It's the Economists, Stupid!
If you want to read it, you can go to the link, but really, I thought, what's so hard to understand? The economy we have, with all its volatility, is exactly the economy any sane person would have predicted after the wholesale decline of regulation, as both a reality and an idea, in the eighties and nineties. And who has kept up the drumbeat for deregulation, not only here but everywhere, if not those screwy, and tenured, free-market economists? Their whole job for the last thirty years has been to prop up the egomania and greed of corporate CEOs by making that greed and ego-mania look both positive and unavoidable. As a result, the gambling side of capitalism has driven every other side away, to a chorus of bleats from the left that, Gosh, something big and bad was bound to happen, and an accompanying chorus from the right that even saying such a thing was treason.
Let's review. At the end of the 1970s, it was decided by some people that they weren't getting rich enough fast enough, and that they were tragically hampered in their efforts by government regulations that dictated, for example, that foods called by some generally understood name, such as "milk" actually had to be milk--not a milk-like product, not a milk-containing product, but truly milk, from cows. We had "stagflation" I remember it well. It might have gone away, or the shock of oil prices at the time might have induced "entrepreneurs", as they called themselves, to invent something new, but they went whining to the Republicans and the Republicans installed that phoney, Ronald Reagan, who installed another bunch of phonies in various offices of the regulatory agencies, and those phonies said that businesses were perfectly capable of reglating themselves, which everyone knew was a crock, since they had never regulated themselves and were openly getting rid of regulations so that they wouldn't have to regulate themselves or be regulated by anyone. Yes, capitalism is a shell game and all salesmen have a little of the snake-oil in them, which is what makes it fun and profitable, but also makes it persistently unscrupulous. The apologists for the "Reagan Devolution" were "Free Market" economists, whose idea of a human being, based on their experience of themselves, was a perfectly rational and isolated male who always acts in his own selfish interest. In addition to themselves, they were, of course, describing people with sociopathic personality disorder. These economists did what was in their selfish best interests to do -- they promoted and excused all the aspects of human nature that Jesus himself had found abhorrent and they made the world we have today.
The managers of our businesses learned what they know from these guys in their business schools, and guess what, that's why they can't manage their way out of a paper bag, because they're unregulated! The purpose of regulations is three-fold. 1. They prevent the "failure of the commons", a concept that describes why unregulated markets become more and more criminal -- if the unscrupulous run things, then the scrupulous have to give up some of their scruples just to save themselves, and so the whole system gets more and more criminal. 2. They give customers assurance that the things they spend their money on are more or less reliable. and 3. They keep the system relatively simpler than it is when there are no regulations, so the system is easier to understand and manage. What was it they said about the subprime mess? Oh, yeah, neither the buyers or the sellers of sliced and diced mortgage-backed securities knew what they were buying or selling. And they were the experts!
I don't hate capitalism. Capitalism has enabled the printing of lots of good books that had been out of print for a long time and also the spread of redleaf lettuce and those delicious blue potatoes that I like so much. But unregulated Capitalism has done a wonderful job of certain other things, too -- consolidating the ruling class, increasing the class divide in our country and around the world, destabilizing lots of third-world governments, and accelerating the pollution of the natural world, climate change, and population growth, while worsening the physical health of almost everyone. It has also provided us with a lots of cheap entertainments and goods that we didn't know we needed (Bratz dolls, anyone?). But the failure of economists to understand human nature, especially the complexity of relationships and the interplay of self-interest and morality, has enabled them to fatally simplify our world and exalt such dopey ideas as "creative destruction". They have led the government down the dead-end path of thinking that the government serves the economy rather than vice versa.
When I read about rightwing jerks attacking Rev. Wright for telling the truth when they themselves have created the mess we are in (huge expensive war, nose-diving economy, rotting infrastructure, climate change dead ahead, Constitution in shambles, White House occupied by delusional idiot) I know we have entered, not the golden age that the shallow, ignorant economists predicted, but a true iron age of conflict, death, and destruction.
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What I find one of the silliest notions put forth by Milton Friedman and the University of Chicago School of Economics is that society can trust the "markets" to self regulate. This idea ties directly into Jane Smiley's statement that economists may know something about analyzing economic statistics but very little about human nature and history; in truth, markets can no more regulate themselves then people can, which is why we have something called laws. Let's set aside the fact that there are no free markets and what constitutes this blessed state of affairs today is the US government's give away of America's industrial base to the world and getting virtually nothing for it beyond Walmart's ability to import cheap goods from Asia and Latin America. "Free market capitalism" as a concept was dead by 1901; it had a disastrous reprieve in the 1920s but by 1932, unregulated capitalism had been derailed by New Deal progressivism. Yet like spiders sitting in a dark corner waiting to strike at an unwitting victim, the paragons of corporate America bid their time, fought progressive ideas tooth and nail throughout the 1960s, and, as Jane notes, in 1980s they elected the perfect candidate; a man so bereft of intellectuality he couldn't understand the differences between micro and macro economics if they had been explained to him by Milton Friedman himself. for those with a short memory or not alive at the time, Reagan was the president who embraced the "Laffer Curve" and the belief that capitalism is really altruistic because capitalists must respond to the needs of customers or "markets" thus the self regulating mantra that every free marketeer since Herbert Hoover has talk about. Honestly, I don't know how many folks remember the debate in 1980 about Reagan's so called voodoo economics but it was fascinating how may people bought into this bullshit. As Jane reports, virtually anyone with a clear head at that time could have predicted the future. Sadly even Democrats embraced and continue to embrace the wonders of the blessed markets. Just ask Bill Clinton and the DLC what they think of free markets and globalization: Clinton did more than any Democratic, even more than Reagan himself, to validate Reaganomics. Obviously, what is needed is a total reinvention of the federal regulatory apparatus and it would be nice to see this firmly Constitutionalized so it can't be undone a generation or two from now by greedy corporatist, their political hacks, and their supporters on the Supreme Court.
"in truth, markets can no more regulate themselves then people can, which is why we have something called laws"
ahhh, the sweet sound on hammer hitting nail on head... Great theories can be built on false assumptions and myth. One you can get people to buy into the assumptions the reast is easy...eve
Other myths...me
- Corporations will respond efficiently to consumer need even if they believe that there is more money to be made in short term by simply giving them what they must buy rather than what they need....th
- The consumers will, by their choices, drive the success or failure of corporations that abuse the consumer. I don't have to look any further than Enron or a host of other readily available examples to bust that myth.
We've listened to these wide-eyed myths long enough. Where is adult supervision when the nation needs it most? The conservatives have McCain who thinks the most important thing is to stay in Iraq until some vaguely defined job is done.
"As Jane reports, virtually anyone with a clear head at that time could have predicted the future.:
Anyone literate person who was breathing and had a pulse during the last 7-8 years could have predicted. It really wasn't much of a prediction though we are going to be seeing a lot of 20-20 hindsight coming up really soon.
As far as our economy goes, it was 3-4 years ago when the most sage among those following our economic situation claimed that any one of several possible crises could push the economy into recession.
Where is analysis that people can trust?
The masters of the universe have zero credibility at this point -- not even a fig leaf to cover their embarrassment. Their computer models that turned NINJA (no income, no job, no assets) mortgages into AAA-rated securities have been shown up as just the latest brand of snake oil. It was a con, aided and abetted by the rating agencies and bond insurers, while the Fed looked the other way.
De-regulated energy markets brought us the Enron debacle. De-regulation of the financial sector (the repeal of Glass-Steagall under Bill Clinton) has exposed the shaky foundations of the shadow banking system http://www
I'm buying a house and a car this year with in the next 90 days. Send that old headline back to 1992.
Good God, woman, you just poked a hole in the ever sacred Reaganomics! You may want to think about a body guard.
You spell it out so clearly, so simply, so obvious. It is unfortunate that the people who really need to read and comprehend this are unable to do so. The inmates have taken over the asylum, so to speak.
It will require the due diligence of individuals to make new choices. With deregulation I learned to read the fine print. Deregulation taught me that it is possible to have my fiction and daily news spun from the same cloth. Amazing stuff really. And now we are truly in the age of anti-intel
Thanks again for a great article.
Excellent! And yet if I forward this to conservative friends, there is no way that they will be able to intellectually entertain any of it. Their blinders have been reinforced for 20 years.
(Anyway, Jane, how do I send you a fan letter? Not your home address, but a publisher's address maybe? Haven't seen you since I insulted you in Iowa City, oh 20+ years ago, and owe you an apology).
Healthcare is a prime example of the idiocy of putting marketplace ideology above common sense. The Nixon administration put forward the HMO Act of 1972 that created for profit HMO's which incentivized competition between doctors and their patients for the money. It remains one of the ten stupidest ideas of the 20th century. HMO's have failed to achieve their original purpose (to restrain health care spending) and have been warped into "managed care," a Kafkaesque system that uses counter-intuitive complexity and Byzantine administrative structures to avoid delivering needed care..
The result is a quasi-regulated system that favors the money changers. It consumes precious dollars in overhead costs and spends 50% more per capita for care than the next highest country (Switzerland), has dismal outcomes, and fails to cover 50 million people. Our medical system should be tightly regulated like a public utility with the intent of achieving universal access to care. It should provide equitable benefits across the spectrum of need. For profit institutions should be banned. The purpose of health care is to serve the public interest. Our system serves Wall Street.
Thank you Jane. I hope some of the free market idiots read your post although I doubt
it will sink in. It's like living through a neverending car wreak. Laissez faire capitalism must
go!
Laissez faire capitalism or as I have always liked to call it:
Lazy and unfair.
Lazy because the rich get corporate welfare no matter what mess they make.
Unfair because the rest of us get screwed!
I like that.
Deep insight, Jane. A sociopathic economist, Uncle Miltie, depicts his cold, brutal, egotistic sociopathy as the natural ( and proper ) human order. So, it was the money lenders who were the beloved of God - not Jesus after all.
Cogently put. I thought i was the only one who felt that way. Brava. Too bad that the people who believe these liars will neither read nor understand it. They deserve what they get. We don't.
Corrected version--sorry 'bout that.
When the human body deregulates its subsystems, the result is called cancer. When a social system deregulates its subsystems, the result is called social disaster. We can see that disaster in progress today in the US and across the world. The resulting social shock has been brilliantly described by Naomi Klein in her incredible book: The Shock Doctrine: The Rise of Disaster Capitalism.
Whoever understands what is written there will never vote Republican again, nor will they vote for most Democrats. Only Edwards (who has been removed from the primaries by the MSM successfully blacking out his candidacy,) and Barack Obama who is now being dimmed out and overtly attached by the corporate owned and operated MSM have the potential to address this fatal problem for our nation’s future.
When the human body deregulates its subsystems, the result is called cancer. When a social system deregulates its subsystems, the result is called social disaster. We can see that disaster in progress today in the US and across the world. The resulting social shock has been brilliantly described by Naomi Klein in her incredible book: The Shock Doctrine: The Rise of Disaster Capitalism.
Whoever understands what is written there will never vote Republican again, nor will they vote for most Democrats. Only Edwards (who has been removed from the primaries by the MSM successfully blacking out his candidacy, and Barack Obama who is now being dimmed out and overtly attached by the corporate owned and operated MSM.
When the parasite kills its host, it dies too.
Sometimes it just creates spores and goes dormant. Anthrax for example.
Nice try, "bdd," but not everything in this world has anything to do with a present-day "so-called candidate.
"Ike" Eisenhower warned us very-explicitly about the damage that what he referred-to as the "military industrial complex" could and would do. But of course, a host of religious texts from ancient days have said the same thing.
The very first thing that we must do, I think, is to impeach and arrest the "civil officers" who have done this to us all... so they don't escape to the compounds they're building in Dubai (literally
I know perfectly well that what we hear on the news is propaganda, but "good grief," how much of this nonsense are the more than 320 million American people willing to take, before they force law enforcement (what a concept...
It's really the Republican Voodoo Economics.
"rightwing jerks attacking Rev. Wright for telling the truth when they themselves have created the mess we are in (huge expensive war, nose-diving economy, rotting infrastructure, climate change dead ahead, Constitution in shambles, White House occupied by delusional idiot) I know we have entered, not the golden age that the shallow, ignorant economists predicted, but a true iron age of conflict, death, and destructio
But what a finale!
Thanks for the link to the Slate article.
I agree with you in general, but not all regulation is good. A good deal of the regulation was not set up to protect consumers, but to protect the businesses. That is why inefficient airlines, such as Pan Am and TWA were able to get away with no new routes, etc. Now, I believe we have gone too far the other way. Competition is good. Too much regulation stifles competition, but too little does as well, since a few behemoths gobble up all of the competition. What is needed is regulation that is designed to protect the consumer, not the corporation.
Simply said ... in terms of the US Economy ...
Keynes was correct ... Friedman was wrong.
EF Schumacher was right. Read his book "Small Is Beautiful" Subtitled "Economics as if People Mattered" It should be required reading for every progressive.
This must be reiterated, Friedman was wrong.
Say it loud, FRIEDMAN WAS WRONG.
Those 'corrections' that are just part of the self-regulation of the economy can be devastating to individual human beings. Friedman assumed a kind of morality amongst businessmen that simply does not exist. His equations become fallacious in the real world, not because the numbers are wrong, but because underlying assumptions are naive.
His willingness to experiment in Chile, for instance, showed exactly how wrong, how naive, how cruel is the pseudo-scientist.
Let us hope that Friedman's world view, under the guise of 'free market capitalism', 'trickle-down economics', and as a cornerstone of the Republican party, politically drowns everyone who holds on to this out-dated religion.
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