Category: Economics

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Economics Financial Crisis History Political Philosophy Politics

The Reagan Revolution

[digg-reddit-me]In which I discuss a repeated theme of this blog – the two domestic revolutions of the past 50 years that undermined the ever-evolving “American way of life” and caused profound social, economic, and political anxieties. The Reagan Revolution did for money what the ’60s did for sex – and today we are paying the price. 

The 1960s are remembered today – for better or worse – for the social, cultural, and sexual revolutions which roiled the nation between 1960 and 1972. The iconic images and movements of the later, more radical years of the time period primarily involve forces that undermined American mores and traditions. Flower children, the Summer of Love, LSD, marijuana, rock and roll, SDS, teach-ins, Black Panthers – the cumulative force of these challenges to the American way of life led to a backlash, which Richard Nixon and his counterparts rode to power. By 1968, many Americans felt as if their way of life were under siege from radical forces – oftentimes, a radicalism embraced even by their children. Riots broke out in major American cities; illegal drugs were consumed conspicuously and without shame; sex was given freely and openly; the legitimacy of the military, of the government, and of the academy were all questioned and often attacked – all of this in the name of freedom and in protest against the societal structures and rules that had heretofore defined the American experience. By the end of the 1960s, the “silent majority” felt their way of life under attack by these sixties revolutions, as Richard Nixon explained in a speech connecting major societal problems to the “sixties” experience:

We are reaping the whirlwind for a decade of growing disrespect for law, decency and principle in America.

Aside from Richard Nixon, the most prominent beneficiary of this counter-revolution, this reaction against the sixties revolution, was a second-rate actor turned politician, Ronald Reagan. He ran for governor on a law and order platform – pledging to beat back the forces of chaos and freedom to protect the compromises that were the basis for the American way of life. Reagan made a national name for himself by taking aggressive measures to quash the college demonstrations of the “communist sympathizers, protesters and sex deviants” at the University of California, Berkley campus.

In defending his extreme measures that resulted in the death of a student in the aftermath of a police riot, Reagan drew a line in the sand:

If it takes a bloodbath, let’s get it over with. No more appeasement.

Reagan’s popularity stemmed in a large measure from how he was able to harness his populist law-and-order stands with a sunny optimism about America. But when Reagan finally took power in 1980, he did not merely attempt to reverse the 1960s revolutions. He unleashed a new revolution, undermining American values and traditions just as radically as the 1960s revolutions had. As Stephen Metcalf explained in Slate:

The ’80s did for money what the ’60s did for sex.

Metcalf goes on:

They told a miraculously tempting lie about the curative powers of disinhibition. It took AIDS, feminism, and sociobiology a while to catch up to our illusions about free love. It has taken cronyism, speculation, and manic overleveraging a while to catch up to our illusions about free money.

Reagan himself revered Franklin Delano Roosevelt and the New Deal but the forces he unleashed were determined to overthrow not just the Great Society programs of the 1960s and the social, cultural, and sexual revolutions of that decade, but the New Deal of the 1930s and the social and economic structure that sprang from the Depression and the government involvement in its aftermath. The Reagan administration unleashed a neoliberal revolution. While Reagan’s support and popularity was to a large degree a result of his stands against the social, cultural, and sexual revolutions of the 1960s against the commonly accepted American values and traditions, his administration unleashed its own revolution which likewise attacked and undermined commonly accepted American values and traditions.

As Stanley Fish recently described neoliberalism in the New York Times:

Whereas in other theories, the achieving of a better life for all requires a measure of state intervention, in the polemics of neoliberalism (elaborated by Milton Friedman and Friedrich von Hayek and put into practice by Ronald Reagan and Margaret Thatcher), state interventions — governmental policies of social engineering — are “presented as the problem rather than the solution” (Chris Harman, “Theorising Neoliberalism,” International Socialism Journal, December 2007).

The free market was seen by these neoliberals as a natural phenomenon that was destroyed by government involvement rather than the government- and society-tended creation that it actually is, as has commonly been understood by Americans from Alexander Hamilton to Theodore Roosevelt. This neoliberal revolution began with much less fanfare and demonstration and less popular support and revolt than the sixties revolutions, but its effects were at least as profound. There were not the same iconic or disturbing images of radicalism and culture war, or catalyzing events like Woodstock, in this second domestic revolution, but the impact on the fabric that bound and organized the nation was just as profound. By explicitly seeking to undermine the “American system” of capitalism and especially the changes to the social contract since the New Deal (which involved the government regulation of businesses, a focus on local and small corporations rather than consolidation, a focus on labor and manufacturing instead of high finance, and a strong, robust middle class that was the focus of a growing economic prosperity) the Reagan revolution accelerated the trends that had begun to appear in the 1970s. Income inequality soared, middle and lower income stagnated while the wealthiest rose, businesses combined and became ever larger, and regulations were relaxed. In what became known as the Great Divergence, the wealth produced by American society stopped being spread out to the middle class and became concentrated in an ever smaller percentage of the population. The very shape of our society changed as a result of Reagan’s revolutions – and American families began to feel squeezed, until the effects of this revolution became more pronounced. By the 2000s, this “silent majority” again felt under seige – though without the same sense of focus as neoliberals actively sought to shift the blame for these economic attacks on the middle class to the 1960s revolutions in a manner that was still resonant for older Americans.

And while the effects of the sixties revolutions have been widely discussed, the effects of the revolution of the 1980s have been largely unspoken. The concentration of wealth in ever smaller percentages of the population, the economic focus on finance over labor, manufacturing, or industry, the slashing of the social safety net, the push for ever bigger corporations, and the relaxation of any type of regulation. 

Thus Reagan, opposing the cultural, social, and sexual revolutions of the 1960s overthrowing conventions that held together American society, unleashed a new economic, financial, and governmental revolution that overthrew the social contract of Franklin Delano Roosevelt, and the economic and governmental conventions that held American society together.

Categories
Economics Financial Crisis The Opinionsphere

AIG Explains Why It Is Too Big To Fail

The short answer: Yes.

The longer answer: This “Strictly Confidential” document that appeared on Scribd appears to be the same one that Andrew Ross Sorkin described last week in the New York Times as “getting a lot of attention” “inside the corridors of power in Washington.” The presentation is not addressed to anyone explicitly, but it appears to be meant as a kind of briefing on the importance of bailing out AIG for Congressmen and other second-level decision-makers unfamiliar with finance. As is my occasional practice, I’m excerpting some of the more important/interesting points raised in the document for convenient citation later.

This first point is obvious, but still bracing to hear from the source:

Without additional federal tools being deployed in the AIG situation, AIG will not be able to repay its obligations. Despite adequate current security against the U.S. government’s investment, that investment may not be recovered. 

Although some critics of the current approach have begun to question whether the collapse of Lehman led to the fallout that immediately began, it seems pretty clear to me as well as to most who were in the loop at the time that the fallout was the result of Lehman’s collapse. AIG wants to point out that the government did not adequately understand what would happen with the fall of Lehman Brothers – and that AIG is far bigger, more complex and interconnected than Lehman ever was:

Just as the government was unable to predict that the failure of Lehman would lead to the collapse of the Reserve Fund, followed by much of the money market industry, the government would be even less capable of predicting the fallout from the collapse of a much larger, more global and more consumer-oriented institution such as AIG.

Then of course, AIG begins to explain how it’s subsidiaries are essential to the running of the government in general:
AIU insures the U.S. military, the U.N., U.S. and foreign embassies, and important commercial and other organizations worldwide, including the Panama Canal, oil rigs, trucking, marine cargo and Doctors without Borders.
 
AIU’s Defense Base Act program provides coverage to contractors in support of the rebuilding of the infrastructure in Iraq and Afghanistan.
Also, another subsidiary could take down many cities as:
AIGCI is the second largest U.S. investor in municipal bonds.
The report comes to the following conclusions:
  • Insurance is the oxygen of the free enterprise system. Without the promise of protection against life’s adversities, the fundamentals of capitalism are undermined.
  • The failure of the world’s largest insurer at a time of major global financial and economic instability will exacerbate the challenge of reigniting consumer confidence. 
  • Since life insurance has changed greatly in character over the last two decades – from just a basic provision of death and disability benefits to a vehicle for retirement savings and wealth accumulation – the effects of disrupting the industry are wideranging and significant. 
  •  There is a legitimate public policy rationale for regulatory reform of the industry, and the federal government continuing role in AIG’s destiny would be consistent with such a policy direction.

In other words, AIG is too big and too important to fail. It’s probably true – but it’s a big galling to hear a company asking to be bailed out – again and again and again and again – making it. Especially after that company just announced the largest ever quarterly loss in the history of capitalism.

Categories
Economics Financial Crisis Politics

The Battle of the Rich

Newsweek Finance editor and Slate contributor Daniel Gross and I seem to be thinking along the same lines, as we independently came to a similar response to his column of last week:

Last week, I wrote that the Republican claim that Obama is fighting a war against the rich was bogus. Over the weekend, I thought better of it. It turns out there is a war on the rich. Only it’s not being waged by vicious overlords in Washington intent on depriving honest, hardworking stiffs of their livelihoods. Rather, it’s a civil war, a war between the rich. It’s Park Avenue marauding through SoHo, Buckhead rampaging through Hilton Head, Palm Beach shelling Bal Harbour with the big cannons.

Call it the War Between the Estates.

While we both came to the conclusion that there is a battle going on amongst the rich, I came to a somewhat different conclusion about where to draw the lines in, as I wrote:

I realize that we are now observing a “Culture War” between the haves and the have mores, between the elites and the financial elites, between two opposing sides in the “overclass.”

Categories
Financial Crisis Politics The Opinionsphere

Culture War: Overclass Edition

[digg-reddit-me]In which I realize that we are now observing a “Culture War” between the haves and the have mores, between the elites and the financial elites, between two opposing sides in the “overclass.”

I’ve been a bit flummoxed by the class warfare rhetoric coming from certain quarters recently – and I don’t mean from the populists. As Daniel Gross observed in Slate:

To hear conservatives tell it, you’d think mobs of shiftless welfare moms were marauding through the streets of Greenwich and Palm Springs, lynching bankers and hedge-fund managers…

All of this overheated rhetoric is about – as Gross points out – Obama proposing to undo some of the changes of the past eight years – the largest change resulting in the wealthiest few paying about $4.10 more per day to benefit the society which has enabled them to become so wealthy. But I suspect that what Gross has gotten wrong here is what I’ve been getting wrong as well – to identify those opponents of Obama’s “Great Wealth Destruction!” as conservatives. Many of them are – and many conservatives are jumping on this meme as it is the only one that seems to have gained any traction against Obama’s agenda. But the meme hasn’t gained traction because conservatives are big proponents of fiscal responsibility. Supporters of the Republican party ceased to be proponents of fiscal responsibility years ago – and the measures they are proposing now (which would create even larger deficits than the stimulus spending) prove that they truly are out-of-touch or are merely posturing for political purposes. At the same time, non-conservatives like Clive Crook, who supports both health care reform and a cap-and-trade system, have begun to join in much of the conservative criticism. The real source of energy behind this line of attack doesn’t come from conservatives – but from a culture war going on between the financial elites and the rest of the elite which has been supercharged by the financial crisis. Everyone is angry about the great destruction of wealth that has resulted from this crisis – and the question has become where to place the blame, where to direct the still largely inchoate anger.

Matt Yglesias has been suggesting something like this type of distinction over at his blog. At one point, commenting on Jon Stewart’s takedown of CNBC, he wrote:

Comedy Central vs CNBC nicely captures the cultural battle inside the American elite between “creative class” types and the business manager types. Both sides think the other side is composed of idiots…

Then yesterday, Yglesias made a related point about how “the growing overclass revolt [is] taking the American right by storm.” Yglesias critically quotes Lisa Schriffen at National Review‘s The Corner:

The doctors, lawyers, engineers, executives, serious small-business owners, top salespeople, and other professionals and entrepreneurs who make this country run work considerably harder than pretty much anyone else (including most of the chattering class, and all politicians). They are not robber barons, or trust-fund babies, or plutocrats, or even celebrities. They are mostly the meritocrats who worked hard in high school and got into the better colleges and grad schools, where they studied while others partied…

[Obama] is demonizing them… [and] is penalizing their success and giving them very clear incentives to ratchet back on productivity.

Yglesias’s response is to point out that not only is no one being demonized, and that:

Guys who move furniture are, of course, working extremely hard. And even your basic retail employee needs to be on her feet for hours and hours at a time while “executives” comfy chairs. And, again, I don’t think the Salvadoran guys who moved my bed found themselves in that line of work because they were too busy partying in college.

On one level, this is an argument about the fundamental fairness of the status quo – which conservatives tend to accept and liberals tend to reject. But on a more superficial level, we’re not talking so much about a “revolt of the overclass” as a culture war among the overclass – in which the argument is less about whether or not society and capitalism has been fair to “the Salvadoran guys” and more about whether or not society and capitalism have been fair to give the super-rich which so many riches. As this is a culture war, your side on it is not based on such petty facts as your income level or total net worth but by who you identify with. 

America has established something resembling a meritocracy among it’s upper and middle classes – as college education is accessible to most – and from there, any range of careers. This is the world Schriffen is referring to. But what Schriffen misses is the growing gap between the “haves” and the “have mores” – as the lawyers, doctors, and businessmen she lionizes realized that their college friends on Wall Street who were partying instead of studying in college were now making ten, twenty, a hundred times what they were – and still partying just as hard. This resentment has now been exacerbated as we realize that these Wall Street bankers – who have been working hard, partying hard, and making obscene amounts of money – lost all of our money but get to keep their bonuses.

In this culture war of the overclass, level of wealth doesn’t cause you necessarily to identify with either side. Warren Buffet for example would clearly be a member of the have mores, but he identifies with the haves and lives a lifestyle more suited to that group. There are those who identify as or who aspire to be “rich” and “wealthy” and who consider their good forture to be of their own making, who see the crisis as hurting them and their chances at achieving obscene wealth even if they do not have it yet. They tend to blame the crisis not on the bankers but on Obama – which is a bit odd considering the timing of his rise. But as early as September, Rush Limbaugh and Sean Hannity were talking about the Obama Recession and by January, the Wall Street Journal was opinining about it as a fact. Jim Cramer, along with some others at CNBC, decided to take on on the White House with “empirical facts”:

When I somewhat obviously and empirically judged that the populist Obama administration is exacerbating the crisis with its budget and policies, as evidenced by the incredible decline in the averages since his inauguration, I was met immediately with condescension and ridicule rather than constructive debate or even just benign dismissal. I said to myself, “What the heck? Are they really that blind to the Great Wealth Destruction they are causing with their decisions to demonize the bankers, raise taxes for the wealthy, advocate draconian cap-and-trade policies and upend the health care system? [my emphasis]

I think we can all understand why Jim Cramer is angry – he’s been telling people the system is fine and cheerleading the market – and now, he looks like a fool. You can see how people who listen to Cramer might be angry – as anyone listening to Cramer’s advice would be rather screwed. On the other hand, Cramer was merely a part of the system of the financial elites – and he wasn’t saying anything that different from what everyone else believe. The question for the financial elities is whether or not they are responsible for their woes as well as the world’s – or if they can lay the blame somewhere else.

On the other hand, there is the rest of the overclass – and much of the rest of America – who, so far, place the blame for this crisis squarely on the bankers, on the financial industry (whose purpose was to protect and make money), and on lax regulation often promoted by Limbaugh and Hannity and Cramer. The many for whom Wall Street is some half-mythical place to which they entrust their savings are certainly angry today – though the rage is still largely unformed and undirected. In spurts and starts, it is directed at lavish expenses indirectly subsidized by taxpayers – but largely, these people are just hoping things get better. The financial elites themselves see the anger – and know they are the logical target, and so seek to deflect it. For the non-financial members of the overclass who know many people on Wall Street – who are the haves to the Wall Street have mores – they know where to direct their anger – at those whose outsized success has made them look foolish for choosing anything other than a Wall Street career. It is part resentment and part righteous indignation.

Either way, this Culture War of the Overclass is more entertaining than that whole abortion/gay marriage culture war.

[Image licensed under Creative Commons courtesy of shyb.]

Categories
China Economics Financial Crisis Politics

Stimulus and Stability

[digg-reddit-me]This Wall Street Journal article by Bob Davis accompanied by this graph to the right illustrates just how far from world opinion the Republican right is in it’s rejection of stimulus spending. This is not necessarily a bad thing – but it should give pause to those who are defending the fiscal austerity Republicans are proposing in the middle of this crisis. This issue is not considered a partisan issue for most of the world – and it is mainly Republicans in power today who see stimulus spending during a sharp downturn as something “liberal” or controversial.

David Brooks’s expressed his fair-minded exasperation this Sunday – as he pronounced the idea of the Republican-proposed government spending freeze “insane.” 

The International Monetary Fund – not normally known as a squishy, leftish organization as it promoted free trade and capitalism around the globe – is in favor of large stimulus packages:

The IMF has been urging nations to increase fiscal stimulus by at least 2% of gross domestic product to boost growth. Of the G-20 nations, only the U.S., Spain, Saudi Arabia, China and Australia are expected to reach that goal in 2009, according to the IMF.

More importantly, and more interesting then discrediting an almost powerless political party, is to notice that there seems to be some sort of inverse relationship between a society’s social safety net and the amount of stimulus spending they are proposing. 

This makes sense on a number of levels. Automatic stabilizers which should take some of the pressure off a need for a stimulus are not included here. On another level, these nations without a strong safety net must rely more heavily on economic growth for societal stability. 

If this is true, China and America would be more reliant on constant economic growth to relieve social and political pressure and would be more likely to have larger stimulus packages. France and Germany with stronger safety nets would feel more insulated and be less likely to push for large stimulus packages. This is exactly how this matter is playing out on the world stage today – with some exceptions due to political leadership. 

But both states with strong social safety nets and those without them are dependent on growth over time. But those states without strong safety nets feel the economic bumps more strongly – and downturns end up being more disruptive.

Categories
Economics Financial Crisis Politics

Housing in Detroit

The Associated Press:

The average sales prices of [single-family]homes [in Detroit] plunged from $46,702 in 2003 to $8,692 last year. Through the first month of 2009, average sales were $6,035. 

Categories
Barack Obama Economics The Opinionsphere

Clive Crook’s “Everything For Nothing”

[digg-reddit-me]Clive Crook in his new Financial Times column faults Obama for:

telling almost all taxpayers they can have everything for nothing.

This is his second column on the subject – and he bases this claim on a small portion of Obama’s overall plan. He does not fault Obama for proposing to increase the top marginal tax rate from 35% to 39%, as Bush’s tax cut legislation actually mandates unless it is amended; he does not fault Obama for pusing for health care reform; he does not fault Obama for pursuing cap-and-trade legislation; he does not fault Obama for any range of allegedly “socialist” policies – rather he takes issue with the fact that Obama plans to cap the deduction for charitable contributions, so that those making over $250,000 get the same percentage credit for a charitable contribution as someone making less than $250,000. 

In addition to this rather minor tweak of our tax system (which Crook points out will generate a large amount of revenue thanks to the extreme concentration of wealth in our society), Crook raises the more substantial issue of how health care reform and cap-and-trade legislation, both of which he favors, are being paid for:

[T]he revenues from cap and trade are spent mainly on wage subsidies and tax cuts tilted toward the working poor. The down-payment on the cost of healthcare reform is financed by an additional tax increase on the rich.

Crook seems to be trying to conjure that bane of neo-liberals and conservatives alike – class warfare! All of this based on the assumption contained in the beginning, that Obama is “telling almost all taxpayers they can have everything for nothing.”

But is this so? Crook bases his argument on the presumption that the status quo is fair. He says that if Obama is planning on paying for health care reform without levying any additional taxes on the majority of Americans, then this majority is getting something – or in the exaggerated vernacular of those who make opinons for a living, “everything” – for nothing. 

But this same majority of Americans getting “something for nothing” here allows a very small minority to control a far disproportionate amount of resources. The legitimacy of these social bargains – whereby those with power and wealth are allowed to keep their power and wealth peaceably – rarely enters into the minds of those who benefit most from the bargain until we enter periods of unrest and instability. In many parts of the world – China, Pakistan, Russia, Latvia, Bulgaria, Iceland – the current crisis is calling into question the legitimacy of their social bargains in fundamental ways. In America, this crisis is calling into question the historically recent amendments to our social bargain from the Reagan revolution of the 1980s. 

The crisis might have prompted a sort of reactionary liberalism that sought to rollback the Reagan revolution in its entirety – much as Reagan’s reactionary conservatism sought to undo the Great Society. But instead, liberalism is guided by Barack Obama whose liberalism accepts some of Reagan’s most profound critiques and incorporates them into a new liberalism, leavened with both the wisdom of Edmund Burke and Friedrich Hayek.

Clive Crook’s invocation of the lazy masses being offered everything for nothing strikes me as a more refined take on Rick Santelli’s famous rant about the “losers” who took out loans they could not pay for. What strikes me about both sentiments is the sense of who the “losers” are – not the corporations and Wall Street bankers who lost the most. To call them “losers” may be morally appropriate but rings hollow when you’re speaking about those who benefited the most from our societal bargain. These “losers” may be feeling the pressure from our flagging economy but having benefited disproportionately during the boom of the past thirty years – and especially the Bush recovery – are still quite well-off. Those who “lost” the most also had the most – and still, after losing so much, often have more than the majority of the population. The real “losers” in the complete derogatory sense of the word as the individuals who took on mortgages they could not afford and now will be left with nothing but bad credit and the knowledge that they too contributed to the financial meltdown.

In other words, the real losers are not those whose prosperity (based on fees generated from borrowed money) is diminished, but those whose prosperity was never quite achieved as they borrowed money (generating the above-mentioned fees) to acquire some portion of their American dream of prosperity.

Crook while complaining about those being offered everything for nothing fails to acknowledge the system itself which has been redistributing wealth upwards for some time now. What – a different version of Crook might ask – did the 95% of Americans receive for allowing the top 5% to control most wealth? They received the promise of a growing economy that would lift everyone up – and the assurance that certain basic services would be provided, even to the least of our citizens. So, if the wealthy will be paying $4.10 more per day to help maintain the stability of the society which has provided them with the opportunity to become so wealthy, I wouldn’t call that something for nothing.

Categories
Economics The Opinionsphere

The Battle of the Elites

Matt Yglesias has an interesting observation regarding Jon Stewart’s takedown of CNBC:

Comedy Central vs CNBC nicely captures the cultural battle inside the American elite between “creative class” types and the business manager types. Both sides think the other side is composed of idiots, but their side is mistaken.

Categories
Domestic issues Economics Politics The Web and Technology

Free markets exist not in spite of the government, but because of government.

[digg-reddit-me]One thing many Republicans today do not seem to understand is that the free market is not a natural phenomon. The free market exists not in spite of the government, but because of government.

Reading this white paper by a broadband front group (pdf) which purports to described the “ideology behind net neutrality” which it dubs neutralism and connects it to a lack of respect for private property and an undermining of capitalism, the above sentiment was driven home. As they described the “private property” rights that net neutrality would undermine or take away, it seemed clear to me that they had a fundamental misunderstanding of capitalism – and upon reflection, this fundamental misunderstanding of capitalism seems to have animated a great deal of the perversion of the free market that Republicans ((I use this term although it is a rough one. Some Democrats seem to agree with the Republican points discussed – but they have mainly been associated with the Republican party.)) have promoted for the past thirty years.

The impression one gets from the quasi-libertarian Republican rhetoric of the past two decades is that “government is the problem – not the solution” – and that the free market is the solution. The government and the market are understood to be fundamentally at odds – and so, Republicans have supported a government retreat from any interference in markets. They are in favor of a relaxation of regulations in various areas including from financial industry to the environmental impact of industry; they favor a government that provides as few services as possible – from wanting Social Security privatized to opposing government interference in the health care industry; they want government to allow more mergers and avoid breaking up large companies; they want to reduce taxation; they do not want government to interfere to help labor unions; they oppose rules limiting media ownership; they oppose any laws or regulations enforcing net neutrality.

In short, the Republicans oppose virtually any government “interference” in the free market – and where they cannot plausibly roll back government programs and regulations, they seek to undermine them and to reduce them.

This point of view is often described and justified as a defense of capitalism and free markets – but it truly is an assault on our system of capitalism and free markets in favor of corporate interests. One of the chief roles of the government is the creation of a free market – and many, though not all, of the regulations, programs, and services of the government are designed with this in mind. Sometimes these government interventions do more harm than good – wage and price controls during the New Deal, for example. But the Republican assault on government has not been confined to attacking these harmful programs, but to attacking the role of the government itself.

Many Republicans these days are calling Democratic efforts “socialism,” “Communism,” and “Marxism” – but in reality the Democratic Party has mainly been trying to defend the American economic system which has been under assault since the second of the twin revolutions of late 20th century America. (First was the sexual/cultural revolution of the 1960s that overturned the social and cultural mores; then came the counterrevolution which masked the financial revolution of the 1980s which overturned political and economic values.) They use these broad brushes to attack the very concept that the government has a proper role in a free market – rather than to merely disagree about the effectiveness of certain measures.

The lie to this rhetoric is demonstrated by those limited instances in which Republicans have encouraged government involvement in the marketplace – to extend copyright far beyond its initial scope; to offer tax cuts to favored corporations; to have an extremely large military development budget, etcetera. Each of this policies follows what George Will described as “the supreme law of the land…the principle of concentrated benefits and dispersed costs.” In other words, each of these benefits big corporations rather than helping to maintain a free market.

A society creates a government to establish a process for making and enforcing group decisions. One group decision is to maintain a free market. A free market is not what happens when a government doesn’t interfere – if it was, then the lawless nation of Somalia would have the freest market on earth. Instead, a free market is a nurtured thing, created and shaped by government and society. The creation of a free marketplace in America meant investing in infrastructure and roads to allow for easy transport of goods and people; it meant the regulation of large corporations to ensure they did not become monopolies; it meant creating an independent judiciary to ensure that business disputes could be legitimately settled; it meant a relatively open and transparent government; it meant regulations concerning consumer safety and protection and environmental impact; it meant regulations regarding the stability of the economic system; it meant providing for the basic needs of citizens, especially the elderly, the disabled, and the young; it meant preventing the concentration of too much power; it meant protecting certain rights for minorities and individuals; and more. 

Today, it means protecting net neutrality. Net neutrality is one of the foundational principles of the internet – and as such must be a principle protected by the government. Imagine how our economy would have changed if there were fees required to travel along any roads – fees which could be waived if you were traveling to certain stores. It would reinforce the dominance of large corporations and serve to continue to concentrate power. Imagine if I would have to pay a fee to travel to my local hardware store, but could go for free if I went to Home Depot. Broadband industry advocates insist that not only should consumers pay broadband companies for access to the “roads”, but that websites should also have to pay broadband companies to get their potential viewers there. They propose to undermine and limit the decentralized market that is the internet to favor big companies. 

It is government’s proper role to protect this market – to enforce the rules that have made it such an effective and innovative force. 

The internet has spurred so much innovation because it is a free marketplace. Large corporate interests seek to control and limit this innovation – to ensure their power and profits are not threatened. The Republican party now seems to be going along with these interests. But they should not be allowed to do so under the pretense of protecting “private property” and “free markets.” In reality, their efforts to stop net neutrality are yet another assault on the freedom of the marketplace, another attempt to undermine the American economic system.

Categories
Barack Obama Economics Financial Crisis Humor Videos

Jon Stewart takes on Santelli and the Stock Market

[digg-reddit-me]Yesterday, I tried to take on some of the opposition to Obama’s handling of the financial crisis. I think I did a fine job – but I’m certainly no Jon Stewart. Pointing out that the stock market tanked after Ronald Reagan became president and after we won World War II, he takes on this farcical idea that the stock market is some sort of  rational indicator of economic conditions:

(I’ll post full links when TDS posts them.)

The stock market isn’t a rational creature – it is subject to panics and irrational exuberance and sour moods and churlishness and massive misjudgments. To judge whether an economic plan is working or not requires time and wisdom – neither of which are found in the daily results of the Dow Jones Industrial Average.

Of course, Stewart founds some time to mock Rick Santelli on the way:

Humor makes it all go down so much easier.

There’s no denying the inchoate anger, not fully formed, matured, directed, or realized, that some seek to target Obama with. The problem is that these Santellis and these Limbaughs and the rest of them have no more to offer than the mythical Howard Beale of Network – whose famous rants clearly inspired Santelli’s on-air persona:

Watching this famous clip today is eerie – as it echoes into our own time – and makes Santelli’s performance seem all the more post-modern. 

In the end, it comes down to this:

As a nation we have a choice to do nothing, to let Obama implement his plan, or to come up with a better one. In my opinion, Obama’s opponents have yet to offer a serious alternate plan. Which is why I’m sticking with him on this, at least for now.

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