Barry!

I was going to do a post on Existing Home Sales and how they were not up except in a bizarro world. Barry not only got off a rant but then backed it up with another post explaining why his rant was correct. I recommend both of them.

So I'll just put up Calculated Risk's chart of the action.



These are non-seasonally adjusted. CR likes to use the previous 5 years of data for each of the month so you can make a comparison. The thinking is something along the line of month-on-month growth may not tell the whole story because there are underlying reasons why September sales are always lower than August. [It's because people have to move before school year starts to have their children start on time.] Here we can see sales were up year-on-year, which is a positive. However the headline Big Rebound in Existing-Home Sales Shows First-Time Buyer Momentum belies the fact sales actually dropped from August. Also as TBP reports the tax credit is also extending the sales season as buyers are motivated to close before the November deadline. NAR though has skin in the game in distorting the data in a manner which looks the most beneficial to them like Edward Bernays script tells them to do.

Finally, one last idea on existing home sales (EHS) effect on the economy; it is not that big. It is most certainly not as big as a new home sale. A new home sale has raw materials being turned into a sale. EHS are secondary market activity, akin to equities, it just shifts money from one party to another. If the previous owner made renovations and upgraded the home than their is an addition to the capital stock of housing but secondary markets of themselves add little to the economy. [commissions, etc]

Public Realtions Part IV

I thought I might piece together parts III and IV but when I reviewed my notes Part IV is the largest by far. There is a lot of ground to cover to reach the conclusion. I will also do one last post on how these ideas are affecting society today.

The most salient point from the previous post is that, "the most important thing in anyone and everyone's lives was to be fulfilled and that was all that really mattered."Of course, it was the job of capitalism to foster the fulfillment of its consumers. If we remember back to the original post though it was understood that this was merely a function of social control. Where this process takes an even more dangerous turn, and a suboptimal one at that, is when politicians use these same psychoanalytical techniques to run their campaigns.

There is a great segment when septuagenarian Edward Bernays appears on the David Letterman show and states people will believe me more if you call me doctor. Bernays initial ideas were that it was good to reach out and stroke the deep emotional yearnings of individuals to make them more confident, powerful and fearful so that they may be controlled.

Now in Great Britain Matthew Freud gave public relations a make over and it became glamorous. Mr Freud was able to engage in very similar activities that Bernays pioneered in the inter-war period. He worked to place ads in interviews with celebrities and also by "purchasing" the editorial pages of the press. The press was outraged and thought this was a corruption of their profession, but still the pages of the editorial sections were filled with pictures of products and specific mentions of the product in the text. It was a part of a sweeping changing in the UK to allow business to take over the role of government in fulfilling the needs of the people and was seen as a new and better democratic process.

Across the pond in America, Reagan was moving against against the government's role in fulfilling its people's need by targeting programs to support welfare. His pitch was that individuals did not need to throw their hard earned money away to people who did not want to work.

Both of these are examples of how focus groups were changing the game for politicians. It was now accepted that people did like to be a part of groups but also retained their individual characteristics. This individual had been trained by Corporate America to make demands for their hard earned dollars. Now with their votes these same consumers could, as they did with business, make politicians cater to their demands. The 1980s was leaving the left side of the political spectrum behind as the left's focus had always been on bettering society for all. In a very similar fashion to what Stanford Research Institute proclaimed the left in Britain was polling well on helping save the community. People openly stated in polls that they would vote for the left. Yet their self interests lay with the proposals that the conservatives were making. Ultimately, as predicted, the conservatives were with whom the voters cast their lot.

Then came the Clinton campaign. The campaign made extensive use of polling of swing voters and tailoring their message to fit their beliefs. The campaign found that voters only wished to support taxes for programs that personally benefited them, so the campaign responded with a middle class tax cut promise. This promise was going to be funded by cutting defense spending (the peace dividend) and raising taxes on the rich. Clinton won election in 1992. However, he quickly found out that the budget deficit was worse than feared and the bond market would not support additional borrowing to fund the tax cuts. The stymied executive office instead tried a new tact to lift the public by appeals to genuine ideals of society and community. Needless to say, the voters felt betrayed. In 1994 Bill Clinton's party was swept out of office in the both houses of the legislature, who ran on a platform of tax cuts funded by cutting welfare programs via the Welfare-to-Work initiative. It seemed certain that Clinton would be a one term president.

Clinton hired Dick Morris to save his "butt." Dick proposed that a transformation of politics needed to be undertaken and to treat voters like consumers, answering to their whims and fulfilling them. Surveys were sent out to identify swing voters and then personal questions were asked of the swing voters to determine their lifestyle. Policies were then enacted that would make the swing voters feel more secure in their lifestyle via "small bore" politics. Traditional issues were dropped in favor of minutiae like the v-chip or school uniforms. Also Clinton's leisure time would be spent doing activities that appealed to swing voters such as hunting or fixing up his home. This created a divide between Clinton's wonks and Dick Morris.

The wonk's argument in the White House went something like this:

What's the point if you have no mandate to be re-elected?

What's the point of having a mandate if you cannot get re-elected? Isn't the point getting re-elected?

In a show of deference to power, suburbanites were now controlling the domestic policy of the United States. However, it should be noted that this new form of democracy was pandering to the unthought about and primitive desires that satisfy individuals. It was discussed before that having people's desires be in control is not the same as having rational people in control. That this is just a guise to control the masses via their own whims.

Britain followed suit with the Tony Blair campaign. The feeling in the UK at the time was now that individuals were not exploited by the free market. Instead that the free market caters to individuals and fulfills their needs. However, this also hollows out the political channel as a means of power and leaves a larger slice of power in the hands of businesses and entrenched interests. Bernays proclaimed in his Democra-city that this new form of democracy was superior because the power was not swayed by politics or ideologies. The argument against this idea was that this was a democracy that controlled its citizens by reducing its active citizenry into passive consumers who are delivered "feel-good" treats.

It should also be noted that what works for business may not be the best manner to conduct political actions. Politics can now be described as a bewildering maze of desires because people's opinion changes at the drop of a hat just like in business, "the (product) market had forever changed from needs-based to a market of unlimited and ever changing desires."Fine, that is why there is Adidas, Reebox, New Balance, Nike, etc. However, for politicians there is no way to plan an agenda because the dynamic changes drastically and schizophrenically. An example of this was the railroads in Great Britain. During a campaign people were polled as to how important this issue was to them. The answer was not at all. Now after a series of accidents, delays and poorer service the politicians are being blamed for not investing sooner.

So instead of having an honest conversation people only want more public services and to pay less. There is no leadership where a politician can say, "Here are my beliefs, we should cut this service and I will cut taxes that fund this service. I pledge to do this wisely and judiciously. If you believe in this idea and in me, than you should vote for me." Or the converse, "We should offer this service to you and people like you in the community and it will cost more in taxes to do so. I pledge to use the money wisely to achieve these ends. If you believe in this idea and in me, than I should have your vote." However, what the political system is instead producing is a fear of having a rational discussion with the masses about a politician's coherent political opinion.

The final plea of the program is for individuals to think beyond themselves and how they have been trained by business. That people are more than "feel-good" machines and not slaves to their desires. If we are these things and cannot move beyond these ideas then it would be best to dissolve the government and allow businesses to sate our desires. As individuals move away from their consumer side, politicians will have to engage them with a rational deliberation that respects the individuals abilities to form rational opinions on what is best for society.

Public Relations Part I

So it begins...

The other day while reading about how shocking it is that more Americans are not rallying against the return to the status quo that is taking place in the financial industry, an astute observer linked to a video series online called The Century of the Self.

Don't worry the first 10 seconds are a little scrambled as it looks like some one ripped this from a VCR recording. VCR? Well it was a machine that played videotapes, which were very similar to cassette tapes in that you could record on certain types videos from your television. My grandmother vividly remembers watching two or three Nintendo video games instead of Dr Zhivago, but I digress.

So I started watching and then I started note taking and below is what I have garnered from watching two of the four parts (they are each an hour long.)

In the beginning there was Freud. Freud gave his young nephew a copy of his book called "General Introduction to Psychoanalysis" This nephew was Edward Bernays and he worked on the PR effort for the US during the First Great War. One of his key messages that he created was that the US was not restoring old monarchies but bringing democracy to Europe. He attended the peace talks with Woodrow Wilson and emerged with a slogan "Making the World Safe for Democracy." After the war he wondered, and would soon make himself rich upon, whether the same type of propaganda/persuasion employed during the war and peace talks could also be equally applied in peacetime.

In a later in life interview with Mr. Bernays he casually states that the Germans had used the word propaganda and now it was tainted, thus, he coined a new term called public relations. The idea that information is power was certainly very relevant to Mr. Bernays. However, he also knew that the information could be coached in such a way as to elicit the desired response despite what logical conclusion could be drawn from it. This was a key understanding of his uncle's work.

One of his first clients was the American Tobacco Company. His task was to find a way to break the male originated taboo of public smoking for women. As Big Tobacco noted, they lost half the target market due to this social taboo. Bernays turned to AA Brill who told him and ATC that cigarettes represented the male penis and male sexual power. Brill continued, stating they would need a way to connect cigarettes as a way of challenging male power by giving women their own penises.

This is where Bernays makes his money. During the NYC Easter parade, Bernays had female models stash cigarettes on their person and at a designated time to light them up and begin smoking. Then he informed the press that Suffragettes were going to light up cigarettes in public as a protest of voting rights and that the cigarettes were "Torches of Freedom." The symbolic gesture, the phrase, the emotion and the memory all tied together as one in the American psyche. The Torches of Freedom ran in major newspapers and soon the sale of cigarettes began to rise. Women found them socially acceptable and felt that smoking made them more powerful and independent. You read that right, a product, a consumption habit (unhealthy at that), was signaling to other people status and power. Bernays had proven what Freud has insinuated that you can produce irrational behavior in people by fulfilling deeper needs and desires.

This method became Bernays masterstroke that he would employ over and over again for businesses. It was called the tie in and it would be the machine that drove the "engineering of consent." One example is of Cosmopolitan magazine (a customer) and he would place advertisements next to specific articles or interviews, which would be one of his other clients, say an actress. In the pictures of the interview she would be wearing or consuming the product. Then in the next movie she filmed she would also be using the product. These powerful images of an attractive person, leading an attractive life filled with products that everyday citizens could also enjoy marked a new era in consumerism.

In the days before the war products were sold on a basis of practical value. Industry worried that once you had sated people's needs that there would be fewer profits as you would then only be replacing obsolescence. Bernays was now showing a new way for the consumer to buy, to have their desires out shadow their needs. He was changing the focus from the clothing to how the clothing made you feel. Also implicit in this was the idea that consumerism helped the country as well. This is because products could fill the voids of everyday life by appealing to the desires and fears of the masses. By keeping these consumption machines happy, which would also keep them docile. It was now as though products were giving people "feel-good" medicine and thus initiating social control. So instead of using social institutions to control people, you could answer their desires and upon sating the desires, the elite could then go about ruling the country.

Some additional acts Bernays pioneered include: product placement in movies, selling cars as symbols of male sexual power, paying doctors to state a product was healthy or recommended (an apple a day...), having fashion shows at department stores with models.

This became especially relevant once the Bolshevik revolution in Russia. The idea that humans could make rational decisions was being crushed as Moscow and St Petersburg burned. This was not the only piece of evidence. As the Great Depression began and ran its course the new consumer Bernays created died. Then the Second Great War ended and the aftermath including the Holocaust very much convinced those in power that humans are dangerous and needed to be controlled.

A closer look at National Socialism was enlightening. Here were normal every day citizens wielded as a weapon by the leadership. The messages were spun in a way to channel the feelings of the masses. Analysts would look at the situation noting that libidinal forces were repressed in deference to the leadership, but it created violence. This violence was then directed outside the group. Even though this behavior should be considered irrational the social norms instituted by the Nazis outweighed what an earnest human being might deem correct.

Later, during a controlled experiment in which 29 participants were actors, 30 people would have to decide which of two lines shown were longer. At first the actors would choose the correct one and of course the experimentee would as well. Then after about 10 different sets, the actors would choose the shorter line. The lone real person, would hesitate, take longer to decide, may at first fight it, but eventually succumb and choose the shorter line to achieve group consensus.

More during the next post, stay tuned.