Of Markets & Morality

William Kristol, editor of the conservative Weekly Standard and New York Times columnist (a reflection of the Times' desire to balance its editorial page, but Bill Safire he is not), wrote recently about the economy for the Times. Apparently he now believes no one knows what's really going on in the world of finance.

Wow! I didn't see that coming.

Forgive me, but some of us have known for a few years what Mr. Kristol belatedly discovered, the economy is in free fall and no one knows when it will end, how it will end, if it will end - a fact more dramatically evident each passing day.

This past summer I read a long article in the Financial Times. It was a profile of the three most important bankers in the world - Ben Bernanke of the U.S. Federal Reserve, Mervyn King of the Bank of England, and Jean-Claude Trichet of the European Central Bank. When I finished it I thought to myself, "They have no clue what's going on."

The grave economic crisis America and the world faces is a great leveler. Neither the most astute economic brains in the world nor your next-door neighbor can fathom what's taking place. There is equality in our confusion.

In my case I didn't go to Harvard or Yale, MIT or Cornell. I didn't study under Milton Friedman at the University of Chicago or Paul Krugman at Princeton (both Noble Prize Laureates). I'm just a guy who went to a small Christian liberal arts school (Pasadena College then, but Point Loma Nazarene University now), but apparently the education I received was enough to understand what you understand, that Wall Street swifties and their economics brain teams have led us into a truly dangerous situation; one so dangerous that in time it may trump the Great Depression.

Last week the Bush Administration announced another bailout, this time Citigroup. The Government has now pledged more than $3 trillion to rescue Wall Street and failing banks - with no end in sight. Where does it end? How many more Wall Street firms will collapse? And just this week we're told the United States is a recession, and has been since December of '07. (Will they tell us next December the recession has become a depression?)

In the meanwhile, Sheila Bare, the head of the Federal Deposit Insurance Corporation (FDIC), has announced that if we can't find a way to stop home foreclosures, there will be more than 5 million people out of their homes by the end of next year - 5 million!

On the day of the Citigroup bailout the New York Times ran a story about a farmer and his family in Platteville, Colorado, who announced they would give away produce left over from the farm's harvest. On the day of the give away 40,000 people showed up. Why? Because people are hurting and hungry and the free produce - more than 600,000 pounds of carrots, leeks, and potatoes - was manna from heaven.

On the day before that in the Los Angeles suburb of Montebello, 4,000 people waited long hours for free food being distributed.

What's wrong with this picture? Billions for banks and Wall Street and nothing for Main Street, nothing for those Americans who once constituted the Middle Class, never mind the poor. It's a damnable outrage, and at its core is moral rot - the moral rot of Wall Street, the moral rot of the Economic Royalists who told us deregulation was good for America, good for the world. No it wasn't!

The Economic Royalists who fought Franklin D. Roosevelt and the New Deal are still with us (not a few of whom made up Bill Clinton's team of economic advisors, and some of whom now counsel the President-elect). They, both Republicans and Democrats, are Economic Darwinians. They believe in the survival of the fittest - as long as they are counted among the fittest. They, in the name of free and unregulated markets, created mechanisms - do you know anyone who can explain a derivative? - by which they could achieve obscene wealth - as in the $54 billion given out by Wall Street in Christmas 2006 bonuses - without accountability to either investors or government; mechanisms so convoluted as to be beyond the comprehension of even those responsible for their creation.

This rush to deregulation began under President Reagan. It grew significantly under President Clinton, and exponentially under President Bush. But this unrestrained faith in free markets, a faith not even Adam Smith, a moral philosopher, fully embraced (although try and tell that to his conservative acolytes), was a horrendous miscalculation, not alone of markets but even more telling of human nature. But today, amid economic devastation, amid crumbling markets, amid rampant economic uncertainties, those responsible for permitting such greed, greed that threatens the very foundations of our Republic, have slipped away in their Ferraris to mansion number two, maybe mansion number three, or four. They got theirs while the getting was good - and the rest of us be damned.

When we dared to question the beneficiaries of this massive wealth accumulation, those responsible for the greatest mis-allocation of wealth in our history, to challenge their moral values, they responded forcibly by saying we must not engage in "class warfare"; it's a dangerous thing, they warned, for a democracy to pit class against class. They said this even as they all but destroyed the Middle Class; as they ran over it as so much road kill on the their highway to ungodly riches.

In the end, the long-term consequences of unregulated markets and uncontrolled greed may impact our country for a longer period of time than even the devastating attacks of 9/11 - as horrifying and tragic as was that terrible day in our history.

I will end this by making a suggestion: If you truly want to understands what's happened to the economy, don't ask your banker or stockbroker, least of all an economist - ask a theologian.

George Mitrovich is a San Diego civic leader. He can be reached at [e-mail].

Comments

[wigglwagon]

You said nobody knows when the free fall will end, but I hate to admit it but I do! When I can get a job and be 95% certain I can stay there and retire in 30 years with a livable retirement, then the free fall will end. When I get that job, I can sign a thirty year mortgage and the bank really won't be taking a very big risk like they have to with temps who only get to work 89 days then have to take a month off or switch jobs. I could go on about this kind of OBVIOUS stuff all night, but I'm sure you get the general idea. Bottom line:
1. ABOLISH FREE TRADE
2. PUT THE TEETH BACK IN THE LABOR CODE
3. REGULATE THE ESSENTIAL INDUSTRIES

[wigglwagon]

Mr. Mitrovich, you are 100% right, "least of all an economist." Economics is so simple and there are so many of them, they have to complicate the issue in order to justify their own existence. And our leaders listen to them, actually pay them, for advice. But that is enough of that. I do not believe in wasting time placing blame because it accomplishes nothing, no progress, that is unless we could get Mr. Obama to fire all his advisors with degrees in economics. That would be an effective cost cutting measure. He could replace them with a single mother of two with an annual income of $30,000. I am sure our costs would go down and the value of the advice he gets would go up a few notches.

[Hiphopcrates]

"There is no force more potent in the modern world than stupidity fueled by greed" -Ed Abbey

[LiarLiarIraqsOnFire]

Of Markets & Morality (in five words or less):

Ne'er the twain shall meet.

[hiprogloho]

Unless selfishness and greed are outlawed like hate and violence, then the former will eventually be completely erased from history by the latter. Moreover, one day the brains of certain caucasians will be studied objectively and without worry of foolish offense like the animal kingdom. They will thereafter be classified as the amoral predators of the human race. Future studies will find that parts of their brains that deal with morality, compassion and goodness are too minute or ineffective and therefore equivalent to Great White Sharks of the sea. Meanwhile, as natural resources dwindle and the world economy is drained to line the pockets of the moneychanger classes, the Madam Defarges of this grave new world are knitting. President Elect Obama? He's a token face of color or Uncle Tom image put on US puppet figureheard leadership so the elite can continue to rape humanity and civilization until it exists no more.

[N2Sman]

They have compromised him in the name of bipartisanship. He better start making some tough decisions not everyone likes.

[Peter007]

The securities and banking business is one of the most regulated industries in the United States. What' s easier to do. , opening a bank or brokerage company or a shoe store?. The regulators approved of all the loans !!

[Peter007]

In a war, the first casualty is the truth. I'm afraid that in this crisis, the truth will be sacrificed by the howling mobs. Deregulation. Its a myth. There was some deregulation that occurred and it didn't help the situation but it wasn't the only cause of the problem. The regulations written required that Standand & Poors and Moody's rate the CDO's and other instruments. That's regulation. It didn't allow for better rating agencies to rate the bonds. As a result, all were rated AAA and sold. Point 1. If they were not rated, investors would have had to use due diligence before putting their money down. As it was, they relied on a government regulator to protect them. The regulator failed.
The bankers making loans had more than 5 regulatory agencies overseeing their loans. The regulators approved of the way the loans were being made. The regulators failed. One of the reasons given why they failed was that the 5 agencies couldn't always agree. Too many chiefs. Now people want to add more regulators. More chiefs. Same results.

[MrJoyboy]

What's the big surprise? Since man got up on two feet in the dim past, the clever and connected have lorded it over the less clever and connected. So it is and so it shall always be. It's in our DNA.

[Henry]

George,
In the early 1980s 20% of U.S. farmers met their economic demise at the hands of deregulation. No one gave an expletive deleted. Now 5% of American homeowners could be foreclosed. It's the game of capitalist economics. Boom bust, it's history. We currently have a war criminal as President, a Congress that will not impeach him, and a public that is fixated on the economic travails of others. And you bring up "morality", sorrry but.

[DuganS1]

The drop in agricultural commodity prices had nothing to do with any deregulation. The prices of most commodities, particularly energy related, collapse in the mid-80s.

[Balancement]

This is but the last war Bush has willed to us from his tenure: class warfare. And make no doubt about it, it *will* be war.

When there's nothing left to lose...

[Rule Of Law]

...Freedom's just another word for...

[Overd0g]

Dream on, comrade.

[Balancement]

Panic room in your McMansion all stocked, is it?

[leftLibertarian]

George, you wrote:

"This rush to deregulation began under President Reagan. It grew significantly under President Clinton, and exponentially under President Bush. But this unrestrained faith in free markets, a faith not even Adam Smith, a moral philosopher, fully embraced (although try and tell that to his conservative acolytes), was a horrendous miscalculation, not alone of markets but even more telling of human nature."

In your rush to equate 'deregulation' with 'free markets,' you forget that America has never had a 'free market' economy but political capitalism. For a 'free market' to truly exist, their would be NO government interference in the market. That is, their would be no federal reserve, no IRS, no Commerce Department, etc.

[NordicSci]

By your strict definition of a free market (the complete absence of "government interference") there is no such thing as a "free market" " its just a myth promoted by economic libertarians. To take one example, markets depend on enforceable contracts. Who is going to enforce them if there is no government? Governments make markets possible. Markets can be more or less managed by governments but they are never free of government regulation.

[Overd0g]

Enforcing contracts is not regulation. Good grief.

[edva]

Modern day "capitalism" (or whatever they want to call it) is government by the rich, of the rich, for the rich. This is a system that rewards greed and encourages exploitation and domination. There is absolutely no way it can survive in the long run. The inequities will eventually (now?) destroy it.

[Overd0g]

Why?

[Overd0g]

Is that you, Karl?

[Paul]

The Law, in its majestic equality, forbids the rich as well as the poor from sleeping under bridges.

[DuganS1]

Deregulation didn't start under President Reagan, it started under President Carter in the late 1970s. It's amazing how many people don't know this. Carter achieved more deregulation than Reagan ever did, although Reagan propagandized his focus on deregulation much more than Carter.

[Overd0g]

No it isn't. In this blog, Republican=bad, and Democrat=good. That is the limit of analysis applied.

[Paul]

Republicans - in just the last 8 years - started two unfinished wars, let an American city stay destroyed by a hurricane and watched as the economy self-destructed from greed.

And this is good?

[DanBest]

Deregulation didn't start under Carter. It started under Nixon, No wait, it was under Johnson. No wait it was under ...
How convenient for you die-hard conservatives to ignore that last eight years of Republican domination.
I'm sure it's just a coincidence that the last time the Republicans dominated the system was in the 1920s. How did that work out for us?
Don't assume everyone on this post is ignorant of history. And don't assume that your "truth" is anything more than a forn of historical revisionism. Like most conservatives you only know the history that fits your narrative.

[DuganS1]

The 1920s worked out pretty well. Unemployment was about 4%, consumer spending hit all time records by far, residential and commercial construction was tremendous, capital investment was huge, and everyone was prosperous. I don't understand your comments about historical revisionism. "By the 1970s some liberals had also endorsed deregulation as a way to protect consumers against legally sanctioned monopolies, such as the telephone company, AT&T. President Carter brought several of these trends together when he promised to free the American people from the burden of overregulation. By 1980 Carter had begun deregulating airlines, trucking, railroads, and interest rates." "President Jimmy Carter devoted substantial effort to transportation deregulation, and worked with Congressional and civil society leaders to pass the Airline Deregulation Act (October 24, 1978), Staggers Rail Act (signed October 14, 1980), and the Motor Carrier Act of 1980 (signed July 1, 1980)."

[Lahonda]

A collapsing economy is something public opinion can't alter, it can only be hidden. The government and Wall Street went hoarse from saying "All is well, in fact it's great... all because of the great American consumer, helping us buy our way out of the nasty deficit thing." Keep singing as you exit the stage... just an old drama class note.

[Gudrun]

I know, early this summer, when the bank failures began, they kept saying, it's okay, we've got it covered. Well, they sure didn't!

[zjr909]

The headline story in this morning's HuffPo takes you to ABC News Blog. After reading the comments on that Blog, the vast majority of which spewed venom at the auto workers, I have to conclude that there is absolutely no hope whatsoever for the people of this country. Instead of bringing us together, as the Great Depression did, this recession has driven so many wedges between so many groups of people that they will never recognize their common interests in time to stop the complete giveaway of all our resources to the rich. That anybody could possibly begrudge any blue collar worker their pay while the rich are stealing billions right in front of our noses is really and truly the death knell for this country. Immoral? I submit that the term "immoral" is far too mild a term to express the essence of what's happening. What our ruling class is doing to the workers of this nation mirrors what they're doing to the people of the Middle East. Did anyone imagine that those who could encourage the destruction of Iraq and Afghanistan would hesitate to bankrupt us in their endless quest for wealth and power?

[DuganS1]

The Great Depression brought us together? How do you figure that? Do you remember Huey Long and Father Coughlin, and all the marches on Washington?