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Thursday, April 11, 2013

Public Accountants Betraying Clients: Insider-Trading on Client Information

There are two basic types of conflicts of interest: personal and institutional. In any conflict of interest, two roles conflict in such a way that one role can compromise the other. The role compromised is the more legitimate of the two. In this essay, I distinguish the two types and situate the public accountants involved in insider trading in the personal rather than institutional type. I discuss two specific cases, both of which resulted in the auditors being prosecuted, in order to distinguish that outcome from the failure of society to come to grips with some of the most important ongoing institutional conflicts of interest.
In a personal conflict of interest, a person’s personal role compromises his or her “official” role. In an institutional conflict of interest, one institutional or official role of an office, department, or organization compromises another institutional or official role of the office, department, or organization. The general public tends to find it easy to spot personal conflicts of interest, whereas the institutional type tends to elude the public’s notice. Given the harm to the system that can come out of an exploited institutional conflict of interest, the focus of the public’s ire is misguided in being on the personal type.
 As to why, it is easier to hold a person blameworthy for illicit personal gain than it is to get excited about a company profiting by ignoring its own firewalls that supposedly keep one official function from compromising another. For one thing, dispersion of responsibility (and accountability) can occur in an organizational “action.” Additionally, jealousy may be the operative word when it comes to excoriating the personal gain of other persons from personal conflicts of interest. A person is not apt to be jealous of an organization. Similarly, it is easier to get angry at a person for shirking his or her official role for personal gain even if a third party is the principal beneficiary. It is difficult to get angry at Moody’s—an organization rather than a human person—for rating a security too high (one official role: rating for the public) in order to receive more revenue from the security or market-share (another official role: profit-seeking for the organization itself). The reliance of the public on the ratings makes the rating role more legitimate than the agency’s profit-seeking role. Societal reliance may be too abstract for the general public to get excited about; only the individuals harmed are likely to raise a stink. Put another way, the systemic harm from an organization violating its duty can be difficult for the public to discern.
Even if it was not obvious on Main Street, the damage possible to the economy and the financial system from the exploitation by rating agencies of an institutional conflict of interest became hard to ignore when the over-rated subprime-mortgage-based derivatives (i.e., bonds) collapsed in value in 2007 and 2008. Their collapse put banks such as Bear Stearns, Merrill Lynch and Lehman Brothers as well as the insurance company AIG at risk of going under.  The entire financial system was at risk of freezing up. Yet by 2013 at least, an important source of the financial crisis—the buyer pays model used by the rating agencies—had been allowed to remain intact. Additionally, commercial banks could still be investment banks too. The $6.2 billion trading loss at JPMorgan in 2012 should have told the public that American banks were still involved in risky proprietary trades, and thus could still wreak havoc on the financial system. Had the public learned anything at all from September 2008?  At the very least, it would appear that institutional conflicts of interest are not taken seriously enough, as they are often allowed to survive when they should have been taken apart.
In contrast, prison terms typically result for people who have exploited a personal conflict of interest involving personal gain. For example, Thomas Flanagan, who reached the vice chairman for the Midwest region at Deloitte & Touche, pleaded guilty in August 2012 to having engaged in insider trading by using non-public information of audit clients including Walgreen, Motorola, Best Buy, and Sears. He made $420,000 off his own trades based on the proprietary information. It is not difficult for people to resent Flanagan’s misuse of his clients’ information because Flanagan himself benefited to the tune of $420,000. His personal role (i.e., trading on his own account) may or may not have compromised his official role as auditor. Even though it was in his own financial interest for those clients to continue in business and Deloitte to remain as their auditor so he could continue his insider-trading operation, the fact of personal gain does not require that he compromised his official role directly. The compromise of his role as auditor was in his taking of client information from the audits for non-audit purposes (i.e., his other, less legitimate role). Accordingly, personal gain can be sufficient for people to react angrily to an exploited personal conflict of interest. Even if Flanagan had not given excessively optimistic audit opinions of those clients, the fact that he made a lot of money from his non-official use of the client information is blameworthy, or immoral.
To be sure, the duty in the official role is not a trivial element in a personal conflict of interest. According to a study by the New York State Bar Association in 2010, professionals such as licensed accountants and attorneys face a greater chance of being prosecuted than say business executives and others. The public trust, which is so salient for professionals, highlights the element of duty in an official role. In the compromising, the violation of the duty is particularly problematic, morally speaking, especially if the violation is direct (e.g., an unjustified unqualified audit opinion). Even the mere possibility of a direct violation can be sufficient for precautions to be taken.

                                   KPMG, one of the major CPA firms, distanced itself from the insider trading enabled by a partner.  Source: Bloomberg News
 Scott London was a partner at KPMG who admitted in 2013 to passing on stock tips about five clients, including Herbalife and Skechers USA, to Bryan Shaw, a friend who compensated London in turn with a $12,000 Rolex  watch, concert tickets, including one to see Bruce Springsteen,  an occasional free dinner, and cash equal to about 10% of Shaw’s earnings from his trades based on client information. Shaw allegedly grossed more than $714,000 from trading on Herbalife, Skechers, and Deckers information alone. On being informed of London’s role in Shaw’s insider trading, KPMG not only fired London, but also resigned as the audit firm handling the audits of Herbalife and Skechers. Because London had been the partner in charge of the audits of those companies, KPMG also withdrew its opinion on the financial statements of Herbalife for the preceding three years and of Skechers for the past two years. KPMG claimed to have no reason to believe that there were any errors in either company’s books. The firm was merely being cautious because it was possible that London had overlooked financial problems in the companies so he could remain in a position to pass on information to his friend.
Although Scott London’s take was significant, he was not the principal beneficiary of the insider-trading. Even so, the Feds went after him rather than Shaw, who agreed to stage a payoff for the FBI in exchange for not being criminally charged. In a personal conflict of interest, the breach of duty even in the possibility of compromising the official role itself can be more objectionable than even the amount of personal gain.
In the cases of both Flanagan and London, no evidence exists that the audit opinions had been compromised. In an exploited personal conflict of interest, it is possible that the official function is only partially compromised—meaning indirectly. Regarding the two CPAs here, they may have limited the impropriety in their official auditing role to an improper use of client information. Even so, the possibility that London might have improperly issued unqualified audit opinions was enough for KPMG to withdraw the potentially compromised opinions. Herbalife went so far as to halt the trading of its shares until it was clear that Herbalife’s management had been innocent of any wrong-doing. The public duty in the CPA’s official role is that important because investors, creditors and the general public rely on the opinions. Trust would dry up in the stock market if publicly-traded companies did not have to have outside auditors. Therefore, even if the personal gain of the person in the personal conflict of interest is a mere 10% of a third party’s personal gain, the mere hint that the duty in the person’s official role has been substantially breached can be very serious.
In an institutional conflict of interest, any personal enrichment is secondary or non-existent. A CPA firm, more than its employees and partners, is enriched by compromising the firm’s auditing role. Unlike in a personal conflict of interest, the compromising of that official role is necessarily direct. That it, the role itself is skewed. The more legitimate official role itself is subverted by a less legitimate, albeit official, role—typically that of economizing, or profit-seeking. The company’s gain is less disturbing than the violation of duty, especially if the compromising of that role is direct, because of the societal reliance.
 When a CPA firm ignores a client’s financial problems in order to be retained as the company’s audit firm, it violates its duty of independence on which the public relies. In an institutional conflict of interest unlike the personal type, the violation is more wide-spread. Indeed, it can be large enough to harm the system itself, in addition to particular organizations. Nevertheless, the general public is more offended by, and thus aware of, personal conflicts of interest.
Authur Andersen’s compromised audit opinions of Enron enabled that company to continue the fraud that ended up costing employees their retirement savings. The rating agencies’ AAA rating of some subprime mortgage derivatives enabled a bubble whose collapse nearly sent the American economy into a prolonged depression. Institutional conflicts of interest, even if only exploited potentially, can be so catastrophic that they should not even be allowed to exist as potentially exploitable. Put another way, were the general public to react to such conflicts as it does to the personal variety, legislators may not allow the rating agencies and CPA firms to continue using the buyer-pays model. Given the possible systemic harm, it is unethical just letting an institutional conflict of interest continue to exist in the design of an organization, its roles,  or its relations to other organizations.

Sources:

Ameet Sachdev, “Thomas Flanagan, Ex-Deloitte Partner, Pleads Guilty to Insider Trading,” Chicago Tribune, August 8, 2012.

Jean Eaglesham, Juliet Chung, and Hannah Karp, “Trading Case Embroils KPMG,” The Wall Street Journal, April 9, 2013.

Reed Albergotti and Jean Eaglesham,”Former KPMG Partner Is Charged,” The Wall Street Journal, April 11, 2013.

Tuesday, April 9, 2013

Johnson’s “Reinvention” of JC Penney: Too Much and Too Little

In April 2013, JC Penney’s board wished the CEO, Ron Johnson, “the best in his future endeavors.” His effort to “reinvent” the company had been “very close to a disaster,” according to the largest shareholder, William Ackman. During Johnson’s time at the company as its CEO, shares fell more than fifty percent. In February 2013, Johnson admitted to having made “big mistakes” in the turnaround. For one thing, he did not test market the changes in product-line and pricing points. The latter in particular drove away enough customers for the company’s sales to decline by 25 percent. Why did Johnson fail so miserably?
                                  Ron Johnson's short tenure as CEO of JC Penney was disastrous, according to Altman.   Source: Reuters

Some commentators on CNBC claimed that JC Penney’s board directors should have known better than hire someone from Apple to have so much responsibility right off the bat in a department store. However, Johnson had been V.P. for merchandising at Target before going over to Apple. Therefore, Penney’s board cannot be accused of ignoring the substantive differences between sectors. Even so, Target and Walmart are oriented to one market-segment, whereas JC Penney, Kohls and Macys are oriented to another. Perhaps had he taken the time to have market tests done at JC Penney, any error in applying what he had learned at Target could have been made transparent.

Although as the former CEO Ullman who would be replacing Johnson pointed out, customer tastes are always changing so you can’t go back to worked in the past, to “reinvent” a company goes too far. For one thing, it is risky for a retail company to shift from one market segment to another. Additionally, to “reinvent” something is to start from scratch to come up with something totally new. Even if that were possible for a retail chain, the “new front” would likely seem fake to existing customers. “They are trying to be something they are not,” such customers might say. Put another way, Ron Johnson might have gotten carried away with his notion of a turnaround.

In an interview just after Johnson’s hiring at JC Penney was announced in June 2011, he said, “In the U.S., the department store has a chance to regain its status as the leader in style, the leader in excitement. It will be a period of true innovation for this company.” A department store isexciting? Was he serious? Perhaps his excitement got the better of him in his zeal for change. But were the changes of “true innovation?” Adding Martha Stewart kitchen product-lines is hardly innovative—nor is getting rid of clearance sales and renovating store designs and the company logo. In fact, renovation is rather superficial, designed perhaps to give customers an impression of more change than s actually the case. Put another way, Ron Johnson may have had a tendency to exaggerate in the sense of gilding the lily as evinced by his appropriation of faddish jargon while coming up short in terms of substantive change. In an old company trying to be something it's not (i.e., going from a promotional to a specialty pricing strategy), there is too much superficial change and too little real change. Sometimes even upper-level managers can get carried away with their own jargon in trying to make their respective companies something they are not. It is like a person trying to be someone he or she is not. In "reinventing" JC Penney, Ron Johnson was trying to make an old woman come off as young by applying make-up and new clothes.

Sources:

Stephanie Clifford, “J.C. Penney Ousts Chief of 17 Months,” The New York Times, April 9, 2013.

Joann Lublin and Dana Mattioli, “Penney CEO Out, Old Boss Back In,” The Wall Street Journal, April 8, 2013.

Addressing Systemic Risk By Increasing Capital-Reserve Requirements

Although the Dodd-Frank Wall Street Reform Act includes significant reforms such as liquidity standards, stress tests, and resolution plans, the additional capital requirements (i.e., the SIFI surcharges) may not be sufficient should there be another financial crisis like the one in 2008. A study by the Federal Reserve Bank of Boston found that even the additional capital requirements in Dodd-Frank would not have been enough for eight of the 26 banks with the largest capital loss during that crisis. As overvalued assets, such as subprime mortgage-backed derivatives, plummet in value, banks can burn through their capital reserves very quickly. A frenzy of short-sellers can quicken the downward cycle even more. This raises the question of whether relying even in part on additional capital requirements as a bulwark is smart. It is not as though the financial crisis of 2008 was the crisis to end all financial crises.
With the $6.2 billion trading loss at JPMorgan Chase in the hindsight, Sen. Sherrod Brown (D-Ohio) and Sen. David Vitter (R-La) in the U.S. Senate proposed a bill that would require banks with more than $400 billion in assets to hold at least 15 percent of those assets in hard capital. The two senators meant this requirement to encourage the multi-trillion-dollar banks to split up into smaller banks. The Senate had recently voted 99-0 on a nonbinding resolution to end taxpayer subsidies to too-big-to-fail banks. Accordingly, the U.S. Senate had Wall Street’s attention. Considering that the U.S. House of Representatives was working on legislation to deregulate derivatives, the chances that the U.S. Government would stand up to Wall Street even to the too-big-to-fail systemic risk were slim to nil. Indeed, the U.S. Department of Justice’s criminal division had been going easy in prosecuting the big banks for fraud out of fear that a conviction would cause a bank collapse.
The senators’ strategy of going about breaking up the biggest banks indirectly can be critiqued on at least two grounds. First, should one or more of those banks decide to go with the 15% requirement rather than break up into smaller firms, even the additional capital might not be enough to protect a bank during a financial crisis. The study discussed above suggests as much. Second, even if the additional requirements would turn out to be sufficient in a crisis, the approach would obviate a decision by the government on whether systemic risk justifies a cap on how large banks can get. The question is similar to that concerning the Sherman Anti-Trust Act. Should systemic risk be added to monopoly as justifying government intervention in limiting private property? I contend that even the actual harm that the financial crisis of 2008 wrought on the U.S. economy justifies such intervention under the rubric of systemic risk.


Sources:

Eric Rosengren, “Bank Capital: Lessons from the U.S. Financial Crisis,” Federal Reserve Bank of Boston, February 25, 2013.

Zach Carter and Ryan Grim, “’Break Up the Banks’ Bill Gains Steam in Senate As Wall Street Lobbyists Cry Foul,” The Huffington Post, April 8, 2013.

Monday, April 8, 2013

Taoist Business Leadership

Leadership from the standpoint of Taoist teachings is paradoxical or even oxymoronic in nature. A leader intending to apply the teachings should therefore be willing to tolerate the co-existence as apparent opposites, or at the very least be willing to lead in ways not typically thought to be consistent with leadership. If this seems too taxing, one might consider the potential benefits. For one thing, leading in unanticipated and unusual ways may give one a sustainable competitive advantage both in terms of alternative leaders below and competitors leading other organizations. Put another way, going down the rarely trodden path opens one up to being able to use something of value unknown to other people. One could “corner the market” on that asset.
The most well-known Taoist symbol suggests that opposites may not be absolute, and thus as mutually-exclusive as we think. There may be control in letting go, as a white dot exists amid the black.  Source: personaltao.com
In the Tao Te Ching, verse 57 is relevant to leaders. “(I)f you want to be a great leader you must learn to follow the tao.” Fortunately, defining the Tao is not necessary. The verse elaborates on how a leader can follow it. First, “stop trying to control.” This entails letting go “of fixed plans and concepts.” Rather than relying on strategy and a marketing concept, for instance, the leader acts in line with the world governing itself. This may sound absurd, particularly if one is enthralled by the concept of strategic leadership. Planning is less effective than moving out of the way and letting the organization run itself. To say that such leadership is rare in modern organizations is an understatement, so we really don’t know whether stepping out of the way is better than strategizing.
Another means of getting out of the way so the people can flourish involves laying off the policies that prohibit. From the text, “the more prohibitions you have the less virtuous people will be.” In other words, the more a leader tells followers what they can’t do, the more the followers will do things that the leader doesn’t want. It may be a bit like trying to squeeze jello in one’s hand. The more you squeeze, the more jello goes through one’s fingers. The prohibitions may be a form of aggression, which results in aggression in reply from the other side. The next line of the verse is, “the more weapons you have, the less secure people will be.” In modern organizations, weapons are typically those of passive aggression. A leader strategizing to squash a potential rival will have followers feeling less secure as well as less virtuous. The aggression could come back to bite the leader, or come to characterize the organizational culture more generally.
In addition to being stable, the followers of a Taoist leader should be self-reliant. According to the verse, “the more subsidies you have the less self-reliant people will be.” A leader should not act in ways that make the followers dependent. This has an obvious implication for government welfare. Citizens should be secure, and thus have the means to sustain themselves (e.g., housing, food, medical care), but beyond that they should be self-reliant. In an organization, followers should be encouraged to think for themselves and take charge of their tasks rather than have a supervisor constantly looking over their shoulders. The supervisor should not allow subordinates to rely on having the boss decide difficult questions. Again, this is counter-intuitive because leaders are accustomed to control rather than “freeing up.”
In terms of more prohibitions resulting in less virtue among followers and more subsidies reducing self-sufficiency, Nietzsche’s philosophy is relevant. To Nietzsche, “thou shalt not” as a prohibition from morality is in actuality aggression from the weak whose instinct to dominate is in hyper-drive. Giving in to the prohibition makes one weak, which Nietzsche characterizes in terms of sickness. The strong are self-confident in their innate strength, hence they are self-reliant. For the strong to be vulnerable to the moral manipulation of the weak who seek to dominate is for Nietzsche a problem to be solved. Strength should not be vulnerable to moral proscriptions. A pathos of distance should exist between the strong and the weak. While the strong naturally give out of their overflowing surfeit, the intent should not be to make the weak dependent. Nietzsche would doubtless agree with the Taoist teachings regarding prohibitions and subsidies.  The Taoist leader in turn could benefit from Nietzsche’s point that generosity is not inconsistent with self-reliance.
The verse ends by essentially kicking out the crutches that leaders are wont to use. Let go of the law, or rules, and people will become honest. Toss out economics (presumably including planning), and people will become wealthy. Resist the temptation to appropriate from religion and people will become serene. Perhaps the most counter-intuitive of all, “let go of all desire for the common good and the good becomes common as grass.” Much harm can come from acting in the national or company interest, as the end of general welfare can justify even rather sordid means. Moreover, letting go of desire may be behind letting go of control, whether one controls through plans, policies, rules, retribution, or subsidies.
Perhaps the leader who is willing to let go of the desire to control stands the best chance of achieving control, not through the leader’s own grasping, but, rather, in a self-governing organization. This entails stepping out of the way so the Tao can govern. This, it seems to me, is the essence of Taoist leadership. To be sure, it takes a certain amount of faith—that order can happen even in the absence of policies and plans. In a business sense, one of the rewards for leading on the basis of such faith is being able to forego the costs in terms of time and money that go into making and enforcing strategies, plans and policies.
The question is perhaps whether those things are really necessary, or even constructive rather than detrimental. We mortals put such stock in our little plans and yet perhaps the dynamics of the market and geo-politics ultimately toss us around anyway. The common good may be naturally provided for by those dynamics, while our leaders merely interfere.
Lest it be concluded that a Taoist leader just sits around, doing absolutely nothing, getting out of the way and urging others to do so too is itself an action. “Leading by constantly getting out of the way” may be the operative slogan for such a leader. Considering how much leaders typically don't get out of the way, preferring to interject their own desires as if they were synonymous with the common good, a leader attempting to apply Taoist principles would likely have his or her hands full—continually emptying his own and others’ plates to make room for food that otherwise would not be delivered. In other words, make a good product and get out of the way, rather than “manage” it to death. Even if such a leader does not practice this completely, just getting out of the way to counter what would otherwise be too many policies would be good business.

Sources:

Lao-tzu, Tao Te Ching, verse 57. For the translation used here, see http://mattpaul.org/tao/te/ching.cgi?n_verse=57

Friedrich Nietzsche, Beyond Good and Evil.

Sunday, April 7, 2013

North Carolina Weighs Making Christianity the State Religion

“Congress shall make no law respecting an establishment of religion, or preventing the free exercise thereof.” Congress. The writers of the First Amendment of the U.S. federal Constitution were obviously excluding the state governments. Even so, the U.S. Supreme Court has established that the amendment applies to the states as well as Congress. From Lemon v. Kurtzman (1971), the Court gave us what is known as the Lemon test. State funding for parochial schools (e.g., Catholic schools) must have a secular legislative purpose (e.g., education), neither advance nor inhibit religion in its consequences, and not foster “an excessive government entanglement with religion.” Yet the leap in claiming that the amendment bears on the states must deal with the explicit language of “Congress shall make no law.”
When the 13 original American states that formed the United States had been colonies, Calvinism was the “state religion” in all of the New England Confederation, which excluded Rhode Island on account of its freedom of religion. Pennsylvania was known as the Quaker experiment. Maryland was heavily Catholic. Virginia was Anglican. New Jersey split in two for a few decades in the late seventeenth century, with the Calvinists taking East New Jersey and the Quakers taking West New Jersey. Even by the time the U.S. Constitution was being considered, the notion of a state religion in a particular state would have been familiar to most Americans. The U.S. Supreme Court’s precedent seems artificial in comparison.
Even so, the North Carolina General Assembly would have gone too far had it passed the bill stating in part that the North Carolina General Assembly “does not recognize federal court rulings which prohibit and otherwise regulate the State of North Carolina, its public schools or any political subdivisions.” The bill also states that the U.S. Constitution does not prohibit states from making laws respecting an establishment of religion. While this assertion is probably correct in theory, the precedent set down by the U.S. Supreme Court makes the prohibition the law of the land. Refusing to recognize the U.S. Supreme Court as bearing on the states harkens back to the Nullification Crisis centered on South Carolina. President Jackson pointed out that the Union would not long last if the states could decide for themselves whether they would be bound by federal law.
Rep. Carl Ford of the NC Assembly. He proposed the bill that would have sidelined the U.S. Supreme Court and paved the way for Christianity as the state's official religion. 
The challenge is to get back to the wording, “Congress shall make no law,” without throwing out the U.S. Supreme Court. Proposing state laws, whether on religion or abortion, that are obviously unconstitutional under the Court’s rulings makes a state body look foolish. Rather than having selective amnesia, state representatives could seek to reverse the Court’s precedent either through the consent power of U.S. senators or by proposing a federal constitutional amendment. The first route may require state governments to have greater sway over the senators. Originally, they were to represent their respective states by representing the governments.
In terms of an official religion at the state level, Utah would obviously be Morman, but not every state has such a concentration of one particular denomination. Nor is religion itself equally strong in every state. Not every state would want to institute an official religion. All of this suggests that the United States would be a richer quilt to the extent that states can differ on religion as a phenomenon and with respect to the particular religions. Put another way, the U.S., being imperial in scale, is innately more diverse than can be seen by the extent of one-size-fits-all Congressional action. Allowing the states to fulfill their particularities more fully would make the U.S. itself a richer tapestry and thus a strong union.
If some of the American republics in the U.S. were to have established state religions, a person in the minority in one of those states might feel more like an outsider in one’s own town. Being a non-Mormon in Utah would be even harder were Mormonism the official state religion.  However, is it not already awkward for atheists in the small towns of several states, such as Alabama and Mississippi? Is there really so much difference between an overwhelmingly Christian population and making Christianity the official state religion? It would not be as though the heretics could legally be burned alive. To counter any unfairness more generally, equal protection under the law and due process could be used in a non-Christian’s defense.   
I would even say that it should not be the case that the typical American feels equally at home in every state, for that would mean that the one-size-fits-all approach of Congress has effectively homogenized an empire that is inherently diverse. In terms of historical political theory, an empire is “different in kind” (i.e., qualitatively) than the kingdom-level on the next scale down. It is not only that an empire is larger than a kingdom (i.e., quantitatively). Whereas a kingdom is only large enough that it may or may not be diverse within, an empire by definition consists of kingdom-level polities and is thus inherently diverse because kingdoms are different. From the beginning, the American colonies/states were mapped on the scale of the then-extant early-modern kingdoms in Europe. The European countries and American republics generally are comparable. France is a bit smaller than Texas, Germany is roughly the size of Montana, Spain matches Arizona and Italy is the size of California. Among the respective smaller states, Malta, Luxemburg, and Cyprus cluster with Rhode Island, Delaware, and New Jersey. Belgium and Maryland are both mid-sized states in their respective unions. To compare the U.S. and France or the E.U. and Texas thus evinces a category mistake. Flawed conclusions should be expected.
The United States altogether thus form an empire, which is composed of kingdom-level polities/cultures/territories. We should not be surprised to find that the culture in Texas differs from that of Massachusetts, for example. One of the benefits of living in the U.S. is that one can live in a republic that fits one’s ideology or lifestyle. For example, a gay person can move to a culture such as Massachusetts or California in which greater acceptance exists. People in the majority cultures in Oklahoma and Arkansas would not have to be pushed into changing their respective cultures into accepting homosexuality, though the marriages made in the other states would have to be recognized due to the full faith and credit clause of the U.S. Constitution.  A fuller happiness for both gays and traditionalists/Biblicalists would result if each can find a fitting environment than would be the case were Congress to pass an empire-wide one-size-fits-all “solution.”  Were it made under one giant compromise, U.S.-wide, it is likely that the result is not a fit for any American. Moreover, to suppose that every state should be virtually the same just because the U.S. is recognized as “a” country ignores the intrinsic diversity that exists within an empire-scale complex-polity. Even the poll finding that roughly a third of Americans want Christianity to be the official religion in their own state cannot be generalized using a broad brush across the United States. I suspect that a much higher percentage of Arkansans than New Yorkers or Californians want Christianity to be their official religion.
In short, the establishment of state religions in some of the states even as strong majorities in other states prefer their respective cultures (and governments) to remain primarily secular would provide a closer fit for not only the people involved, but also the diversity that exists anyway within an empire that is composed of kingdoms and/or republics. To treat an empire as though it were synonymous with one of its republics or kingdoms evinces a category mistake. The benefits of diversity that can be enjoyed within an empire are threatened when Congress makes the mistake by acting like a state legislature. Put another way, the United States would be stronger were the strictures relaxed such that they could more fully manifest their uniqueness. Seeing a strip-mall with a McDonalds restaurant in every town from coast to coast is appreciably more bland. “Sameness” multiplied across a continent is not only tiring; it fails to take advantage of the inherent diversity that springs from distance and more than one government. One need only look at the E.U. states to get a sense of how little distance is necessary for culture to differ. Even though the North Carolina’s General Assembly was pursuing a foolish strategy in proposing a bill that would have the government ignore the U.S. Supreme Court when convenient, the presumed article of separation between church and state at the state level can and should be re-considered.


Sources:

John Celock, “North Carolina House Speaker Kills Bill to Create State Religion,” The Huffington Post, April 4, 2013.

Emily Swanson, “Christianity As State Religion Supported By One-Third of Americans, Poll Finds,” The Huffington Post, April 6, 2013.