Charles Krauthammer is Genuinely Stupid

I'm making a concerted effort to pay attention to conservative writers during these tumultuous economic times, mostly because I want to see which ones are exhibiting any signs of intelligence. Many of them have quickly abandoned their small government pretenses and are calling for drastic federal action to stave off the recession. But some are sticking to their guns, obstinate in their belief in the free market, and convinced government is the problem, not the solution. Neo Con extremist Charles Krauthammer has been true to form, ignoring all the evidence and judiciously spinning his own ludicrous take on events. Krauthammer wants the government to intervene and pump credit back into the economy, but heaven forbid they start to tell banks and industry how they must behave. For Krauthammer, free markets still reign supreme.

In an article for the Wall Street Journal, Krauthammer warns of the imminent danger the government will bring if it intervenes with the sanctity of free market capitalism. He writes:

The ruling Democrats have a choice: Rescue this economy to return it to market control. Or use this crisis to seize the commanding heights of the economy for the greater social good. Note: The latter has already been tried. The results are filed under "History, ash heap of."

Krauthammer's take is interesting for a number of reasons.

---

Firstly, social democracies like Sweden, Norway and Denmark are amongst the most successful, egalitarian societies on earth, so Krauthammer is simply lying.

Secondly, as Noam Chomsky pointed out in an interview I conducted with him last month, government intervention in the market is nothing new. It is as old as capitalism itself, and the defining engine of economic prosperity. All of Western economic development follows a remarkably similar pattern -- a strong, central government protects fledgling markets, subsidizes them while they are growing, then bails them out during times of crisis. It is a story of socialized risk, and privatized profit, or corporate socialism if you will. The market does exist, but only for the poor and middle classes who must fend for themselves without the support of Uncle Sam.

Yet the Krauthammers of this world ignore this fact, ascribing economic development to the 'Invisible Hand' of the market. He writes:

Republican minimalism -- saving the credit-issuing utilities -- certainly risks not doing enough. But the Democratic drift toward massive industrial policy threatens to grow into the guaranteed inefficiencies of command-economy maximalism. In this crisis, we agree to suspend the invisible hand of Adam Smith -- but not in order to be crushed by the heavy hand of government.

I've often thought that a good percentage of economic conservatives don't believe their philosophy actually helps the most people. I think they are simply greedy, and want society to work in a way that benefits them regardless of the plight of others. However, commentators like Krauthammer seem to genuinely believe in the doctrine of free market capitalism, and will subscribe to its purity no matter what. If it crashes, it wasn't 'free' enough, and if doesn't work, then human error is to blame. His rigid belief that government is bad, and free markets are good has led to the current disaster, yet he is incapable of seeing it. So Krauthammer, as loathsome as he appears, it not necessarily a bad person. Just stupid.

Ben Cohen is the Editor of The Daily Banter.com

Comments

[jimtree]

Many so called economic conservatives either through ignorance or by design confuse a privatized economy with a true free market economy. A privatized economy might start out resembling a true free market. However, over time without some form of government oversight, a private economy will become as uncompetitive, inefficient, and corrupt as any socialist one.

Anyone who remembers economics 101 should know that for a true free market, a market operating solely by the law of supply and demand, to exist requires three things:

1. All players in a market must have a complete knowledge of that market including all costs of production and the prevailing price that the consumers are willing to pay.

2. All players must be able to decrease or expand production as needed, as well as, enter and exit the market as needed.

3. And no single player can dictate prices or in any way influence the overall supply of a product or operation of the market.

Obviously these are utopian requirements that are seldom met in the real world. Indeed, in the real world all vast fortunes are made because the above conditions, which are required for the law of supply and demand to operate unimpeded, are in some manner circumvented or perverted. In a true free market driven only by the law of supply and demand huge fortunes would be impossible as competition would automatically quickly push profit margins down to exactly the minimum amount required to stay in business.

[econ1]

Well I don't know if Krauthammer is stupid but he does make some valid points, and as for Denmark, Sweden and Norway pointing the way for the USA, it won't work. They all have a tightly knit society, minimal population growth (a quarter to 2/3 that of the US), restrictive citizenship (imagine the USA saying that someone born here of foreign parents isn't a citizen, or even that you need to be fluent in English), as well as concentrated natural resources (for Norway and Sweden) of oil, and hydro power supplemented with significant nuclear.
A top down government controlled economy might work under those circumstances for awhile, but even Sweden has been moving to increase the private sector in recent years. WIth a larger society you will need more control mechanisms and that's where it has generally gotten ugly.

Only a big government is worth corrupting and our government at all levels is getting bigger every day. Hence the parade of supplicants to Washington rather than to their consumers.

If we want to learn from Sweden,. they stopped supporting their auto companies some time ago and sold them to the US firms. I understand that they have indicated that don't want Saab (I have one) or Volvo back.

[HeevenSteven]

"Top down government controlled economy" = strawman.

[legalgirl]

I guess Mr. Krauthammer never played "Monopoly" alllllll the way to the end of the game. Remember how it ends? The title of the game is the answer.

[billw8017]

Anthropologists find a child buried with rich shells and decorations; that is to say, inherited wealth forty thousand years ago. All systems tend toward stratification. Look at the privileges that the Communist elite took for themselves. Yet, this kind of stratification is a kind of rot in the body politic. Diminishing each person is much the same as shrinking the population and making a smaller nation. These partisans are merely a riot, Josephus writes of the Jews opposing the Romans. Diminish each person, each person counts for less. You lose the insight that comes of operating a machine when you lose respect for the operator, and invention becomes something to be discouraged by your contempt for the inventor. Colleges have been founded to teach that the world began six thousand years ago -- the people who promote these dogmas are not geologists, merely wealthy enough to promote their points of view. The cure is a more egalitarian society, and this is achieved by giving ordinary people a power to pursue their interests; basically, the right of assembly assured in the first amendment to the US Constitution. They knew.

[BillMelater]

I'd like to know what these noecon hacks have against industry? It is almost like they cannot stand industry. Just look at what they are doing to Detroit as compared to Wall Street - the difference in treatment is night and day.

http://billmel8er.wordpress.com

[DiogenesOfAlaska]

The difference is the contagion effect. The bailout isn't a subsidy. It's not money thrown at bankers. It's done to avoid effects that would be worse. The same question is asked in Detroit. And the answer is forthcoming: liquidation is worse than throwing a life-line with government funds.

But the overall economic effects of bank failures are generally worse by orders of magnitude.
The difference in decisions has little to do with favoritism. It is much more of a cost calculation.

[BillMelater]

The big difference is that Detroit just wants a loan which the banks are not doing in spite of receiving all of that free money.

The decisions have everything to do with favoritism.

If you are so in support of free markets, why not let the banks go under? Let the rich get a real job in stead of sitting around the swimming pool collecting dividend checks.

[hcurran]

To quote the writer named Viking: "Finally, to dismiss economic conservatives as simply greedy belies your own bigotted myopia, revealing your apparent ignorance of the fact that economic conservatism, i.e., free market capitalism, has benefitted more people in more places for longer periods of time than any system ever devised."

The "Viking" writer has an appropriate name. Vikings were successful capitalists by the simple act of raiding and taking the wealth of communities, including monasteries (the universities of their time), farmers, merchants and those anyone else whose livelihood came from diligent effort to survive the dark ages of the 8th & 9th centuries in Ireland, Scotland & Wales, as well as England. Vikings were among the most prolific raiders and the most greedy entrepreneurs the world has ever seen. They had no compunction in killing monks, nuns, teachers or anybody else that got in their way in their quest for instantanous wealth without effort except by destruction. The simplistic Viking philosophy is representative of "free market capitalism". Take without consideration of the ethical consequences of depredation. The long term consequences are of no concern. The thinking seems be that those made homeless & destitute by "free market capitalism" deserved what they got because "free market capitalism" is based on a "buyer beware" philosophy. Greed is good is the rallying cry of "free market capitalists". The assumption is that some vast universal "free market" law is in effect, an assumption that has no historical merit .

[DiogenesOfAlaska]

Well, the Vikings didn't persist.

This may be a case where the free market law was in effect: free market also means you need to be prudent with respect to what happens in the future.

Restricting attention to prudence may well be insufficient for ensuring a decent human life. But in my opinion, the problem with the present crisis is not this (sort of moral) observation. The problem is that a lot of agents - including many bankers - did NOT act prudently.

Why ask for ethical behaviour - which is very hard to grasp for many folks - when mere prudence -in the short as well as in the long run - would already suffice?

Consider it as a game: whenever you ask for ethical behaviour, people won't listen. But pointing out that they act like fools always works. It's even easy these days, because bankers cannot quite avoid the admission of mismanagement.

[mikey2]

What blows me away about the whole free market meme is the notion that somehow the markets work best without human (well, gov't) interference. B.S.!!! The market IS a human invention, that can, is and always has been susceptible to manipulation by individuals, companies and countries.
To think that an entity (or groups of entities) can be left alone to handle trillions of dollars of other peoples' monies without supervision in the very definition of insanity.
Like my daddy always said: if you can't trust priests to not rape kids, you sure-as-hell can't trust some bozo you've never met with your retirement, life-savings or tax money (without supervision)!
If you believe in the wonderful, omnipotent, benign, guiding hand of the free market, I gotta bridge to sell you!

[DiogenesOfAlaska]

As is the case with all memes, the free market meme is subject to mutation and transmission error. Not always good. Only sometimes.

Transmission error 1: (occurred more than half a century before Marx) read only one of two volumes of Adam Smith.

Transmission error 2: (occurred ever since the 1970s, when asymmetric information was beginning to be the subject of systematic study): markets are ALWAYS efficient and most best unprecedented at resource and capital allocation.

Transmission error 3: Government intervention is a concept that does not refer to central bank activity, not to Wartime spending, not to the precise shape of the tax code and its competitive consequences etc.

Transmission error 4: Property rights are a concept that is self-evident and that do not require precise interpretation in the context of societies who go through once-in-a-century changes of reallocation of retirement savings. In particular, it is unnecessary to rethink the short vs the long term in incentives of managers, even in the face of the richest billion of the population of the earth putting their savings into stock instead of trusting old-fashioned instruments.

Mutation: if enough idiots believe that it is also wonderful and omnipotent, benign and guiding, then why clarify that all of this contradicts and defeats the purpose?

[VikingKing]

Ben, Ben, Ben:

Krauthammer is a brilliant intellectual, and Pulizter Prize-winning writer who would never engage the kind of juvenile name-calling and simplistic analysis displayed in your column.

First, the Norway thrives thanks to North Sea oil. Sweden, Denmark and other European socialist countries keep their noses above water thanks to American productivity and prosperity. Now that the Left has weaked the U.S. to the point of depression, even bankruptcy, watch Europe crumble.

Secondly, if Chomsky is your hero, then you'll love Soviet style central authority but you'll be one of the first in front of the firing squad once the thugs have no more use for your propaganda services.

Finally, to dismiss economic conservatives as simply greedy belies your own bigotted myopia, revealing your apparent ignorance of the fact that economic conservatism, i.e., free market capitalism, has benefitted more people in more places for longer periods of time than any system ever devised.

http://www.hillsdale.edu/news/imprimis/archive/issue.asp?year=2008&month=05

But hey, let's go ahead and kill the Golden Goose! That's intelligence for you!

[DiogenesOfAlaska]

Newsflash:
Unfortunately, some brilliant intellectuals and Pulitzer Prize-winning writers may not engage in juvenile name-calling, but still are very much into simplistic analysis. (For obvious reasons, I will not name anybody in particular here - who am I to engage in name-calling? I have a reputation to lose).

If Scandinavia is socialist, then I have two questions for you:
1) do you think the hope of the US for getting through this banking crisis would be better if they didn't emulate what the Scandinavians did in their very own banking crises in the 1990s? And btw, how come they had to nationalize their banks when they were socialist? Or did they only become socialist when they reprivatized them?
2) did you ever calculate the impact of the effect of the Nobel prize cluster at University of Chicago on the chances of policy proposals in 1980-2008? And who exactly was Nobel? A socialist? A Non-VikingKing?

[HeevenSteven]

Straw men!

[DiogenesOfAlaska]

Just in case you haven't heard of it yet:

The fundamental principle of asset-pricing (trusted within and outside of the University of Chicago) reads thus:

THERE IS NO FREE LUNCH.

Contrast this to: don't kill the Golden Goose.
Just wondering that maybe you have some basics yet to learn.

[BillMelater]

Nonsense.

Free market capitalism leads only to a medieval caste system where a small percentage of the population is filthy rich, the vast majority is dirt poor, and a small percentage in the middle class. The middle class in this case consists of merchants and a few tradesmen, etc., serving mostly the rich.

To have a sizeable middle class, one needs what is called regulated capitalism. Something that we had from the Great Depression up until the George W. Bush Administration.

I really wish these neocons could buy a clue, cause it seems they just can't grow one naturally.

http://billmel8er.wordpress.com

[DiogenesOfAlaska]

I'm not sure about copyrights when it comes to terminology.
If you ask me, regulated capital markets are the thing to do, but I'm not sure many people would call it regulated capitalism.

With so much agreement, I almost don't dare to point out that even in regulated capital markets, there is such as a thing as the time-value of money, or net present value. I'm not sure that this is fully consonant with the notion of 'bill me later'. But maybe your name is really meant to be 'bill me later - and I'll pay the interest you charge, if it is fair'. In that case, we would agree completely on everything.

What's the net present value of a clue, by the way?

[DuganS1]

There is still a sizeable middle class in the United States. The loss of un-skilled and semi-skilled manufacturing jobs does not equate to the disappearance of the middle class, nor did the loss of those jobs begin under the second Bush administration. The loss of these jobs largely started in 1979 and has occurred for several reasons including productivity increases and the lack of business investment in many sectors because they're not profitable in the US (eg. textiles/apparel).

[ReverendDraco]

"Free market capitalism leads only to a medieval caste system where a small percentage of the population is filthy rich, the vast majority is dirt poor, and a small percentage in the middle class."

You're kidding, right?
*I tried to respond here, but not allowed enough space. . . so I am posting this to my blog*

[truthynesslover]

Ludvic von misses the point because he was a closet faciest?Oh my god! The influence of the Chicago University on modern economics is unprecedented. Since 1969, most of the Nobel prizes in economics have been awarded to the free traders, despite the spectacular failures of laissez-faire economies.The connection between the University of Chicago and fascism was renewed in the 1960s under Pinochet in Chile. It was the "boys from Chicago", students of Milton Friedman, who destroyed the economy and reduced the citizens to serfdom in Pinochet's fascist Chile, where dissent was eliminated by right-wing death squads is the spirit of Ludwig von Mises, Friedrich von Hayek, Milton Friedman, Murray Rothbard, and Alan Greenspan, etc.These hardhearted economists claim to be for the individual, but what could be worse for the individual than the policies of the Chicago school or Chicago boys? Capitalism, in its pure form, does not persist in the world. If it did, as the Peruvian economist Hernando de Soto understands, there would be far more employment and especially in third world countries. Instead, America and Europe engage in subsidary policies that wipe out the competition. Genetically modified food as well as irradiated food will only further widen this gap. Corporate welfare is the worst form of this pseudo-capitalism. It is, as a French economist put it, privatizing gains and socializing losses.

[plumnelly]

As we've seen ,when the going gets tough for the rich they become socialists. Their free markets have given us over to China without a whimper.

[DuganS1]

The Chicago school "destroyed the economy"....???? I don't see how the economy has been destroyed. The 1982-Dec 2007 economic period we just completed witnessed in the US the greatest period of growth in world history, and was only interrupted by two very short and shallow recessions (1991 and 2001), saw unemployment below 5% for a good part of the period, and saw inflation go from double digits to below 3% for a long period. We're in a correction now and will recover like we always do (except in the 30s when we didn't).

[DiogenesOfAlaska]

Krauthammer is a retiree, not a commentator. It's a mistake to assign too much weight.

That said, I am afraid you are reacting in the manner he is enticing. Transactional analysis suggests the following appropriation of the general method:

Yes, he is in denial (or lying). No reason to cede ground. Because he is toying with his denial. That's what ideologues do, conservatives and others.

Since he is also wrong, the minimal response which shows why he is wrong is the best. The good thing about this crisis is that it puts into evidence the minimal position which nails down his error: he is self-contradictory. The crisis is the result of a market FAILURE, and it follows textbook economics in that. Bubble economics is difficult, but the crisis doesn't require any bubble economics. Stuff has been traded for which no market price could emerge stably. Example x+1 for the observation that not all things can be traded, unless you put effort into making it tradeable. Blind greed, investor ignorance, intransparency, misaligned incentives, markets dominated by small numbers of dealmakers etc are
5+ reasons why this had to go bust.

Those who want to reap the benefits of free markets (including me, btw) must see to it that markets CAN work. Not enough to pay lip-service. Lots of europeans do more, and some of them know why they must.

[Peter007]

Mr. Krauthammer may be an idiot on most of the topics he writes about but I may be close to agreeing with him on this.
The job of the Federal Reserve is to control the money supply. It has to make sure there are enough dollars circulating so business can function. That' s their job. Its been that way since 1918.
Now ,most people are calling the $700 billion bailout a bailout. ( I wonder why).
Most of it is not a free grant to business that have lost money,
It's a loan to keep banks in business. Thats what banks do. They get money from the Fed and lend it out. There's no money to lend out now , no cash , so the Fed is supplying the banks with the cash in the form of a loan. Business as usual. This is over simplification but you get the idea.

"I place economy among the first and most important virtues, and public debt as the greatest of dangers. To preserve our independence, we must not let our rulers load us with perpetual debt."

-Thomas Jefferson

[bigbingtheory]

I believe the author of this post was taking issue with Krauthammer's denial that his economic philosophy is to blame for a our current mess and still clings to those proven failures of less government regulation.

[DiogenesOfAlaska]

It's not difficult to agree that Krauthammer is a very learned and able man. It's also very uninteresting to study the precise level of knowledge or ignorance of particular individuals. Schools do that and they often fail. Elections do that and they often fail. Bosses do that and they often fail. It's a business prone to failure.

But look: to quote Jefferson is really beside the point. The man was a genius, but he didn't understand a word of finance, credit or capitalism. That's ok, because you cannot ask a renaissance man like Jefferson to know what Adam Smith will write and publish only after Jefferson forms his view, gets himself an education and enables himself to found a nation.
Still: he is simply the wrong quote here.

[fishgirl26]

Oh Ben you warm, fuzzy leftist!!!! People like Krauthammer believe "what's good for me is good for me and screw everyone else" I simply believe, like you, that if you're using our tax dollars to bailout industries and banks and NOT tracking where the money is going...it's stupid! We've seen how well his "market control" idea has worked!

[ianrthorpe]

Pumping money into the economy and cutting interest rates to restart borrowing and spending is not just futile, its a deception.

How are people and businesses going to borrow more when they have no money to service the debts they have already amassed.

The stupidity is not on the left or right, they are only guilty of short termism and self interest. The stupidity lies in the orthodoxies of free market economic thinking that had dominated government and business for thirty years and blinded us to the twin crises of the economic system and climaste change.

Add to those a looming overpopulation crisis and yo have the perfect storm.

http://greenteeth.blog.co.uk/2008/12/08/interest-rate-cut-will-only-benefit-bankers-5182652

[Peter007]

I disagree.
The rules of the game since 1918 have been inflation is part of the game. We have it every year. Sometimes it big sometimes small. Inflation forces people to buy hard assets because paper assets ( dollars) lose value. Thats how the game has been played. Now, whoever you want to blame ( Federal Reserve, Treasury ) the rules have quickly changed and caught everyone with their bankbooks hanging out. Deflation has arisen. The government didn't want this to happen.
It would be better for our economy if prices stabilize.
After the economy is stable, you can promote your ideas of communism, socialism of whatever you want. A rising tide lifts all boats and a sinking ship drowns all that are aboard.

[bigbingtheory]

I think the point was this bailout was needed because of a lack of oversight and too much dependency on "free" markets. Yes, we have to bail out, stabilize, industries that were allowed to crumble left to their own devices. When people like yourself start tossing out terms like socialism or communism, you are showing a profound ignorance to the vast majority of people who simply want the government to do their job and protect us from corporate malfeasance. It is not socialist or communist to use the government to ensure fair business practices.

[DiogenesOfAlaska]

Your faith is slightly blind. Just because something is the rule of the game doesn't mean that under the circumstances of finiteness of fossil fuels or excessive gaming of the free markets it can still work.

Economy and finance aren't known to be realms of knowledge where the future always resembles the past. You are shifting the burden of proof away from those who should first and foremost provide proof that what they propose can work: financial innovators.

[drkazmd65]

Mr. Cohen - I think you are confusing 'Stupidity" with "Wilful Ignorance and Inflexibility' as regards Mr. Krauthammer.

Don't call a person stupid that has the mental capacity to learn and adjust his/her thinking IF that person refuses to do so. That is an insult to those that really are stupid and can't help themselves.

[DiogenesOfAlaska]

Congratulations! You sure are taking the high road on everything.
I hope to get there one day. Are you a Yoga master or Buddha nature by any chance?

[drkazmd65]

Nope,... just a relatively sarcastic, cynical, agnostic, practicing pagan Diogenes.

But it always infuriates me when people dismiss the bad, willful actions and choices of those with (allegedly) functioning minds as 'stupid'.

George W. Bush - for example - isn't stupid. He is actually quite intellegent. He just lacks empathy for his fellow man, is a raging narcicist, and is intellectually extremely lazy and sloppy. He is smart enough to know what he is doing is 'bad' - but choses not to care about anything except himself.

[HeevenSteven]

I agree, Krauthammer has a long record of saying stupid things. Not long ago he said something to the effect that climate change was a liberal conspiracy for social engineering. If I said things half that stupid at work, I'd be unemployed.

[oncethere]

They rationalize their greed and lack of empathy for their fellow man with the argument that, in a free-market system, everyone benefits. Bush said, on the day the tax-cuts for the super-rich passed, "It's a great day for the working man of America." Really said that. Even he has some shame, then, finding it impolitic just to go "he he he" and rub his hands together.

[MCpiano]

Krauthammer is one of the smartest conservative commentators today. You are citing Noam Chomsky in your rebuttal. I have read Noam Chomsky interviews. Literally everything he promotes, including accepting the jurisdiction of the International Criminal Court and the World Court, support of the UN, signing the Kyoto protocols, sharp cuts in military spending, are all wrong for our country.

[Ben Cohen - Huffpost Blogger]

Let me get this straight: Accepting the jurisdiction of the International Criminal Court and the World Court, support of the UN, signing the Kyoto protocols and sharp cuts in military spending are bad for the country, while embarking on unilateral illegal military adventures, ignoring the U.N, trashing environmental agreements and wasting money on weapons that don't work is good? Also, if Krauthammer is so smart, why has he been wrong on virtually every issue he has written about (and Chomsky right?)

[Parducci]

Your agreement with Chomsky doesn't make him right. You may both wrong. Or in your lingo, "stupid". One thing I'd never call you, though: classy.
PS Right or wrong, smart or stupid, it was President Clinton who declined to submit the Kyoto treaty to Congress. And that's a fact, Jack.

[DuganS1]

Signing the Kyoto protocols doesn't make sense unless every country signs it and abides by it, otherwise it just puts the US at an economic disadvantage. I don't understand why anyone would want sharp cuts in military spending, except for ridding ourselves of the Iraq spending that is. Clinton already gutted military spending enough. As for "wasting money on weapons that don't work", what weapons are you referring to? I hope you're not referring to missile defense which does work and which I think should be a top priority and receive a massive increase in funds.

[MCpiano]

To your first sentence, yes. For the unilateral military adventures, what are you referring to? Iraq was not unilateral. Ignoring the corrupt UN--yes. Not signing Kyoto--very good. Don't know what weapon you are referring to. Krauthammer wrong on every issue? Like what???

[Rule Of Law]

As I recall, it was Bush I who began slashing military spending after enacting tax increases to help balance his budget after the fall of the Soviets? Whereas his son want to put missals in Poland! Bush I was also smart enough Not to invade Baghdad, as opposed to Junior, whose illegal runup to the war is now well documented. As for Kyoto, most of out top competition has already signed, and as with Humanitarian decrees, such as agreeing not to torture or suspend human rights, isn't it often the responsibility of the grownups in the world to set the proper example from the top down? Might cost us a little in the short run, but worth the purchase of the higher moral ground. As for Mr. Chomsky, rarely do we see a man of such genius in any generation!