The Long, Steep Road Ahead - to Capitalism 18 comments
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Over the past couple of months, an unprecedented series of dramatic interventions by the U.S. Treasury and Federal Reserve—not to mention ongoing bank seizures by the FDIC—have seen government’s role in the domestic economy take on a scope and size almost inconceivable as little as six months ago. Many pundits have written glumly about the shift in the nation’s economic center of gravity from New York to Washington, D.C. and its implications for the future. Many political commentators, particularly on the left—which after Tuesday’s election appears ascendant—would like to blame the unfettered, laissez- faire capitalism of the Bush administration for creating the problems that now bedevil the global economy.
Before rational people can formulate a solution to a problem, it might be a good idea to correctly assess what caused said problem and to do so in a manner which—to the extent possible—removes political viewpoints from the analytical process. Failure to do so will only ensure that a correct diagnosis will not be obtained and therefore the treatment intended to tackle the problem will more than likely fail or—perhaps—make the problem worse.
As the Obama administration—with buttressed margins in both houses of Congress—moves to address the problems which confront us, there will be great temptation to foist the blame for this mess on George W. Bush and the Republicans. This was certainly the standard Democrat party line in the election. In pursuing this argument, the standard criticism is that Republican infatuation with laissez-faire capitalism enabled an under-regulated and greed-besotted finance sector to inflate a monstrous credit bubble which has now burst with calamitous consequences.
Were it only that simple. It is quite unfair to blame laissez-faire capitalism for this mess. Truthfully, such an economic system, if it ever existed in America, has long been a thing of the past. While government regulation in this country may pale in comparison to Europe, it is certainly there and ponderous. Whether we are talking minimum wage laws, the Community Reinvestment Act, Sarbanes-Oxley (which was enacted during Bush’s first term in office), fair lending laws, etc., there are federal, state and local laws and regulations affecting every business that are hardly inconsequential.
Fannie Mae (FNM) and Freddie Mac (FRE), so much at the heart of the housing disaster, were “government sponsored enterprises” with an almost unprecedented ability to impact the secondary mortgage market in a way that would horrify a true capitalist. Of course you cannot call either Fannie or Freddie “government sponsored” now, as the government essentially owns them, lock, stock and barrel.
Our whole legislative system of government and the lobbyists that flood it with campaign donations, meals, entertainment, etc. begets a government that cannot—even if it wanted to—keep its nose out of economic affairs. We live in a quasi-capitalistic society, with the degree of socialistic intervention existent in the system on a sliding scale that moves left and right depending on the shifting whims of the electorate. (That the vast majority of the electorate do not understand this reality is certainly worrisome in its own right, but I digress.)
By all means, hard times require hard choices. President-Elect Obama, in his eloquent acceptance speech, described a long and steep road ahead. This was not hyperbole. However, it might be a good idea to at least correctly diagnose what has happened before attempting to treat the disease. Unbridled capitalism did not create the problems we now face. I say this because unbridled capitalism has never been tried—at least not in modern history—in the U.S. And if unbridled American capitalism is the culprit for the world’s problems right now, how would you explain the massive problems roiling Europe? Most reasonable people would agree that the European economic model—particularly excluding Britain—is far more statist, if not socialist, than capitalist. Yet from Germany (often held up as a shining example of an economic model) to Spain and Scandinavia to the Mediterranean, Europe, with its heavy regulation and massively intrusive government bureaucracy (the EU), is currently suffering worse than we are and with fewer prospects for rapid recovery. European banks, we come to find, were much more heavily leveraged than our investment banks. Did hyper-regulation prevent that?
The road ahead is long and steep and our leaders will need to “think outside the box” in order to get things turned around. In such a dire situation, one would hope that unconventional and heretofore untried methods might be implemented. I would propose that we consider trying something that we really have not tried before to overcome these hurdles: a little more laissez-faire capitalism.
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do so in a manner which—to the extent possible—removes political viewpoints from the analytical process." Then in the next paragraph you use the Republican, that is to say neo-CON Extremist-Capitalist, epitaph "the Democrat" party.
Which is to say, those who don't agree with you shouldn't use politics but you can! What a joke.
Some will read this slanderous article and bob their heads up and down in agreement, emphatic or otherwise. It won't make what you say worth any more than Federal Reserve Notes.
The Extremist-Capitalist neo-CON agenda is what drove America and the rest of the world in turn to the brink. Europe is there because they believed your Bankster bravo sierra. You Banksters did it!
Grow up, get over it.
On Nov 06 03:25 PM bosun.j wrote:
> You wrote: "
>
> do so in a manner which—to the extent possible—removes political
> viewpoints from the analytical process." Then in the next paragraph
> you use the Republican, that is to say neo-CON Extremist-Capitalist,
> epitaph "the Democrat" party.
>
> Which is to say, those who don't agree with you shouldn't use politics
> but you can! What a joke.
>
> Some will read this slanderous article and bob their heads up and
> down in agreement, emphatic or otherwise. It won't make what you
> say worth any more than Federal Reserve Notes.
>
> The Extremist-Capitalist neo-CON agenda is what drove America and
> the rest of the world in turn to the brink. Europe is there because
> they believed your Bankster bravo sierra. You Banksters did it!
>
>
> Grow up, get over it.
Study American history and you will see the wreckage of three such swindles on the American people by those who guard the vault. This one dwarfs the others and is global in scale. By the time we go through the next decade, you will have seen the WWIII and already be rebuilding from the ashes. But the good news is this is the last part of our societal evolution and will enter a very nice era for a very, very long time.
On Nov 06 03:25 PM bosun.j wrote:
> You wrote: "
>
> do so in a manner which—to the extent possible—removes political
> viewpoints from the analytical process." Then in the next paragraph
> you use the Republican, that is to say neo-CON Extremist-Capitalist,
> epitaph "the Democrat" party.
>
> Which is to say, those who don't agree with you shouldn't use politics
> but you can! What a joke.
>
> Some will read this slanderous article and bob their heads up and
> down in agreement, emphatic or otherwise. It won't make what you
> say worth any more than Federal Reserve Notes.
>
> The Extremist-Capitalist neo-CON agenda is what drove America and
> the rest of the world in turn to the brink. Europe is there because
> they believed your Bankster bravo sierra. You Banksters did it!
>
>
> Grow up, get over it.
I agree with you in almost all respects! While NY state is assuredly Democratic, look at the stats from Manhattan and you'll find they are much less so. Especially in midtown!
Good luck!
@bosun.j: You've been saying the same thing in other articles. Blame the bankers and Republicans for everything. Yeah, bankers have some blame in this game as do the Republicans, but go do some research and see where some of Obama's advisers are coming from, before you squarely blame Republicans and act like Democrats are virgins... Hate to tell you, but "banksters" are in both parties and sub-prime mortgage policies were implemented by many Democrats during the Clinton years. Ever stop to think, maybe both parties are guilty? Many of Obama's top advisers are from Goldman Sachs (remember, bail-out money that Obama supported), Fannie and Freddie, and the Clinton Administration (Community Reinvestment Act that pushed things like sub-prime mortgages to allow home ownership rates to increase amongst lower class families - which is noble, but the wrong way of going about it.). There's enough blame to go around if you want to play the blame game all day. I think we need to stop the blame game.
I'd say Republicans weren't conservative despite what many say, and that is the problem. The Republicans were liberal the way they ran the economy... They spent more money and made government bigger than it EVER has been!!! Sure, they gave us some fiscally irresponsible tax cuts when we couldn't balance the budget, but that is NOT conservative! All it proved was that the Republicans are just lousy liberals trying to pretend to be conservative by throwing in a tax cut once in a while. At least the Democrats are good at being liberal.
Too bad we don't have a true conservative party to vote for. One that would freeze the taxes (not tax increase or decreases!) and cut government spending so we can balance the budget. Then, with any profits, start paying down that damn debt - before one penny of tax cuts is given. That would be really conservative (I'm talking dictionary definition of conservative, not the political definition that exists today - if you call the Republican party conservative I must laugh and differentiate because economically and fiscally speaking, the Republicans are far from conservative). Spend, spend, spend.
Are regulations in some areas needed? Sure. It doesn't mean they aren't conservative in nature....a regulation to make bank lending requirements stricter would be conservative in my books... "Don't spend money you don't have or can't afford" is as conservative as it gets... I don't care what party intiates a regulation like that, it is conservative.
As I said: There is only one Party in America. The Corporate Party. GOP are anything but conservative and Pelosi is anything but liberal. We can agree on that much.
Where we differ is on what direction America needs to go from here. I say Denmark. Apparently you say.... Zimbabwe!
You wrote: "One that would freeze the taxes (not tax increase or decreases!) and cut government spending so we can balance the budget. Then, with any profits, start paying down that damn debt - before one penny of tax cuts is given. That would be really conservative"
The then with any profits bit is revealing. Government doesn't exist to turn a profit. Not by nature, not in practice. Government exists to provide services. More importantly, Taxes don't go to pay for those services.The congress borrows money from the Fed every year to pay our governments bills. In that borrowing from the Fed is an amount designated to pay part of the interest on the national debt. In other words, it's a ponzi scheme.
You want to get truly conservative like Jefferson and Hamilton you will have to abolish the Fed. Federalist papers # 10. If you'll do your homework. Hamilton also felt strongly that only those that own property should rule and that the rules had to be designed to ensure that never changed. Thats why America is a republic not a democracy.
Taxes MUST be increased. Starting with those with incomes above 10 million! Perhaps 88% to start. After all, they sit on their asses and collect money for doing nothing more than interest or dividends after inheriting it from Mummy and Daddy! They'll just have to get by on 2.2 million a year! (My heart bleeds!) Viola, fully funded Social Security and Medicare!
Exactly the opposite of what caused this mess in the first place!
we should simply monitor everything else, intervening when necessary to prevent economic cascades of unintended consequences. we can argue what to do but do nothing until we are sure. few economic bullets remain in our gun.
i am not sure that even a stimulus package at this point would achieve its intended target. we are in the dark and shooting at a target we do not see. we are using bullets we will need later.
Also, "under-regulated and greed-besotted finance sector" does not describe laissez-faire capitalism any more than "Overcrowded American prison system" does.
"Truthfully, such an economic system, if it ever existed in America, has long been a thing of the past."
The truth is that it was never a thing of the American past either. The people who created American capitalism in the late 19th century were called "robber barons" and the age they produced was called "the gilded age." It's excesses were described by the muckrakers and by such intellectual lights as Lucius Beebe and Thorstein Veblen. It is what has always happened here when the invention of one or several creative individuals becomes highly successful: It becomes a monopoly or part of an oligopoly.
It was not different in the distant past either: America began as a series of monopolies given to favorites of the crowns of Europe and mainly the crown of England, and that is why we have names like Jamestown (named after King James I) and Virginia (named after the virgin queen Elizabeth.)
"We live in a quasi-capitalistic society, with the degree of socialistic intervention existent in the system on a sliding scale that moves left and right depending on the shifting whims of the electorate."
In truth, America is a plutocracy which is a parasite living on the back of the creative, inventive and industrious American "can do" spirit: Alexander Graham Bell (ATT), Thomas Alva Edison (General Electric) , Luther Burbank, Thomas Watson (IBM), Henry Ford (Ford) William Hewlett and David Packard (Hewlett-Packard), Andy Grove (Intel), Bill Gates (Microsoft) and the list goes on, and on.
Once successful, these small businesses become monopolies which finally become moribund or at least rigid collectives which resemble socialism more than capitalism.
Also, we shouldn't forget that all of these inventors and entrepreneurs relied on the discoveries of scientists and mathematicians who, more often than not, worked alone in laboratories and offices around the world for very little money or recognition. The American can do spirit is deeply dependent on scientific research and discovery. That is why education is so important.
"I would propose that we consider trying something that we really have not tried before to overcome these hurdles: a little more laissez-faire capitalism."
I think we should run as fast as we can from all ideologies whether from the right (Libertarian "laissez-faire capitalism") or the left (socialism).
We simply need to reaffirm the American entrepreneurial "can do" spirit: Far too many Americans turn their backs on it and run to join the big law firms, big HMO's and (they think) the cradle to grave security of huge international corporations.
I believe that the 1960's were a creative political period of American hands-on involvement in politics but when Americans realized that they couldn't break the back of monopoly capitalism, instead of throwing bombs, they turned their backs on the plutocracy and went back to inventing the future where we now live. We might be entering another such period now. Let's learn from history and not waste our time chanting slogans and walking around in huge crowds in front of the television cameras.
We should forget about the French expression "laissez-faire" at least for awhile. After all, it was made popular by a Scot named Adam Smith whose ideas were never tried in America and probably never will be. We don't need utopian illusions, we need action.
We need to turn our backs on the big law firms, the HMOs, the big corporations, the "think" tanks and role up our sleeves and get back to the business of inventing the American future. After all, it's doubtful that any other country can do it so if we don't, it won't happen. (And we need to stop whining about government regulations. They didn't stop our ancestors and parents and they wont stop us either.)
Avoid all (Utopian) ideologies whether they are socialist or libertarian! America has never been about ideology. We've always been about action.
Let's roll up our sleeves and invent the future (again!)
Your words are very true, but lost in the noise and economic illiteracy of the day. All you have to do is sample the likes of bosun.j.
Nevertheless, it is worth making the case for freer markets, especially if one has compassion for the poor.
Can you imagine what school competition could do for inner city children?
Let's not give up on free markets. The alternative is yoke of servitude at the hands of government.
Next article will be - tax cuts solve every problem!
Government must turn a profit in order to pay off past deficits, not that we actually want it turning a profit later on... we want it to balance the budget - but we've done such a bad job, we do need to have some surpluses to apply to past deficits - I worded it badly - as it won't be an actual profit once you take into consideration past deficits... .
As for the rest of what you say, I generally agree... Federal Reserve is a huge problem, as is the two party system, where both parties are almost the same when you step back and objectively look at the big topics (and disregard the smaller differences that they use to polarize America - divide and conquer baby!).
On Nov 06 05:39 PM bosun.j wrote:
> R. Nabloid:
>
> You wrote: "One that would freeze the taxes (not tax increase or
> decreases!) and cut government spending so we can balance the budget.
> Then, with any profits, start paying down that damn debt - before
> one penny of tax cuts is given. That would be really conservative"
>
>
> The then with any profits bit is revealing. Government doesn't exist
> to turn a profit. Not by nature, not in practice. Government exists
> to provide services. More importantly, Taxes don't go to pay for
> those services.The congress borrows money from the Fed every year
> to pay our governments bills. In that borrowing from the Fed is an
> amount designated to pay part of the interest on the national debt.
> In other words, it's a ponzi scheme.
>
> You want to get truly conservative like Jefferson and Hamilton you
> will have to abolish the Fed. Federalist papers # 10. If you'll do
> your homework. Hamilton also felt strongly that only those that own
> property should rule and that the rules had to be designed to ensure
> that never changed. Thats why America is a republic not a democracy.
On Nov 06 03:25 PM bosun.j wrote:
> You wrote: "
>
> do so in a manner which—to the extent possible—removes political
> viewpoints from the analytical process." Then in the next paragraph
> you use the Republican, that is to say neo-CON Extremist-Capitalist,
> epitaph "the Democrat" party.
>
> Which is to say, those who don't agree with you shouldn't use politics
> but you can! What a joke.
>
> Some will read this slanderous article and bob their heads up and
> down in agreement, emphatic or otherwise. It won't make what you
> say worth any more than Federal Reserve Notes.
>
> The Extremist-Capitalist neo-CON agenda is what drove America and
> the rest of the world in turn to the brink. Europe is there because
> they believed your Bankster bravo sierra. You Banksters did it!
>
>
> Grow up, get over it.