McCain's Mortgage Policy...and Economic Theory
The New York Times reported yesterday that Senator McCain thinks “it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers.” Indeed, even though the instruments of the credit crisis were so complicated they “weren’t particularly well understood by even the most sophisticated banks, lenders and hedge funds,” he offered no policy to address those or similar instruments – and even suggested, in the words of the Times, that “government should eliminate obstacles to the ability of financial institutions to raise more capital.”
When taken together, these extraordinary comments show just how committed Senator McCain is to a particular theory of political economy that rejects government action in the economy. What would it take for Senator McCain to acknowledge the need for government action in the economy? Would he ever act?
I’m reminded of Franklin Roosevelt’s Commonwealth Club Address: The question, Roosevelt said, was “whether individual men and women will have to serve some system of government of economics, or whether a system of government and economics exists to serve individual men and women.” We should ask that question of Senator McCain today.
How can you be a student at Harvard's law school and not know that the government always acts in the economy? The economy is essentially a legal product. Markets are legal creatures. Even a laissez-faire government organizes the economy through specific rules. We all need to resolve to stop saying things like "government interference in the economy."
March 27, 2008 11:49 AM | Reply | Permalink
without any additional comment:
http://www.law.du.edu/russell/lh/alh/docs/hale.html
March 27, 2008 12:11 PM | Reply | Permalink
There are different levels of interference. The Kymer Rouge sanctioned people (often by executing them) who fished or foraged for food in the forest.
Jimmy Carter deregulated the airlines (and trucking). There was definitely less government interference after deregulation than before.
The Republican's claim to want less than more government interference in markets, but what they really advocate for an oligopolistic hegemony favoring the few and the powerful.
March 27, 2008 3:08 PM | Reply | Permalink
My point is rather different. Markets only exist because governments enforce specific rules that establish the markets. Many people on the right simply assume that capitalism is the state of affairs prior to government, i.e. that without any government, markets would operate perfectly. People find inspiration for this line of thinking at least as far back as John Locke. But that's not reality. Without some form of dispute resolution mechanism, no market could exist. Thus, markets only exist as creations of law, and as such, the rules creating them are properly viewed as interference. Any economic regulation is an interference, including laws as basic as private property.
March 27, 2008 4:13 PM | Reply | Permalink
Precisely. It would be snake oil salesman, coercion and retaliation.
March 27, 2008 4:38 PM | Reply | Permalink
You're being obtuse. Take a walk or something.
He was laying out how proponents of laissez faire see things, and it was pretty clear he disagrees.
March 27, 2008 4:48 PM | Reply | Permalink
I'm only being partially obtuse. I get annoyed with these random Harvard law students that show up here with every new semester. Yes, I know they are allowed to write here through their connection with Elizabeth Warren, but that doesn't really justify subjecting us to uninformative and uninteresting posts like this about McCain.
Kozmik, in all honesty, I would rather have you posting in the front page than this joker. But it's been clear since the beginning that Josh Marshall has an extreme East Coast bias and the tpm organization is not particularly interested in spreading beyond it's narrow regional confines. Specifically, I mean that there are plenty of people in this country who have much more valuable insights than Ganesh here, but Marshall et al refuse to look beyond the Northeast in order to find them.
Chalk that up to my recurring bouts of malcontentedness if you want.
If you really want to parse his language, we can do that. He wrote, "What would it take for Senator McCain to acknowledge the need for government action in the economy?" This does not indicate an understanding of my position but rather directly accepts that there is scuh a thing as "interference in the economy." He does not use quotes as I do to indicate that they are not his words, and he does not attribute the phrasing to any other person. Thus, we have to assume that this was his chosen phrasing.
March 28, 2008 10:47 AM | Reply | Permalink
perhaps mr mccain would care to equate 100 or a 1000 years of borrowed $$$trillions to personally .... long slow bail out of his personal pre presidential promise to iraq's inheritance
on behalf of US treasury
March 27, 2008 1:38 PM | Reply | Permalink
Ganesh is right. And note that McCain doesn't seem to have a problem with bailing out Bear Stearns, so he doesn't even seem to be consistent in his Hooverism.
March 27, 2008 7:25 PM | Reply | Permalink
The illegal drug industry runs without government interference. It's an example of perfect capitalism.
Funny that you never hear conservatives mention this.
April 1, 2008 2:16 PM | Reply | Permalink