For twenty-eight years, since the beginning of Ronald Reagan's first term, we have been subjected to a steady stream of Republican propaganda claiming that if we just got government out of the way and "off our backs," deregulate the economy, and let the market work its magic, prosperity would "trickle down" to the average American citizen. In the mid-1980s, corporate lobbyists descended on Washington, threw huge amounts of campaign cash around, and told us that deregulating the Savings and Loan industry would be a great idea. John McCain and his good friend Charles Keating from Arizona were big advocates of this scheme that turned out to be a disaster that cost taxpayers $160 billion. Phil Gramm, when he was Senator from Texas (and John McCain's choice for president in 1996), worked up another "deregulation" bill that President Bill Clinton signed into law in 1999 that repealed the Glass-Steagall Act of 1933, thereby destroying a key firewall between commercial and investment banks.
We witness the same over-confident, smug market fundamentalists and laissez-faire devotees, businessmen and women who hate "government" when it provides aid to families with dependent children, or food stamps, or health coverage for poor people -- businessmen and women who denounce as creeping "Socialism" any attempt by the government to redistribute some of the nation's wealth to the working middle class or to the poor -- now come to Washington, hat in hand, begging the federal government to fix their self-created problems brought on by their own unbridled greed and recklessness and demanding massive infusions of tax-payer dollars in the form of bail out after bail out.
It's Socialism for the rich and laissez-faire capitalism for everybody else.
What Bear Stearns, Lehman Brothers, Merrill Lynch, and now American International Group Corporation have in common is that they all hired Washington lobbyists and lavished campaign donations on politicians to push through with no public support the radical deregulation of the financial sector. Then they proceeded to create entire new categories of "financial products," derivatives and the like, that amounted to nothing but a giant Ponzi scheme. And when it all collapsed due to their Wild West, shoot 'em up, freebooting, 19th Century-style rapacious business practices, they turn to the government for a hand out to keep the whole goddamned system from descending into another Great Depression.
For historians like myself, and for people like Kevin Phillips, William Greider, and other observers, this collapse of our financial sector was like watching a slow motion train wreck. The laissez-faire proponents for the past thirty years have perpetrated the biggest lie ever told to the American people. And George W. Bush, as with everything else, took this lie to its extreme. He gave the financial industry everything it wanted, and he appointed their lackeys and puppets to run the regulatory agencies that were set up in the wake of the Great Depression to avert exactly the kind of catastrophe that we're witnessing on Wall Street today.
George W. Bush spent the first months of his second term on a 60-city tour where he answered prefabricated questions in phony "town hall" meetings claiming that privatizing Social Security -- taking $1 trillion out of the trust fund and throwing it to his backers on Wall Street -- would be a great idea. And even though the Republicans ran the House of Representatives with Denny Hastert and Tom DeLay, and the Senate with Bill Frist, and the presidency, the American people did not fall for this legalized form of grand larceny. And it's a good thing they didn't. Had Bush been able to get his way and throw a third of the Social Security trust fund at these same damaged, greedy firms we would be witnessing with the current financial meltdown the demise of Social Security.
The libertarians like Ron Paul, Bob Barr and others tell us that the government should not bail out these Wall Street hucksters and gangsters and should let them go down and pay the price for their own mismanagement and bad investments. I agree philosophically with this point of view. But I don't think it's realistic unless one is willing to see the nation enter an economic collapse that would probably look a lot like what Japan and Argentina endured in the late 1990s only worse. The fact is these giant firms, with their billionaire owners and their army of pin-striped men driving Jaguars and flying in private jets to their summer homes to visit their mistresses, have a stranglehold on the nation. They are too big to fail because it would bring on another Great Depression.
Everybody knows that what is needed is exactly the opposite from what we've had for the past three decades. Instead of a government that is asleep at the switch and filled with cronies and hacks from the industries that are supposed to be subject to oversight, we need an activist state that rebuilds the firewalls between the commercial and investment banks; we need a "re-regulation" of the economy, especially key sectors that the entire nation depends on -- finance, energy, health care, food, etc. In short, what we need is a "New" New Deal in this country. We need an IRS and a Justice Department that can strike fear in the hearts of these captains of industry.
Ronald Reagan is often looked upon as the Republicans' Franklin Roosevelt. But Reagan sold the nation a bag of goods. We can finally see clearly the failed results of this three-decade experiment in laissez faire capitalism. It has nearly destroyed the middle class in this country, greatly widened the gap between the super rich and everybody else, destabilized vital sectors of our society, and made the United States a laughing stock abroad.
As a historian I always wondered what evidence of the free market utopia people like David Brooks (with his "ownership society") and the army of ideologues and market fundamentalists marching in lockstep out of the Cato Institute and the Heritage Foundation and the American Enterprise Institute and Gover Norquist's Americans for Tax Reform, and all the other shills and hucksters who sold this tripe to a naive public like a greasy used car salesman selling a lemon -- I always wondered where is their laissez-faire utopia? Are they referring to what America looked like in 1880? A time with nearly zero federal government regulations? With no child labor laws, no limits on the hours worked, no weekend or paid overtime, no minimum wages, no workers' safety regulations, no Securities and Exchange Commission, no Federal Deposit Insurance Corporation, no worker pensions or Social Security, no right to form independent labor unions, and no vote for women. Is this their laissez faire utopia that deregulation was supposed to produce?
Today, we have the worst of both worlds. Government bailouts for the rich -- naked capitalism for everybody else. This whole mess could have been avoided if the generation that followed the New Deal had the common sense and decency to understand that you cannot turn over capitalism to the capitalists. Greedy individuals will always figure out clever new ways to make their own piles of money at the expense of their fellow citizens and at the expense of their nation's wellbeing. Whether it's the Savings and Loan scandal of the 1980s or the Dot.Com bubble of the 1990s or the Enron collapse or the mortgage meltdown -- it's always the same old story. They pass on the wreckage to the taxpayer as they always do. It's time to put to rest once and for all the Big Lie that deregulation and privatization of government institutions will bring the nation anything other than calamity after calamity.