individual’s will was – or could be – “completely autonomous,” and also that the universe is “a rigidly deterministic single whole.” In other words, you certainly can choose to think and act contrary to reason; but if so you’ll not lead a virtuous life – and consequently will be miserable.

Stoics thus promote a life of harmony with one’s true self, whom the individual can to some extent know, because such a life is in harmony with logos over which one exerts no control. As Marcus Aurelius put it,

If you work at that which is before you, following right reason seriously, vigorously, calmly, without allowing anything else to distract you, but keeping your divine part pure, as if you were bound to give it back immediately; if you hold to this, expecting nothing, but satisfied to live now according to nature, speaking heroic truth in every word that you utter, you will live [content]. And there is no man able to prevent this.

Benjamin Graham agreed. “Have the courage of your knowledge and experience,” he urged in The Intelligent Investor:

If you have formed a conclusion from the facts and you know your [reasoning] is sound, act on it – even though others may hesitate or differ. (You are neither night nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.) Similarly, in the world of [investment], courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand.

The Vocabulary of Stoic Ethics

Stoics used many of the same terms that we do today, but the meanings that they and we attach to them often differ – sometimes subtly and other times greatly. For this reason, today we often comprehend Stoic terminology superficially and occasionally misunderstand it entirely. Stoic ethics teaches that if he follows logic and truth then man can free himself from his passions’ painful shackles. To grasp this point, one must first appreciate that Stoics’ conception of ethics is not the same as the modern conception (we’ll turn to “passion” shortly). Today, we regard ethics as a matter of specific thoughts and actions that by some criterion are either good or bad. In contrast, Ancient ethics are concerned not with whether specific acts are morally right or wrong. Specifically, the central concern of Stoic ethics is whether the totality of our thoughts and behavior corresponds to a specific purpose – namely, the purpose for which our Creator has created us.

What, then, must a man do in order to live an ethical life? The Stoics answered unambiguously: he must live virtuously. But beware – Stoics’ and modern man’s understandings of virtue differ subtly but significantly. Today, we judge a person’s virtue by listing a person’s good (ethical) deeds and his bad (unethical) acts, perhaps weighting each action by some criterion (i.e., some good deeds are better than others, some bad acts are worse than others, etc.), somehow adding all the ethical and unethical deeds and – even more implausibly – expressing the former net of the latter. The bigger the disparity, by this modern conception, the more virtuous is the person in question.

“Investors or not, Stoics don’t suddenly force themselves to erect a serene countenance; instead, they gradually and voluntarily disassemble the artificial (unsettled) temperament that usually surrounds and otherwise obscures our natural (calm) one.”

To the ancients, this modern conception isn’t just crude; it’s absurd. Virtue isn’t a catalogue of specific episodes of past behavior: instead, it reflects your general conformity to the function for which you were designed – which is the function for which Zeus (or, depending upon the writer, Nature) designed all humans. Just as a “virtuous” hammer performs well its function – namely to drive nails into wood – the virtuous person performs well the function for which his Creator designed people: that is, to live in accordance with God and Nature. How to do that? Strive to use your faculty of reason. Our Creator has designed us to think and act rationally, i.e., live peaceably among others and interact in mutually-beneficial ways. As Marcus – whose Meditations leave the reader in no doubt that he thought poorly of most men – put it: “fellowship is the purpose behind our creation … I am bound to do good to my fellow creatures and bear with them.” If we do these things, Marcus assures us, we will enjoy “true delight.” The virtuous being accepts this truth and acts accordingly.

Stoic ethics and logic are thus closely intertwined. Epictetus emphasised that virtue “is nothing else than right reason.” Stoic ethics champions the rule: in matters of thought and action “follow where reason leads.” In particular, the Stoic strives, through logical validity and empirical truth, to liberate himself from his passions. To understand Stoicism, one must appreciate that the ancient meaning of “passion” is akin to today’s conception of “anguish” or “emotional suffering.” As Stoics conceive it, a passion is a negative and unthinking – that is, an unreasoning and hence unreasonable – inner reaction to external events. Passion, by this conception, is the low road to sure misery.

This ancient notion differs diametrically from modern usage, which regards “passion” as a laudable, necessary and perhaps even sufficient condition of emotional health and material success. Ancient Greeks including Stoics distinguished pathos (whose plural, “pathe,” is normally translated as “passion”) from propathos or instinctive reaction (e.g., turning pale and trembling when confronted by physical danger) and eupathos (reasoned reaction, whose plural is eupatheia). Eupathos is the hallmark of the sage (sophos). Just as passions result from faulty reasoning, eupathos is the calm that stems from sound judgments and correct reasoning. Stoics thus seek through apatheia (literally, “absence of passion”) to free themselves from emotional suffering. He who’s free of it becomes able, through the exercise of virtue (reason), to experience serenity and joy (mental health).

For Stoics, the goals of attaining virtue and joy were closely intertwined; accordingly, when they discuss virtue they also discuss equanimity. Early in his Discourses, for example, Epictetus advises us to pursue virtue but reminds us that virtue “holds out the promise … to create … calm and serenity.” Further, “progress towards virtue is progress towards each of these states of mind.” Epictetus identifies calm as the result to which virtue aims. The arrow of causality also runs in the other direction: the attainment of peace helps us to pursue virtue. Consider someone whom negative emotions such as anger have distracted. This person will find it difficult to do what his reason tells him: emotions are shouting so loud that he can’t hear reason. Emotions thereby conquer reason; as a result, he becomes confused about virtue, is unable to pursue it consistently and thus fails to attain it. For the Stoics, the pursuit of tranquility comprised a virtuous circle whereby the pursuit of one helps to achieve the other.

By this Stoic conception, peace of mind entails not just cognition (i.e., clear judgment) but also a specific kind of temperament (namely equanimity in the face of life’s inevitable highs and lows). For Stoics, “reason” means not just the correct application of logic but also the broader and deeper comprehension of logos – that is, conformity, humble submission to and hence harmony with the divine universal reason that inheres in all things. To live according to reason and thus virtue is to live harmoniously and hence joyously with nature and God. If someone is angry, cruel, unkind, etc., it’s because, willfully or otherwise, he’s rebelling against logos – which leads man naturally to compassion, kindness and mercy.

The Stoic solution to the individual’s evil and consequent misery thus comprises the examination of one’s own emotions, judgments and behavior; the determination of where they diverge from divine and universal reason; and the resolve to reform one’s emotions so that they conform better to reason. Properly understood, then, Stoicism is the diametric opposite of today’s stereotype. According to Seneca (On Tranquility of Mind), Stoics seek to discover “how the mind may always pursue a steady and favourable course, be well-disposed towards itself, and view its conditions with joy.” Seneca adds (On the Happy Life) that the Stoic “must, whether he wills or not, necessarily be attended by constant cheerfulness and a joy that is deep and issues from deep within, since he finds delight in his own resources, and desires no joys greater than his inner joys.” Along similar lines, in his Lectures Musonius Rufus tells us that if we conform to Stoic principles, “a cheerful disposition and secure joy” will automatically follow.

Sounds Great, But How?

Technique #1: Constantly Ask Yourself – “Is This Within or Beyond My Control?”

Whenever some internal thought or external event occurs – which is almost constantly – Stoics advise that you ask yourself: “is this within or beyond my control?” They readily concede only sometimes can you influence what does and doesn’t happen to you. They hasten to add, however, that anybody can usually, at least to some extent, influence how he reacts to life’s real and imagined vicissitudes. Epictetus is more forthright: he emphatically rejects the contention (as William Ernest Henley’s poem, “Invictus,” expressed it) that we are masters of our fates and captains of our souls. Instead, we are merely actors in a play that others – namely the Fates – have written.

Yet Stoics are hardly fatalistic. Regardless of his role in this drama, and whether they’re expected or unforeseen, the sage determines his reactions to events. “Man is disturbed not by things,” said Epictetus, “but by the views he takes of them. If, therefore, any be unhappy, let him remember that he is unhappy by reason of himself alone.” Marcus Aurelius added: “Get rid of the judgment, get rid of the ‘I am hurt,’ and you are rid of the hurt itself.” Epictetus concluded: “there is only one way to [joy] and that is to cease worrying about things which are beyond the power of our will.” Jim Collins and Morten Hansen capture this idea:

Clear-eyed and stoic, [investors] accept, without complaint, that they face forces beyond their control, that they cannot accurately predict events, and that nothing is certain; yet they utterly reject the idea that luck, chaos, or any other external factor will determine whether they succeed or fail (Great by Choice: Uncertainty, Chaos and Luck – Why Some Thrive Despite Them All, HarperBusiness, 2020, p. 36).

Epictetus’s Handbook, also known as the Enchiridion, begins with the sentence: “Some things are up to us and some things are not up to us.” From an appreciation of this obvious truth’s implications springs the state of mind – the calm or equanimity and self-control – for which Stoics are best known: why let anger or worry you those things which are beyond your control? Why try to persuade people whose acts and opinions you cannot change? As Marcus tartly concluded, “Nothing is worth doing pointlessly.” Instead, concentrate your limited time and resources upon those things over which you exert influence or can determine.

Don’t fret about the countless things that always exceed your reach; instead, concentrate upon that relative handful of matters that sometimes lie partly within your grasp. If you’re busy influencing the few things you can influence, then the countless things you cannot control will recede from your thoughts – and thus neither upset nor worry you. Stoics thus counsel, in effect, that you abandon your quixotic, egotistical, exhausting and ultimately misguided and perhaps idiotic quests to change the world – which are doomed to fail because others’ thoughts and deeds beyond your control. Reform and improve yourself: and if others did so, then the world, too, might be a better place. Many passionately proclaim that they intend to “make a difference;” very few, however, humbly volunteer to do the dishes.

The wise man modestly recognises that he cannot affect – never mind change – countless things. (Indeed, Stoics imply, the frustration of the average man in the street that he can’t or doesn’t always get what he wants, that others don’t or won’t do what he wants and that he can’t impose his desires upon everybody else, is simply disguised hubris that his thoughts somehow can or should transform their desires into reality.) Particularly noteworthy in this context is the unalterable reality that all things in this world are impermanent. “All things human,” Seneca wrote in To Marcia (whom we’ll meet shortly), “are short-lived and perishable.” Marcus Aurelius added that “the flux and change” in the world is neither accidental nor ephemeral, but is an essential and permanent part of Nature.

This insight has a vital application. In “Investors Dealing With a Loss of Control” (The Wall Street Journal, 7 October 2008), Jason Zweig expressed it simply:

As an investor, … it’s absolutely vital to separate what you can truly control from what is beyond your control. The only thing you can know for sure is that [in J.P. Morgan’s words, “prices will fluctuate”] You cannot control whether or not the market will continue to trash stocks, but you can control how you respond.

Even during the Great Depression, the best investment results were earned not by the people who fled stocks for the safety of bonds and cash, but by those who stepped up and bought stocks and kept buying on the way down. A man named Floyd Odlum made millions of dollars putting his cash into battered stocks. His motto throughout the market nightmare of 1929 to 1932 never changed: “There’s a better chance to make money now than ever before.”

Technique #2: Picture the Worst-Case Scenario

Why contemplate the possibility that bad things will affect you? Why, to use modern language, think negatively? Any sensible person will occasionally ponder the many unlucky and tragic things that might befall him. He will also consider the absolute certainty that unfortunate occurrences of some kind (such as his own death) will eventually affect him. Why do Stoics advise that the sensible person should regularly cast his mind towards these things? The first reason is that a bit of forethought may provide plenty of prevention. A homeowner, for example, may consider the possibility that a burglar or intruder might enter his home, assault his nearest and dearest and steal his possessions. If he concludes that this risk is sufficiently great, he should take precautions such as the installation of deadbolts on doors, locks on windows, a security system, etc. These concrete actions “manage” or mitigate the risk that prompted the negative thoughts. Paradoxically, negative thinking can produce positive results. And positive thinkers, who purportedly somehow “will” that their home be safe, are more likely to suffer the negative consequences of their mismanagement of risk.

Clearly, however, no matter what actions we take to prevent the occurrence of particular bad events (that is, however well we “manage risks”), unfortunate events of some description will certainly befall us at some point. For example, no matter how much you wish otherwise, one day both of your parents and all of your siblings and children (if any) – indeed, all of your family and friends – will die. Hence a second reason to think negatively and contemplate undesired events: if we do, then, when they eventually do occur, these things won’t affect us so badly. Hence the positive thought: thank heavens that we, too will die – and thus avoid the pain of continuous loss of family and friends. Because we expect them, when they happen these events don’t shock and distress us so much.

Seneca put it thus in To Marcia: “He robs present ills of their power who has perceived their coming beforehand.” Misfortune weighs most heavily, he added in On Tranquility of Mind – positive thinkers take note! – upon those who “expect nothing but good fortune.” The critical point, which Epictetus emphasised, is that in this life nothing lasts forever and all things are perishable. If we ignore this obvious and indisputable truth, and instead assume irrationally that we’ll always be able to enjoy the things we value, then we subject ourselves to considerable distress when these valued things disappear.

Stoics recommend that we contemplate the certainty that we will eventually lose all of the things and people we value. Thinking these negative thoughts, which Paul Veyne (Seneca: the Life of Stoic, Routledge, 2003, p. 178) calls the “premeditation of evils,” provides three benefits. First, it might, through preventative action, decrease the chance that some of these events occur; second, before these unfortunate events inevitably occur, we will value these things and people more highly; and third, after these events occur we will suffer less.

Imagine, for example, that your wife dumps you or that your employer sacks you. If you think about it rationally, you might ask “why might she do so?” And if you consider this question dispassionately, you might confess to yourself that from your wife’s point of view you’re hardly the best husband and from your boss’s point of view you’re not a valuable employee. Why not? To answer this question honestly suggests means whereby you can mend your ways, e.g., become a better husband, more productive employee, etc. And if you put these means into action, you might decrease the likelihood that your wife and/or boss give you the boot. More generally, this “premeditation of evils” decreases the chances that “worst-case scenarios” actually eventuate. In modern terms, this Stoic technique is simply “proactive risk management.” Today’s legion of positive thinkers tries to block negative thoughts – and thereby deludes itself and fails to prepare for unwanted but nonetheless possible, likely and inevitable events. From the point of view of positive thinkers, it’s perverse and even anathema. But Stoics know it’s true: thinking negative thoughts and acting rationally in response to them helps to achieve positive (or, at least, less negative) results.

In his letter of condolence to Marcia, a woman who, three years after the death of her son, was as inconsolable as on the day he died, Seneca alludes to the premeditation of evils. In effect, he counsels that by overcoming her present grief Marcia can prepare for the anguish she will almost inevitably experience at some point in the future. How, then, might Marcia cope with the loss of her son? Seneca gently reminded her that all we have – or, more precisely, all we think we have – actually isn’t ours: in truth, these things are merely a loan from Fortune, which can reclaim them at any time, certainly without our permission and often without giving us any advance notice. Marcia didn’t lose her son: she returned something that God had temporarily entrusted to her and was therefore His to reclaim at any time. Therefore, says Seneca, we should certainly “love all of our dear ones … but always with the thought that we have no promise that we may keep them forever – nay, no promise even that we may keep them for long.”

So by all means let’s cherish our personal relationships. Indeed, precisely because we know that they will end one day (if nothing else, our death, which is certain, will terminate them) let’s henceforth treasure them all the more. For similar reasons, Epictetus also advocates this rational form of negative thinking. “In the very act of kissing [our] child,” he counsels in his Discourses, “we should silently reflect upon the possibility that she will die tomorrow.” In his Meditations, Marcus Aurelius approvingly quotes this advice. Knowing that you won’t have her forever, you’ll likely cherish her even more today. So forget about the Test rugby on TV and spend time with her doing what she wants to do.

The implication is obvious: for the sake of you and your loved ones’ present benefit, you should contemplate your and their eventual demise. Indeed, because one day would certainly be his last, Seneca advised that his friend Lucilius live each day as if it were his last. Does Seneca thereby imply that he should undertake all kinds of hedonistic excess? After all, if this is his last day then Lucilius will pay no earthly price for any immoderation or improvidence: tomorrow he won’t have a hangover because there is no tomorrow; similarly, he need not fear the adverse consequences of sexual promiscuity, financial profligacy and so on. Anticipating St Paul and St Thomas а Kempis, Seneca condemns such behaviour. Why? Because it isn’t virtuous: we simply weren’t created to be hedonists. Hedonism is irrational; accordingly, to varying extents hedonists are miserable.

To live each day as if it were your last – or that your fortune will disappear overnight – will likely prompt you to reprioritise your daily activities; it will almost certainly exert a much bigger change upon your state of mind with respect to those activities. Stoics show us that by contemplating our own death and accepting the loss of our possessions we can enhance our appreciation of and thankfulness for life. This attitude, concluded Musonius Rufus in his Lectures, will “set [you] free from the fear of death” – and of bear markets and financial crises.

1. What is an “intelligent” investor? In the first (1949) edition of The Intelligent Investor, Graham stated that intelligence has nothing to do with IQ. It comprises patience, discipline, humility and the willingness to learn; it also entails the ability to harness one’s emotions, learn from one’s mistakes and above all think independently. This kind of intelligence, said Graham, “is a trait more of character than of the brain.”

2. “Overlap” does not mean “coincide.” Stoicism is pantheistic. In plain English, Stoics affirm that God exists but deny that God created the world and all things visible and invisible. Instead, they believe God is the world and all things. The idea that one God created the world is a monotheistic (i.e., Christian, Jewish and Islamic) conception. To these three faiths’ adherents, God is the Creator and the world is his creation. God, in other words, is the cause and the world – including man and his ethics – is the consequence. In sharp contrast, Stoics regarded “God” and “the universe” as coterminous and synonymous. Also, and unlike Christians, Stoics do not posit a beginning to the universe; nor is the individual’s life after death a tenet of their faith.

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Stoics’ pantheism and the monotheism of Christianity, Judaism and Islam are incompatible. On this and other grounds, the early leaders of the Christian Church came to regard Stoicism as a “pagan philosophy;” nonetheless, they adopted (albeit with adjustments of meaning and emphasis) some of its tenets. Hence Stoics and Christians proclaim that:

human fellowship and communion with God is possible. Specifically, Stoics claim that the Gods created man, care about his well-being and gave to him a divine element (the ability to reason); Christian confess that God has created man, cares about him in a very personal way, and has given him divine elements (i.e., a sanctified brain and soul);

an innate depravity (to Stoics, “persistent evil;” to Christians, man’s fallen status and the inability of human acts or works to achieve their salvation) plagues human nature;

in order to escape his bondage, the individual must surrender in toto – mind as well as body – to Nature (Stoics)/Christ (Christians);

worldly possessions and attachments are temporary, and the desire to amass more goods merely for the sake of more goods is futile. Yet wealth and money per se are not problematic. The dependence upon wealth and the love of money is the issue;

people should resist vice and to pursue virtue.

3. Of this passage, Jason Zweig wrote: “this may well be the most important paragraph in Graham’s entire book. In these … words Graham sums up his lifetime of experience. You cannot read these words too often … If you keep them close at hand and let them guide you throughout your investing life, you will survive whatever the markets throw at you.”

4. Scholars usually divide the history of Stoicism into three phases: (1) Early Stoa, (2) Middle Stoa and (3) Late Stoa. Unfortunately, no complete work by any Stoic philosopher survives from the first two phases. Moreover, Romans wrote the only texts that survive from the Late Stoa.

5. Lucius Annaeus Seneca (often known simply as Seneca; ca. 4 BC – AD 65) was a Roman philosopher, statesman and dramatist. He was also a tutor, and later an advisor, to Emperor Nero – and forced to suicide as punishment for his alleged complicity in a conspiracy to assassinate Nero. Seneca wrote his essay “On the Happy Life” for his older brother Gallio – the same Gallio mentioned in Acts (18:12-16) for his refusal to try Paul the Apostle in Corinth.

6. Epictetus (AD 55-135) was a Greek sage and Stoic philosopher. He was born a slave at Hierapolis, Phrygia (present day Pamukkale, Turkey), subsequently acquired by Epaphroditus, secretary to Emperor Nero and subsequently to Emperor Domitian, and lived in Rome until his banishment to Nicopolis in northwestern Greece. His pupil, Arrian, compiled and published his writings and teachings in the Discourses.

7. Marcus Aurelius Antoninus (usually known as Marcus Aurelius) was born Marcus Annius Verus and his parents died when he was very young. First his grandfather (who ensured that Marcus received a good education) and then, when he was seventeen, his uncle (Aurelius Antonius, who had recently become emperor and had no sons) adopted Marcus. Aurelius Antonius changed Marcus’ surname and married him to his daughter. She bore him five children – none of whom survived into adulthood except the awful Commodus, who succeeded Marcus as emperor. Marcus and Lucius Verus ruled as co-emperors from 161 until Verus’ death in 169. Marcus was the last of the Five Good Emperors, and also one of the most important Stoic philosophers. Natural disasters, famine, plague and barbarian invasions blighted his reign – but didn’t disturb his composure. In 167, he left Rome to join his legions on the Danube. Apart from a brief journey to Asia to crush a revolt (whose followers he treated leniently), Marcus spent the rest of his life along the Danube.

During this time Marcus consoled himself by writing a series of reflections which he entitled To Himself (which has become known as his Meditations). They reveal a powerful and humble mind, albeit a rambling one, and show how to find and preserve calm in the midst of tumult. Revered in Christian Europe during the Middle Ages, today these writings are still admired as a monument to a philosophy of service and duty. In the words of William Lecky (History of European Morals, Braziller, 1955, p. 249), Marcus was “the last and most perfect representative of Roman Stoicism.”

8. In physics, dualism refers to phenomena whose properties are associated with two mechanics. Because these mechanics are mutually exclusive, both are required in order to describe the phenomenon’s behaviour. All matter, for example, has wave-particle duality. In philosophy, ethical naturalism (also called moral naturalism) claims that: (a) sentences about ethics express propositions (i.e., aren’t mere babble); (b) some propositions about ethics are true; (c) in particular, objective features of the world, which are independent of human opinion, render these propositions true; and (d) these moral features of the world can be reduced to some set of non-moral features.

9. Stoics were like virtually all ancients in the sense that few were atheists. A general spiritual tone pervades lengthy passages of major Stoics’ writings; frequent, too, are specific references to particular deities. Perhaps most notably, Epictetus mentions Zeus more than anybody except Socrates.

10. According to Stoics, the universe is a material substance, known as God (or Nature). Stoics divide it into two classes: active and passive. The passive substance “lies sluggish, … ready for any use, but sure to remain unemployed if no one sets it in motion.” The active substance, dubbed Fate or Universal Reason (Logos), acts on the passive matter. Everything is subject to the laws of Fate – including the souls of people (Stoics also thought that animals have souls). Since Reason is the foundation of both humanity and the universe, it follows that the goal of life is to live according to Reason, that is, to live a life according to Nature (i.e., God).

11. Cosmopolitanism is a distinctive feature of Stoicism. One spirit has created all people; accordingly, everybody should readily accept one another. Accordingly, external differences such as race, rank and wealth are of no importance in social relationships. Seneca, for example, exhorted, “Kindly remember that he whom you call your slave sprang from the same stock, is smiled upon by the same skies, and on equal terms with yourself breathes, lives, and dies.”

12. In “The Depression of 2008? Don’t Count on It” (The Wall Street Journal, 30 September 2008), Jason Zweig wrote: “’Investors hate uncertainty.’ Well, that’s just tough. Uncertainty is all investors ever have gotten, or ever will get, from the moment barley and sesame first began trading in ancient Mesopotamia to the last trade that will ever take place on Planet Earth. If tomorrow were ever knowable with absolute certainty, who would take the other side of a trade today? The financial future is no more uncertain now than it used to be; in fact, it’s far less uncertain than it was in the summer of 2007, when the Dow shot above 14000, the future seemed bright, and utterly no one foresaw the disaster that would befall the financial system. The absolute certainty of blue skies ahead was an illusion then, and the notion that we all know that worse misery lies in store is an illusion now. The only true certainty is surprise.”

13. To Stoics, wisdom is the recognition that we usually know less (and often far less) than we think. Socrates claimed that he could be certain only of his own ignorance. That’s a sound basis for humility and curiosity – both of which are characterise successful investors. Indeed, investors know that the greatest danger is the “certainty” that arises from the suspension of critical thought.

14. Cleanthes of Assos (ca. 330 BC – ca. 230 BC) was the successor to Zeno as the second head (scholarch) of the Stoic school in Athens. Originally a boxer, he came to Athens where he took up philosophy. Listening to Zeno’s lectures during the day, he supported himself by working as water-carrier at night. Cleanthes preserved and developed Zeno’s doctrines; his pupil, Chrysippus, became one of the most important Stoic thinkers.

Chris Leithner grew up in Canada. He is director of Leithner & Co. Pty. Ltd. , a private investment company based in Brisbane, Australia.

From the same author

▪ Will Interest Rates Remain Permanently Low?
( no 331 – April 15, 2020)

▪ Frank Knight’s Economic and Social Theology
( no 326 – November 1 5, 2020)

▪ Austerity, What Austerity? Europe Desperately Needs “Genuine Austerity”
( no 317 – December 15, 2020)

▪ The shameful treatment of Ron Paul by the mainstream media
( no 300 – May 15, 2020)

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