Liberals and Markets: A Strained Relationship
Allow me to clarify a little my critique of Eric's analysis. When I
criticize the New Deal-Fair Deal era, I'm not doing so from a purist or
rigidly ideological perspective. My interest isn't in overturning or
scrapping the modern American welfare and regulatory state that was
created then; such a goal is, to my way of thinking, neither possible
nor appropriate. My interest is in reforming and modernizing the welfare
and regulatory state by bringing it more in line with the best of
contemporary social science and the bedrock liberal principles of
individualism and suspicion of concentrated power.
The problem is that America's welfare and regulatory state was created at a time when social scientists were smitten with hubris about the possibilities of central planning -- and when, due to the traumas of the Great Depression and total war, individualism and suspicion of concentrated power were at their lowest ebb in American history.
So we ended up with a lot of policies that, while called liberal, had much more to do with collectivism and regimentation than with any of the Enlightenment values Eric and I share: for example, the National Industrial Recovery Act (basically, an abortive attempt at full-scale cartelization of industry); the Agricultural Adjustment Act (its misbegotten scheme of price supports and production controls still with us after all these years); the Civil Aeronautics Act (cartelization of air travel designed to ensure that no airline ever went out of business); the Communications Act of 1934 (broadcast licenses handed out by politicians conditional on good behavior -- how illiberal can you get?); the Wagner Act (sorry, but Wagner Act labor unions are just another kind of cartel, and they all but destroyed a whole string of American industries); etc. The way I see it, these forms of economic regimentation were of a piece with other illiberal forms of top-down control from the first half of the twentieth century: like forced sterilization, racist immigration controls, and rounding up Japanese-Americans.
A great deal of this economic regulation was scrapped during the '70s and early '80s -- good riddance. But I'm afraid that hostility to market-based economic growth remains a common mindset among people who call themselves liberal. A few examples: the belief that growth is leading to inevitable environmental ruin; indiscriminate opposition to globalization and trade liberalization; a knee-jerk aversion to profit-seeking enterprise; and, to bring me back where I began, a growing nostalgia for the "good old days" when the best and the brightest, the men in the gray flannel suits, and the Jimmy Hoffas of the world ran the show.
I share Eric's desire to see a rejuvenated and unapologetic liberalism that can reclaim the center of American politics. But I don't see any way for that to happen as long as support for market-based economic growth -- the most progressive force in the history of the world -- isn't a central part of the liberal program. And though things are better than they used to be on that score, there's still a long way to go.
I find it very difficult to agree that regulatory measures taken in the New Deal era were "of a piece" with Japanese internment, a criminal policy driven by xenophobia and paranoia about subversion.
Also, with respect to your last post, I think that unfettered markets breed their own brand of corporatism. And furthermore, while corporate power is theoretically de-centralized, it is unified in its purpose and effect.
Creating a black and white dichotomy between individual liberty and collectivism is also, I believe, a misleading over-simplification. No society is composed of completely atomistic individuals, just as no society is a completely unified collective bloc. They very problem of democracy is negotiating the middle ground between these non-existent extremes. Raising the banner of individual liberty in the name of increased corporate power is, in my opinion, a mendacious bit of rhetoric.
May 23, 2008 11:24 AM | Reply | Permalink
Or, to ask Lindsey directly -- although who expects a guest blogger at TPMCafe to respond to a commenter, ever --
Does he believe that corporations should continue to be treated as juristic persons?
May 23, 2008 1:53 PM | Reply | Permalink
This is an excellent question!
May 25, 2008 11:58 PM | Reply | Permalink
One can always try to argue that every effort to control anything is "of a piece" with every other effort to control or organize something else. I guess that's right in some very abstract sense. Building regulations in earthquake-prone zones are of a piece the Gulag; raking and burning yard waste is of a piece with the Holocaust. But it gets silly pretty fast.
Some of what I read from libertarians reminds me of my old college students. The 18 year old mind is in a permanent condition of rebellion against human society, and fixes itself in a "you can't make me do X" stance. Every college freshman's favorite writer appears to be be Ayn Rand. Most eventually get over it, and adopt a mature balance between the desire to protect individual dignity and pursuit of happiness on the one hand, while accepting responsible commitments to broadly beneficial social projects and needs on the other hand. Some never do, and they become libertarians.
May 23, 2008 5:58 PM | Reply | Permalink
Lol, of course you do, as do we all. Lindsey's assertion is about as goofy as it gets. Without getting into psychoanalysis, I can't say whether Lindsey is a buffoon or a compulsive lair. But accurate he ain't.
Here's a little time line:
1870's to 1910's was the Gilded Age of laissez faire leading to great excesses and corruption.
1900 - 1920 or so was a period of New American and European Imperialism.
1928 - the Great Depression begins as laissez faire policies and political corruption collapse from rot. Bubbles are produced, malfeasance causes scandals, capital availability causes short term growth but produces more debt, demand slows and confidence drops, many default, runs on banks, etc.
For the next several years the market bounces around and several bad policies are taken, with even the best being too little, too late.
1933-38 - New Deal
December 1941 - WWII begins.
Feb 1942 - Executive Order 9066 for Japanese internment is signed.
2008 - Brink Lindsey says rather stupid things and demonstrates a complete ignorance of history.
May 24, 2008 3:06 AM | Reply | Permalink
deserves study surely
May 23, 2008 12:57 PM | Reply | Permalink
What Brook Lindsey is carefully avoiding mentioning is New Deal reforms were taken, specifically, due to the failures of laissez faire markets and their inability to regulate themselves and prevent excesses of greed and self destruction. They were taken as a direct response to the Gilded Age and the consequent corruption, inequality, and collapse.
Let's also be clear that "Libertarianism" has always been a populist disingenuous facade created in the 1930's to represent laissez faire by another name. It's always was, and continues to be, funded by big business and other Plutocratic minded elites as a wedge to co-opt liberal values and distort them into laissez faire propaganda. Libertarians can't be taken seriously because they're inherently disingenuous or just goof balls.
Libertarianism has about the intellectual integrity of Communism or Scientology and appeals to the same sorts of people. "Invisible hands" and such mumbo jumbo is just laissez faire repackaged in charismatic quasi religious blather.
Again, I compare Libertarians to Communists and conclude they're mirror images. Both are morinically simplistic utopian ideologies, with one problem and one solution to everything. Both
wind up becoming coercive and self destructive as they implode from the hypocrisy, being incapable of delivering on stated goals.
Where Communists see communalism as the universal solution, Libertarians see markets as the universal solution.
Where the Communist party elites employ propagandists to glorify the communalism they control and profit by, Libertarian wealthy elites employ propagandists to glorify the markets they control and profit by.
Just as Communists and the party can do no wrong because it's supposedly the epitome of human organization in it's most elegantly beautiful simplicity, so can Libertarians and markets do no wrong as they're supposedly the epitome of human organization in it's most elegantly beautiful simplicity.
Where Communists espouse a simplistic solution to everything: "Communalism!" so do Libertarians espouse a simplistic solution to everything: "Markets!"
Where Communists scream demand and crank up tractor production, Libertarians scream supply and crank up Wall Street profits.
Where Communism makes boogy men of individualism, merits, or personal wealth, Libertarianism makes boogy men of community, responsibility, and common purpose.
Where Communism takes a basic human (and animal) instinct, altruism and empathy, and builds an entire philosophy around it, Libertarians take a basic human (and animal) instinct, individuality and greed, and build an entire philosophy around it. Both have a one dimensional view of humanity.
Where Communists would argue their ideology is flexible and tolerant because it allows petty individualism and downplays the coercive power of the party, Libertarians argue their ideology is flexible and tolerant because it allows petty regulation and downplays the coercive power of markets and wealth accumulation.
Both are simplistic ideologies that sound good superficially but don't actually function in real world complexities. In fact, both tend to prosper for a brief while before failing catastrophically.
May 23, 2008 2:57 PM | Reply | Permalink
correction:
Where Communists scream supply and crank up tractor production, Libertarians scream supply and crank up Wall Street profits.
i.e. both are "supply side" ideologies which fail to meet real demands. In both cases a self interested and short sighted bureaucracy is incapable of addressing the full spectrum of society's needs.
In the case of communists, they tend to excel for a while in providing common needs such as infrastructure, but fail to meet the individual needs of people such as freedom, merits, and variety. As they struggle to remain in power despite shortcomings, it ultimately becomes coercive, stifling individual needs.
In the case of laissez faire plutocrats and Libertarians, they tend to excel for a while at providing individual needs such as consumer goods, but fail to meet common needs such as infrastructure investment, environmental standards, and such common goals. As they struggle to remain in power despite shortcomings, they ultimately become coercive via corruption, monopolies, lobbying, tax avoidance, and other means by which to stifle community needs.
***
There is no easy solution. Not laissez faire, not socialism. A mix of approaches is needed. Those espousing such one sided ideology, Libertarians or Communists, are either idiots or con artists.
May 23, 2008 3:14 PM | Reply | Permalink
As Cato’s Brink Lindsey write: “A great deal of this economic regulation was scrapped during the '70s and early '80s -- good riddance.” OK, so stand back and look at the results. The percentage of Americans in “deep poverty” is now rising and will soon surpass levels of the 1960s. For the first time ever in U.S. history, a key statistic of the well-being and health of the American people, life expectancy, is now declining. The U.S. shoe industry – annihilated. The textile industry – wrecked. The U.S. is now totally dependent on imports to clothe its people. For the first time since the founding of the republic, we have become a net importer of food. The auto industry – wrecked and the major firms about to go bankrupt. The steel industry – barely able to stand on its feet and about one third of domestic consumption relies on imports. The ship-building industry – almost entirely gone, except for U.S. Navy contracts. The airline industry have been flirting with collective bankruptcy for years. Machine tool industry – a handful of major U.S. firms left, and over half our machine tools now come from overseas. Printing equipment industry – annihilated. Electric generating equipment – struggling to stay alive except for gas turbines. Electric transmission equipment – what’s left of domestic capacity is entirely owned by foreign firms. There are not many industries left that the U.S. leads in – agriculture equipment, construction equipment, medical equipment, and semiconductor manufacturing equipment. And those industries are far less than the world leaders they were just thirty years ago. In both freight and passenger railroads, the U.S. lags far behind Europe, Japan, and even China. You can ride mag-lev from the Shanghai airport – while in Dallas, Miami, and Phoenix combined, there’s not even 50 miles of urban rail track combined.
And as for the U.S. crown jewel – aereospace – well, the Indian Air Force had Russia re-work an SU-27 to its specs five years ago, and that aircraft has blown the USAF out of the sky the past few annual fly offs. Meanwhile, Boeing can’t even get the 787 out the door.
In summary, if you look at the REAL economy – the actual capacity to take raw materials and work them up into the stuff needed to sustain and support human life – not the make-believe fantasy land of government statistics and monetary aggregates, the triumph of conservatism that the Lindsey trumpets - “A great deal of this economic regulation was scrapped during the '70s and early '80s -- good riddance.” - has been an unprecedented and unmitigated disaster for the real U.S. economy and its people.
The only sector of the U.S. economy that has done well is banking and finance – and that sector has just been bailed out to the tune of $1 trillion and counting since multiple Federal Reserve interventions began last August. In fact, it is an outright fiction when Lindsey claims that the era of the New Deal was the “lowest ebb” in the “suspicion of concentrated power.” Lindsey’s historical rewriting is just more of the relentless and cynical defense of economic privilege enjoyed by the rich patrons of the Cato Institute.
But reality is rapidly catching up to Lindsey, Cato, and their rich benefactors. If we are to survive as a republic, we now have no choice but to smash the political power of the usurers and speculators of Wall Street and the Chicago futures pits, and to begin forcing flows of capital back into the real economy – building rail transit systems, wind turbines, hyper fuel efficient cars (such as the Aptera which gets 240 mpg) and everything else we need to become industrially self-sufficient again. Just building rail mass transit in the 38 largest urban areas of the U.S. to the same density as that found in New York City is going to require $3.5 trillion, two and one half years of total U.S. steel production, and about 100 million new jobs. That’s right – 100 million new jobs.
And if we don’t force the financial system to be a servant to the real economy again, the only alternative is to keep sending $1 or $2 trillion to the Middle East each year to maintain our addiction to oil. Which is a sure bet for national suicide.
In short, the ideas and beliefs of Lindsey and the Cato Institute have done more to destroy American national strength than any third-column of communist agitators ever did. It’s far past time to unmask them as the deadly germs they really are.
May 23, 2008 3:43 PM | Reply | Permalink
OK, so stand back and look at the results. The percentage of Americans in “deep poverty” is now rising and will soon surpass levels of the 1960s. For the first time ever in U.S. history, a key statistic of the well-being and health of the American people, life expectancy, is now declining.
This is a misleading statistic, because it ignores the fact that since 1965 we have been importing a heck of a lot of dirt-poor immigrants. Someone who makes $5,000 a year in Mexico who comes to the U.S. and makes $12,000 a year will cause the "average salary" to go down even if no one's salary goes down, because we only look at his current salary vs. the average salary, not his salary vs. the salary he was making in Mexico.
To really have meaningful statistics about U.S. poverty over a period of time, you must either exclude anyone who immigrated here after the start of the period (as wll as their descendants) or you have to estimate how much money these immigrants were making in their home country before they came here.
The auto industry – wrecked and the major firms about to go bankrupt.
Yeah, that was deregulation - it had nothing to do with insanely powerful unions brought about by the New Deal.
May 23, 2008 6:40 PM | Reply | Permalink
I just love it when some arrogant philistine falls into my trap. Here is Glaivester, folks, a study in precisely what is wrong with conservative economics – it knows NOTHING about how real productive industries function. To a conservative, managing a company that produces semi-conductor lithographing equipment with tolerances measured by the orbital paths of an electron, is not that much different than managing a chain of brothels in Nevada. All a conservative looks at is the bottom line – the number of dollars shown as “profits.” Never mind that an industrial enterprise requires years of agonizing detail work and sustained maintenance of equipment. I’ve seen dozens of manufacturing facilities that suddenly started showing spectacular “profits” after falling under the sway of new “management” that cut back expenses by, for example, simply ceasing the maintenance program for the factory equipment. Presto – two or three years of record profits. Then, blam! the company goes out of businesss because it can no longer produce a product to sell: it has been essentially asset-stripped.
But let me directly address the one industry Glaivester, in his or her arrogant ignorance, chose to mention. In the mid-1980s, the Massachusetts Institute of Technology conducted a five-year study of the world auto industry, literally visiting at least one production facility or assembly plant of over 30 auto manufacturing companies around the world. At the time, captains of U.S. industry were trying to figure out how to adopt the "lean production" methods pioneered by Taichi Ohno at Toyota, which had made Japanese automakers nearly three times as productive as U.S. automakers.
Led by James Womack, the MIT study was released as the 1989 national bestseller The Machine That Changed the Wolrd: The Story of Lean Production, and it showed that because Toyota and Japanese auto makers in general were much more respectful of their employees and suppliers, they benefited greatly from suggestions that originated on the factory floor.
By contrast, the management of U.S. auto makers were aggressively hostile toward their workers and suppliers, and scoffed at the notion that workers on the factory floor could offer any meaningful contribution other than their brute, raw, physical labor. One statistic tells it all: U.S. workers at Chrysler, Ford, and General Motors plants in the U.S. submit 0.4 suggestions per worker per year; U.S. workers at Japanese plants in the U.S. (which had been established in the late 1970s and early 1980s) submit four times as many, or 1.6 suggestion per worker per year. But each Japanese worker in a Japanese car plant in Japan submits an astonishing 64 suggestions per year. In other words, the Toyota system of production is 160 times more efficient than U.S. mass production at mobilizing the creative powers of human ingenuity at the lowest level of production. Workers may suggest small, incremental changes, but over time and given a large enough number, they can make for impressive results: at the time of the MIT study, Toyota could produce over 50 cars per employee each year, compared to only the 10 or 15 cars produced per each employee per year by U.S. automakers, and Toyota’s defect rate was one third that of the U.S.
U.S. automakers have striven mightily to catch up to Japanese levels of efficiency, productivity, and quality, but today, some two decades later, they still lag behind. For over 20 years, U.S. automakers and U.S. industry in general have tried implementing a number of facets of the Toyota "lean production" system, such as just-in-time inventory control and concurrent design and production, but they have stubbornly refused to do anything but give lip service to "valuing their human assets." If anything, the United States economy and society have become more stratified and more ossified since the MIT study, with the arrogance and disdain of top management readily evident in the multi-million pay packages executives extract even while they drive their companies into the ground.
What I feel for morons like Glaivester is beyond disdain. People like Glaivester are beneath contempt. In less than half a century they have taken the most amazing industrial economy the world has ever seen – the arsenal of Democracy - and absolutely ruined it, all the while arrogantly and self-righteously proclaiming that their ideas were making our republic stronger. Now, the United States cannot even produce enough 7.62 mm ammunition for its military forces engaged in Iraq and Afghanistan! At some point, you have to begin asking if conservative ideas go beyond stupid, to actual treason.
May 23, 2008 7:28 PM | Reply | Permalink
Good treatment and respect of employees, not exactly an American traditon, especially if they are lowly workers.
I personally know of 3 separate cases where employees would be $$$ rewarded for their ideas if they saved the company money.
One was an aerospace engineer who suggested that instead of spending millions of dollars in disposing of "waste" chemicals, that some could instead be sold to other industies that could use them. She was supposed to get 10% of any savings for the year. The 1st year it saved over 15 million dollars...and this was in the 80's. The company was shocked, they reneged and cancelled the program. She won the lawsuit and left the company.
Almost identical to the major airline my husband worked for. They had a similar employee suggestion program and another engineer came up with an idea on how to load planes so that the weight and balance would save millions of dollars worth of fuel. They reneged, cancelled the program, and the employee won the lawsuit and left the company.
These same companies will pay out millions to consultants who come up with brilliant ideas like getting rid of accounting depts. and purchasing depts. that in the long run cost more because of mistakes and lack of oversight. They show them how to use "just in time" inventory methods that work until they don't. The cost incurred by not having the inventory when needed can quickly overrun any savings.
But it's easier to blame those pesky American unions for companies not running efficiently. BTW, many of those efficient Japanese workers are unionized, too.
May 26, 2008 9:49 AM | Reply | Permalink
Whatever you want to call it - modern American liberalism, New Deal liberalism, welfare liberalism, social democracy - what we are talking about is several modern political traditions that are clearly a fusion between classical liberalism and socialism. It is only the American tradition of fanatical, persecutory red-hating, and the reign of fear perpetuated by people like McKinley, Palmer, Wilson, Hoover and McCarthy, that prevents us from acknowledging the obvious in polite company.
Obviously we can all list egregious examples of top-down, central control horror stories, and attempts at economic and social organization run amok. However, we can also identify many examples in which large, organized human projects contributed a great deal to the common good.
The socialist traditions to which Mr. Lindsay is alluding surely antedate the traumas of the depression and war in the first half of the twentieth century. Indeed, their roots are ancient, and address persistent human longings for community, equality, social solidarity and brotherhood, and inexpungible insights about the capacity of human beings, working together in an organized fashion and guided by reason, to achieve great things. My guess is that these political longings and instincts will always be with us, because they are the political expression of some of our earliest social experiences, most notably the experience of family life.
I know this kind of talk terrifies classical liberals and libertarians. There is a persistent strain in American thought that is pathologically frightened of being absorbed into the "collective", and often resists even the most modest attempts at large-scale social organization, and the most limited assumption of social obligations. See any 50's, Cold War era science fiction movie, suffused with radical individualism and it's clinical counterpart, paranoia. Ask a libertarian to participate in national project to re-organize our energy economy, and you would think you asked him to join the Borg. But I have some respect for this tradition, and we have all learned something from it. The next great round of social mobilization will avoid the horrible excesses of Marxist-Leninist varieties of socialism, with its anti-democratic trust in "vanguards" and other elites, it's self-destructive tolerance of violence and brutality, and it's failure to attend to the cultivation of individual human potential. We know we can't organize everything from the top, and need well-regulated markets to process emerging human needs and wants into productive and efficiently organized work to satisfy those needs and wants.
But libertarianism is itself an extreme and fanatical ideology, and is responsible for tremendous evils in our world, including this country's persistent neglect of the need to make sure that everyone born into our society is raised and cared for properly, and finds a place as an adult in a healthy social network of friends - even of brothers and sisters. The tragic result in America has been a nation filled with alienated, rage-filled individuals; with drifters, loners, religious fanatics and violent desperadoes; and with armies of atomized nobodies living out their lives in lonely desperation, sometimes managing to fill the spaces with coarse sensual pleasures.
Human beings were not meant to live this way. Our lives were not meant to be "do it yourself" projects. No matter how much libertarians try to turn us into self-reliant atoms of individual responsibility, private owners of every good we possess, whose social relations are all exchanges with other private owners, their scheme will never work. That's because human beings are inherently social animals; they crave sociality and don't understand themselves without it. And they understand instinctively that it is absurd to expect all good things to flow from the invisible hand, from "public goods from private vices", or from semi-magical processes of self-organization and emergence which eschew deliberate planning and coordination. They have too many experiences of collective achievement and the human capacity for rational group organization to believe entirely in the supreme, inviolable individual.
At least Mr. Lindsay honestly believes his ideology. For many, it is just a ruse that gives them the rhetorical ammunition they need for unregulated taking and selfish hoarding.
May 23, 2008 5:43 PM | Reply | Permalink
the Communications Act of 1934 (broadcast licenses handed out by politicians conditional on good behavior -- how illiberal can you get?)
not very.
yes, the comm act was passed by roosevelt and promoted as "new deal" legislation. no, the act itself was neither liberal nor "illiberal" (though if anything, commercial) at a time when no effective control -- top or otherwise -- existed to oversee radio operators, radio operations, operator licensing or interstate telephony (only 2% of telephone traffic was interstate in 1934) -- much less content. and no, broadcast licenses issued under the act in its original form were not conditioned on "good behavior" other than u.s. citizenship. [1]
the 1927 act responsible for creating the frc (federal radio commission) was a congressional first attempt to satisfy "listeners, industry, the fourth national radio conference" [2] and others who sought such oversight. a subsequent attempt to improve frc effectiveness (merging frc with the interstate commerce commission) was vetoed by hoover in 1933. roosevelt responded through study (an appointed committee) and enactment. the comm act of 1934 signed by roosevelt [3]:
The way I see it, these forms of economic regimentation were of a piece with other illiberal forms of top-down control from the first half of the twentieth century: like forced sterilization, racist immigration controls, and rounding up Japanese-Americans.
indeed you would. likening any regulation to "forced sterilization, racist immigration controls, and rounding up Japanese-Americans" is about de rigeur for hysterics, libertarian or not.
But I'm afraid that hostility to market-based economic growth remains a common mindset among people who call themselves liberal.
well, that's good to know. and here i thought "hostility," or at least suspicion, towards market fraud, market irrationality, market inflation, market overvaluation etc. was politically neutral or even universally shared. my bad.
less bad: equilibrium (rawls).
May 23, 2008 6:54 PM | Reply | Permalink
notes.
[1] Congress and the Control of Radio-Broadcasting, I; Carl J. Friedrich and Evelyn Sternberg; The American Political Science Review, Vol. 37, No. 5 (Oct., 1943), pp. 797-818
[2] ibid.
[3] ibid.
May 23, 2008 6:58 PM | Reply | Permalink
Re: a key statistic of the well-being and health of the American people, life expectancy, is now declining.
Can you document this (from a non-ideological source)? I have seen stats that show that the rise in 20th century life expectancy has pretty much plateaued (mainly because we've hit the limits of the possible with current technology) but I have seen nothing to suggest that life expectancy is falling in the US.
Re: The only sector of the U.S. economy that has done well is banking and finance
Um, high tech and software? Pharmaceuticals? Healthcare in general? Higher education? Also, to what extent has the decline of other industries been due to deregulation rather than to foreign competitors out-competing the US, and ultimately to spectacularly bad management? Can we regulate against stupidity in the boardroom? And by the way, what's wrong with finance doing well? Yes, we should like to see health and prosperity across the economic board, but I see no reason (other than envy) to complain about an industry that is doing well. Surely the solution lies in building up other economic sectors not in bashing and trashing the healthy ones. This is especially egregious because employment policies in Wall Street firms are among the most progressive in the country, and anyone who cares one fig about labor (which the Left used to at least) should be celebrating Goldmann Sachs and company, not calling for their ruin.
May 23, 2008 10:04 PM | Reply | Permalink
JonF311 writes that I should not be calling for the ruin of Goldman Sachs. In point of fact, I am:
Euthanize Wall Street to save the economy
http://www.dailykos.com/story/2008/4/22/222049/728/230/501153
Here is an excerpt:
Yes, I see Goldman Sachs as a net negative for the U.S. economy, not a positive. John Bogle, founder of the Vanguard group of mutual funds, calculated about two years ago that the financial system is SUBTRACTING about $540 billion in value from the real economy. (I think the figure is closer to $1 trillion.) See his interview on Bill Moyers Journal. Warren Buffet made the same point in his 2006 letter to Berkshire Hathaway shareholders.
I will be explicit - we must kill Wall Street before Wall Street kills us.
May 23, 2008 11:00 PM | Reply | Permalink
JonF311, you have given us another perfect example if what’s now wrong with economics in this country. Two and one quarter centuries ago, when the republic was founded, the word “industry” was used ONLY to describe manufactories. The word would NEVER have been used to denote banking and finance, which were understood to be held subservient to the needs of industry, commerce, and agriculture. See in particular Manufacturing Revolution: The Intellectual Origins of Early American Industry, by Lawrence A. Peskin, Johns Hopkins University Press, Baltimore, 2007. In the Federalist Papers, number 15, Alexander Hamilton laid out a simple, succinct test: “Is private credit the friend and patron of industry?”
Economics is NOT about money. A financial system alone does not an economy make. Economics is about how a society organizes itself to obtain natural resources, transform them into useful products, and distribute them. What would happen if all the farmers gave up farming and instead became speculators and arbitragers on Wall Street. They would probably all make much more money than they did as farmers, but what would we all eat? Yet, because they are all making more money working on Wall Street, your paradigm of economics would hold that the economy had "improved."
“Can we regulate against stupidity in the boardroom?” Well, of course not. But we can break the stranglehold corporate managers have over boards of directors, by implementing the type of proposals for expanded shareholder ballots that the Securities and Exchange Commission (SEC), shelved in 2003. See this discussion: http://www.atimes.com/atimes/Global_Economy/JE21Dj09.html
On life expectancy, see the joint study released about a week ago by the Harvard School of Public Health and the University of Washington. I heard a story about it on NPR, so I don’t have a link.
May 23, 2008 10:35 PM | Reply | Permalink
There is something about the title Lyndsey selected that has irked me all evening. The title: Liberals and Markets: A Strained Relationship. Working on the last few posts of mine, I remembered a friend's blog entry a few months ago, and the irritation came into sharp focus.
From The Greatest Generation--economics division
by techno
Thu Mar 13th, 2008 at 04:09:28 AM EDT
http://www.eurotrib.com/story/2008/3/13/4929/01806
Thurow was probably correct. Academic economics in USA is now the home to such extreme economic fundamentalism; the religious fundamentalists of the earth seem utterly tolerant and reasonable by contrast. The complexity the old Keynesians embraced seems to frighten and baffle the new crop of economists. To demonstrate the performance difference between the greatest generation of economists and the current bunch it is useful to compare the outcome of the advice given to Russia after the fall of Communism in 1992 and that given to the destroyed economies of Japan and Germany in the 1940s. The greatest generation produced such prosperity that the Germans called it Wirtschaftwünder (economic miracle) while today's fundamentalists recommended a plan for Russia that resulted in massive poverty and unemployment, a 20 year drop in life expectancy in less than a decade, and the return of diseases humanity had conquered a generation ago like tuberculosis.
From this devastated base, a new and improved Keynesianism must emerge. Socialism did not work and as the Russians discovered, unregulated Capitalism can actually be worse. These were failures of extreme thinking. The Keynesian era demonstrated the economic superiority of centrist thinking. With appropriate modifications, a new Keynesianism could bring back prosperity by putting people to work solving the great environmental problems of our age.
The "Strained" in Lindsey's title does not even begin to capture the fury I have for his ideas, because his ideas KILL people.
May 24, 2008 12:27 AM | Reply | Permalink
Look, I work for one of these banks, so of course I have an interest, but what in god's name is wrong with solid middle class wages, rigorous non-discrimnation policies, domestic partnerships treated equal with marriage (as far as is legally possible), four weeks vacation, or excellent health insurance progressively priced (the more you make the more you pay). Those are policies liberals argue for for everyone (and they should!) So why do you have it in for those workers who enjoy such benefits? It's not like tearing us down is going to help anyone else. No, yours is just the same old Jacobinal politics of envy and resentment. A true progressive would be trying to copy and extend Wall Streets employment policies not wreck them. It's you and your type that render liberalism a bad word in the public's mind.
May 24, 2008 12:12 PM | Reply | Permalink
C'mon, JonF311; whether, vis-a-vis their employees, investment bankers located in liberal enclaves act as enlightened paternalists isn't relevant to any issue under discussion.
What you've got to show is that the activities of these "too big to fail" banks -- that is, financial institutions who are in the enviable position of socializing losses -- add sufficient value to the economy to justify their current freedom from regulatory restraint.
You'll forgive me if, looking over the past 20 years of LBOs, M&As, and debt securitization activities, I conclude that they don't.
May 24, 2008 2:40 PM | Reply | Permalink
JonF311 writes: "but what in god's name is wrong with solid middle class wages, rigorous non-discrimnation policies, domestic partnerships treated equal with marriage (as far as is legally possible), four weeks vacation, or excellent health insurance progressively priced (the more you make the more you pay)."
There's lots wrong with it when these are characteristics found in only one sector of the economy. JonF311, you know damn well that Wall Street goes ballistic whenever there is a "union" win, or even if a company gives its non-union employees above average pay and benefits, as in the case of Costco.
The day Wall Street begins to say nice things and reward companies that actually compensate their employees well, is the day I will lay down my pitchfork and torch.
May 25, 2008 2:19 AM | Reply | Permalink
Brink Lindsay's ignorance of 20th century history suggests that he's blinded by his ideology. Someone has already pointed out the New Deal program was developed in response to capitalistic excess. If left alone, capitalism will always reach for excess because it's based on human greed. Call me an optimist but I think most people want to behave in a manner that is beneficial to both themselves and society but if left on their own with no effective regulatory apparatus in place, greed wins over reason. Corporations are run by humans who are required by law to make a profit but obey the law; there is nothing in law that requires a business to act in the public good. Consequently business cannot be trusted with the public welfare. Governments are only slightly more trustworthy than business but they are also more subject to societal control and aren't legally compelled to place profit over everything else. FDR had no intention of going as far to the left as he did; but I'm convinced he would have gone further to the left if circumstances permitted. When FDR landed in the Oval Office, it was clear that he came to realize the economic situation was far more dire then he had believed and his reforms (call them collectivist...whatever) were critical for pre-empting violent social unrest, which most assuredly would have occurred had FDR sat on his ass like Libertarians and Conservatives wished he would have done. Bottom line: Markets have proven themselves to be a poor way to establish economic policy that's in the best interest of society and they create as many problems as they resolve.
May 26, 2008 12:14 AM | Reply | Permalink