I just finished reading Paul Krugman’s The Return of Depression Economics and the Crisis of 2008. It’s a great little book that takes novices on a quick walk through the history of economics since the Great Depression. Krugman argues that depressions and recessions come from runs (bank runs, shadow banking runs, house sell-offs), and that the remedy is to bring back confidence in spending.
He makes a great argument, and I couldn’t help but agree with him. The problem, as he argues, is that we need to fix society, but we need to do so from a position of power. With nearly 10% of our workforce unemployed (which is actually higher since it doesn’t count those who are too discouraged to look or are working less than they’d like to), we’re not at that position. We need for people to have more money, and we need them to be working. Otherwise there’s no spending and no investment. We also need to do what we can to unfreeze the credit markets.
The big piece of whimsical wisdom I took from this book was his reference to Joan and Richard Sweeney’s “Monetary Theory and the Great Capitol Hill Baby-Sitting Co-op Crisis,” which uses a real life barter-based baby-sitting co-operative to illustrate how recessions start. Check it out.
Related posts:
I also wanted more rice than what could fit inside the wrap....
Krugman’s answer to a leaky roof is to keep patching it until it’s above the rain clouds, but he doesn’t realize that new rain clouds will form inside the structure itself, and rain will happen regardless. He sidesteps the fact that runs, house sell-offs, and excessive leveraging are symptoms of a certain kind of financial institution that he and most in academia fully support.
Eric,
I think Krugman just wants to get people spending. The babysitter coop was especially cool, and it’s a real world example. Simply by giving people more vouchers to exchange for babysitting services, the coop was able to stop the hoarding.
Now of course it becomes more complicated when babysitters and parents can buy on credit…
Krugman doesn’t simply want people to start spending. He’s in favor of laws that force money from one person to another. Spending does fuel the economy, except when productivity is low, spending is pointless, and then spending doesn’t happen. Increased consumer activity is a result of higher productivity, but productivity in the US is incredibly low right now. Krugram says that because people aren’t spending, money should be forced around the economy in various redistributive forms (stimulus -> higher taxation), except this does nothing but move resources around and actually COSTS more money from all the transaction costs (government program costs that move money around are expensive, like IRS, etc). This method (Kenesianism and stimulus) was tried in Japan all throughout the 1990s and it was an utter flop. Krugram only sticks to his statist guns because that’s what won him the Nobel Peace Prize.
By the way, progressives were very critical of Bush’s stimulus, which was something Krugman would’ve supported. Progressives seem to be a little more quiet on Obama’s stimulus, despite the fact it’s hundreds of billions of dollars bigger.
Eric, you sound very much like a free marketeer. I don’t know enough about economics to interpret the merits/pitfalls of Keynesian economics nor to discuss this topic in depth. But if you’re coming from a more conservative, laissez-faire perspective, then what is the answer? Because it sure seems that in the last 8 years under conservative rule, the gap between rich and poor grew even wider. Seems to me that the Bush tax cuts were a form of redistribution of wealth skewed to those who were wealthy to begin with. Are we caught between two opposing philosophies here?
Does economic policy always have to be zero sum game? Is there no middle ground between social darwinism and totalitariansm? How does a society balance out inequalities w/o resorting to either extremes?
Republicans don’t hold the answer. They expand government just as badly as Democrats do.
If you’re so concerned with inequality, maybe you should petition the world to become a single democracy. That way, India, China, and Africa could lobby to raise taxes on the “wealthy”, which to them means anyone making more than $3,000 per year, and redistribute that income worldwide. That would make the world more equal than it is now. But I’m sure you’re not in favor of suddenly finding yourself in the top 5% world tax bracket and losing half or 3/4 of your paycheck to the world IRS. If you don’t favor this policy, do you only favor it on a slightly smaller scale, like in America?
Here’s my answer. If you think socks at Macy’s are too expensive, you go to Walmart or Target. You don’t vote to lower the price of socks at Macy’s. I’d prefer it if governments worked the same way and stopped letting citizens and businesses dictate economic policy. Let the market be. With a democracy it’s impossible.
There’s enough hypocrisy from both the left and right, I think that’s fairly common knowledge if you’re an honest observer.
But I dunno if I can see that the the market solves everything and that competition will always correct the defects. maybe in theory. but the problem is, the free market doesn’t control human greed that well, if at all. so what would happen had we actually let Bank of America, Goldman Sachs, GM, et al, go down the tubes? how does the market help those who are devastated by the wild swings in a completely unregulated market?
again, as far as tax inequalities go, like I said, how do you find a middle ground? Does it have to be zero sum? Wasn’t there a tax policy in Hong Kong, prior to the return to mainland China, where if you make in excess of X amount of money, your taxes are greatly reduced? I’m not sure if I’m stating it correctly (again, I’m not well versed in econ), but it created an incentive for an individual to earn that target amount. And that drove entrepeneurialism, more people went into business. I could be wrong, but i thought it was Hong Kong.
in every society, there will be the haves and have nots, there will probably always be an underclass. lot of it is due to accident of birth, lot of it’s due to hard work to achieve, some are lucky to be born into wealth and privilege. i’ve traveled enough in Latin America and have seen socieities that had very small middle classes if any; it was mostly wealthy and the poor. And in some of these elite circles, they were fucking corrupt and selfish bastards (most of them were government officials, some were business types). I also witnessed extreme poverty where small kids were so poor, they didn’t even have clothes to wear. they were wearing burlap bags. And I thought, man, I’m glad I live in the US. At least there is sense of charity in American culture. So yeah, inequalities do kind of bother me and no tax policies will probably fix those disparities. But ins’t the choice to do something rather than do nothing? Can an unregulated free market help solve societal ills?
I don’t know if an unregulated market can solve societal ills because it’s never been done. It’d be a great experiment.
There’s far too much value placed on egalitarianism. People are not created equal, all have different skills. The incentives put forth through egalitarian policies result in unproductive shifting of assets rather than growth. Incentivise growth through lower tax policies (like Hong Kong and Singapore) and everyone’s better off. Demand higher taxes and implement more government intervention (like France) and the economy stagnates.
Also, we shouldn’t be “controlling greed”. Everyone wants more of something, and should be free to work for it because that’s the most efficient method of growth.
I don’t know if an unregulated market can solve societal ills because it’s never been done. It’d be a great experiment.
Well, if you think about it, the very word “Market”implies some form or rule and regulation. The primary rules are:
1) The right of private property
2) The rule of fair exchange
3) The rule of refusal (which ties into both of the afore-mentioned rules)
In other words, people have the right to own stuff, to sell stuff for their own set price, or to refuse to sell it. All good—but how are these rules inforced? For that, you need a governing body, ie, government intervention. You can call it whatever you want, but basically, the governing body must have more power than any of the individual market participants, or combinations of market partcipants banded together. If this is not the case, then you have the “Bazaar without a Sultan,” and it all reverts to the rule of the sharpest sword. Such a circumstance is not a market, but a melee.
A market, by definition, must be regulated…. it just cannot be OVERREGULATED, or again, the market will dissapear. A true market can only exist between the two extremes of absolute control and absolute chaos.
hmmm, interesting. but if you don’t regulate greed to some degree, don’t you wind up a lot of these Wharton and Harvard MBA types on Wall Street who went ahead into risky practices that exacerbated the conditions that led to the economic recession we have now? all these bankers and Wall Street types were smart enough to know that there was a bubble being created.
i certainly don’t advocate an “everyone is equal” thing—that’s communism. but i think a society should be able to create an environment whereby a person can get out of poverty and into the middle class. i didn’t like seeing such an extreme in Latin America. i guess a strong democracy has a middle class, and the Latin America I saw some 15 years ago is a lot different now, where there is such a thing. at least in some countries.
capitalism seems to be the best system we have, but without some sort of oversight by a governing authority, i think unrestricted greed can lead to abuses. i know that a free market encourages innovation and competition and incentives, but does it have a conscience? because of competition and the pursuit of profits, can a free market regulate itself when it comes to factory pollution and stuff like that? It seems like China wants to be an economic force on the international stage that they’ve placed profits way above the health of their citizens and dump toxic waste into their water systems. Just think about how the Olympic athletes were worried about the air quality in Beijing. Do the Chinese government have emission controls on cars? I don’t know.
i know we’re not an entirely unregulated market, but is our system really that broken? i think it’s the best we can do for now unless there is a universal wholesale change in human consciousness and come up with another system.
“In other words, people have the right to own stuff, to sell stuff for their own set price, or to refuse to sell it. All good—but how are these rules inforced? For that, you need a governing body, ie, government intervention… If this is not the case, then you have the “Bazaar without a Sultan,” and it all reverts to the rule of the sharpest sword. Such a circumstance is not a market, but a melee.”
You have no evidence to support your “melee” claim. Markets were free, secure, and safe all at the same time when people were allowed to defend their property. What’s normally called the “Wild West” wasn’t nearly as wild as we’ve come to believe. Crimes did happen, but they were usually between willing and able bodies who were drunk, young, and pistol happy. They did not involve women, the elderly, children, etc. Crimes were also less frequent because committing a crime carried a heavier, immediate penalty, since your neighbor probably had a gun and was happy to use it on you if you violated him. That went for bank tellers too.
Legal systems with property rights, insurance, and insurance-provided police could emerge without government. Iceland had a very successful (almost) government-free system during the commonwealth in 900 AD and it lasted over 300 years until they adopted a monarchy. It had a very strong legal system, secure property rights, and great freedoms. Legal systems emerge from commerce because it’s in all parties’ interests to develop rules that bring about the most efficiency. Pop culture connotes “anarchy” with “melee” like you did so eloquently. I connote “anarchy” with emerging order and greater efficiency.
The internet is a good example of how markets emerge unregulated and work optimally as such. Sure you have US laws protecting surfers on the net, but you still rely on the good will of those millions of unregulated bodies not to send you a virus. Most of us fare quite well. Those who open anonymous email attachments don’t. You can’t use the government to prosecute someone who emails you a virus, or a poor prick in Nigeria who convinces you to wire him $1,500 to get him a visa. So you protect your own property rights by getting anti-virus software and read up on the latest Nigerian scams. The government can then say, “You cannot have those services. Rather, we’ll protect you, and you then give up the right to protect your own property.”
Iceland’s commonwealth survived 300 years before converting to a monarchy. That’s a good run for a pile of ice with (practically) no government.
“A market, by definition, must be regulated…. it just cannot be OVERREGULATED, or again, the market will dissapear. A true market can only exist between the two extremes of absolute control and absolute chaos.”
You seem to think that government can be “stopped” at some point before it starts to over-regulate. If you could point to a method that could seemingly “stop” government from growing and over-regulating WITHOUT its citizens exiting, and WITHOUT a revolution, then I’d accept that argument. I say without exiting because usually a government, when it’s come to be totally massive, makes exit very costly, eventually illegal.
Eric:
“What’s normally called the “Wild West” wasn’t nearly as wild as we’ve come to believe. Crimes did happen, but they were usually between willing and able bodies who were drunk, young, and pistol happy. They did not involve women, the elderly, children, etc. Crimes were also less frequent because committing a crime carried a heavier, immediate penalty, since your neighbor probably had a gun and was happy to use it on you if you violated him.”
I have to say, Eric, that really doesn’t sound like the kind of world that I’d like to be living in. As I posted a while back, it’s not easy to use a gun without constant practice:
http://www.bigwowo.com/2009/04/shooting-under-fire/
I’d hate to live in a world where I had to constantly practice shooting guns in order to keep my family safe. Also, crimes happened pretty frequently against minoritiesin the Wild West. Not pulling the race card, but just saying…
“The internet is a good example of how markets emerge unregulated and work optimally as such. Sure you have US laws protecting surfers on the net, but you still rely on the good will of those millions of unregulated bodies not to send you a virus. Most of us fare quite well.”
You can also opt out of the internet. It’s a bit harder when you have people shopping, working, doing business, and living in one area where they live on top of one another. I think it was Toqueville who said during the time of the 13 colonies that the nature of American government would change when it ran out of land for expansion and people were forced to live on top of one another.
“Legal systems with property rights, insurance, and insurance-provided police could emerge without government. Iceland had a very successful (almost) government-free system during the commonwealth in 900 AD and it lasted over 300 years until they adopted a monarchy.”
Let me ask this–who enforced property rights back then in 900 AD Iceland?
You have no evidence to support your “melee” claim. Markets were free, secure, and safe all at the same time when people were allowed to defend their property.
Well it depends on what you would except as evidence. The “melee market” has happened countless times in history, when an armed group swoops in and simply takes everthing that they can carry. The occurences are too numerous to count. They set a price (FREE!) and take what they want because they have the most power. Now, you may not call that a market, and neither would I, but again—that’s the point.
Now, on to the Wild West. It’s true that the wild west was not as violent as it is portrayed in Clint Eastwood movies. However, it’s also true that it was not ungoverned. To be sure, there were vast open territories but most people settled in or near towns (for the usual practical reasons). If you lived in or near a town, you had a Marshall or a Sheriff and a Circuit Judge. You probably also had a Mayor although it usually wasn’t a full-time job. That, my friend, is government.
People who broke the law (goverment), even in the desolate territories, were hunted down by deputized posses (government) and put in jail (government) and then brought before a circuit judge (government) before they were hung (government). That is ALL government intervention, I’m afraid. If you want to argue that this is very basic government that hardy reflects the kind of government we have today, then I will agree. But it’s still government and that is my point. You need SOME form of government, just sot so much that the market doesn’t work.
Internet: The internet is not unregulated. There are laws that extend to what is done on the internet, copyright laws, Trade Mark laws, liable, slander, commerce laws, etc.
“You seem to think that government can be “stopped” at some point before it starts to over-regulate. If you could point to a method that could seemingly “stop” government from growing and over-regulating WITHOUT its citizens exiting, and WITHOUT a revolution, then I’d accept that argument.”
The Continental Congress also thought that government could be “stopped” at some point. That’s was why they they wrote checks and balances into the American system or government. But why do you exclude the greatest and untimate check against government tyrany?
Revolution is never off the table.
well, i don’t think that any economic philosophy is perfect. free marketeers and all the Phil Graham’s and Dick Armey’s are highly idealistic as much as the Marxists and socialists. and the problem is, both sides adhere too much to ideology and theory.
i don’t necessarily trust big corporate entities to always behave by the rules and i don’t trust totalitarian rule either. if big conglomerates can get away with dumping toxic waste from their factories that pollute townships, they’ll do it. That’s why you need some sort of government regulation or oversight. And the former Soviet Union was a joke, so we can see that it didn’t work.
And perhaps it isn’t so much as controlling self interest and greed as it is coming to realize that as a society, we are in it together. For good or worse. And if to correct a social problem with huge consequences for the future means higher taxes, then, it’s a sacrifice that the citizens of that society will have to undertake for their country. At some point, a citizen will have to stop their individual pursuit of self interest and become part of that which helps out the collective good. That means everyone.
Jaehwan:
You wouldn’t have to live in that world. Today we have insurance, and you could purchase insurance to protect yourself from crime, just like you have insurance to protect yourself against floods, car accidents, and heart attacks. What keeps insurance costs down is the companies applying downward pressure on recipients to further insure against disaster. To have cheap home insurance, you need a safe. To have cheap health insurance, you need to stop smoking and jumping off buildings. To have cheap crime insurance, you should carry a gun and take self defense classes. If you don’t, you’re grouped in a riskier bracket, and your price goes up. But competing insurance companies will vie for your business, and thus keep prices in check.
Insurance companies would then have their own police forces. It would be in the interest of the police forces to maintain peace and not be involved in shootouts with each other because that would spell disaster for the insurance companies involved. Nobody will want to be insured by a company that starts wars with other companies. Unfortunately for us, the USG is such a company, except it’s illegal to compete with it. It enforces this monopoly by illegalizing self defense and limiting other personal rights. I would prefer to have a choice of defense agency. It’d be cheaper and more effective.
Minorities had it rough in the old west, just like in Japan today, or Spain, or Hong Kong. This is a constant when minorities are 1 or 2% of a homogeneous population. However, today the price of exit is lower (plane tickets are affordable by far more than even boat tickets in the 1800s, and the chance of death is FAR lower than taking a wagon across the country… or into the water), so one could theoretically move to a more homogeneous environment where he would better fit in. 1800s West is a poor example of how defense rights work “against” minorities, which you seem to imply.
Property rights in Iceland were enforced by common law and the Gothorth system, which was feudal in nature. Gothar were feudal leaders that provided military/police protection of their citizens, who in turn probably paid a small tax. Citizens could leave the Gothorth freely, forcing the Gothar to compete with each other and make their section more attractive to people. Property was also protected by the individual who wished to protect it. But violence was uncommon because revenge was always lurking around the corner. If a victim of violence, should he survive, could not afford to prosecute the criminal, he could sell his claim to an able party at a discount. While this wasn’t the best result, it did dis-incentivize criminals from abusing widows, poor people, people with no friends or family, etc.
Yes there were civil wars, but they were pillow fights compared to wars we have today:
“During the Civil War the average battle consisted of fewer than 1000 men with the average casualty rate of only 15%. This low casualty rate has been attributed to the blood-feud mentality that permeated Icelandic society which meant that the defeated army could not be slaughtered honourably to a man. — Birgir Loftsson op.cit.”
I say Iceland was mostly an anarchy because there was a central legislature, but no king or “president”. http://en.wikipedia.org/wiki/Icelandic_commonwealth
King:
I’ve never said that the wild west had no government. It did however have a market that was almost entirely unregulated. The only government that existed was the courts, police, and I guess military. My point in bringing it up was that during these wild times, the economy grew quickly “despite” the 99.99% free market, a market progressives would decry today.
Checks and balances don’t work when they’re all under the same agency, obviously. The president declares war without Congress’s approval, and the supreme court is appointed based on political ideology. The legislature and president support each other when they’re the same political party (today, and during Bush, both catastrophic), negating the “checks” they’re supposed to place on one another. The supreme court, legislature, and president regularly void private contracts. When the USG violates a law and a case is brought against it, the supreme court can choose not to hear the case. It’s not an independent court, so it often rules in the state’s favor. If 3/4 of the legislature feels it necessary, any part of the constitution may be changed, eliminating any and all checks should it want to. It’s silly to think one branch would act to limit the others because obviously they don’t do that, and it’s a pipe dream to imagine a big government that would.
Violent revolution is very difficult and probably impossible at this point, especially when it’s becoming more illegal to defend yourself. Revolution by the likes of posting anti-government comments on blogs like this are about the best I can do… until Seasteading takes off.
“I’ve never said that the wild west had no government. It did however have a market that was almost entirely unregulated. The only government that existed was the courts, police, and I guess military”
Then it comes down to your definition of what the word “regulated” means. To me, a market where the merchants call upon a higher government authority (Sheriff—Circuit Judge) to enforce contracts, make rulings on unfair transactions, and punish the breaking of rules, is a regulated market. The regulator of said market is “the government.”
Everything beyond that is a matter of DEGREES of regulation—but make no mistake, it is regulated. My main point is that all markets are regulated, our only debate is regarding HOW much regulation is needed.
The economy of the old west was much less complex than the global economy which we have inherited today. It is therefore logical that there must be more rules than there were in 1842. Another way to express that is say that there must be “more regulation” than there was in 1842.
However, that doesn’t mean that the market is not currently overregulated. It’s just a deductive statement based on the facts. If you have information about today’s market that indicates that a loosening or regulation would help it, then that’s may be a legitimate argument. However, arguing that the simple economy of the old west is a good model for our current economy seems shortsighted.
“Violent revolution is very difficult and probably impossible at this point…”
No, I think not. A revolution is as much about it’s ideas than it is about force of arms. The real question in any revolution is who’s ideas will the military back.
You misquote me. I never said the model of the old west is proper for today’s economy. Rather, I said it was mostly unregulated, and there was great growth. It’s a decent starting point, but not good enough. I think even a state-empowered police that enforces contracts is too much, as is a state-controlled court. Let those things go to the private market where reputations are at stake, unlike the monopolized system of the old west, which invariably leads to where we are today with our molasses economy that STILL manages to go to hell every couple years thanks to all the wonderful regulation our government bestows upon us.
You know… I wrote out a big response to all this, but I doubt anyone here can stomach it. So I’ll just make it quick: we ought to ditch democracy and it’s awful redistributive qualities that hamper growth. Anarchy or even privately-owned jurisdictions would be better alternatives. We just need a lot of em. The US could be 500+ different countries. One is too few. Soon it’ll probably be even less than that.
You misquote me. I never said the model of the old west is proper for today’s economy. Rather, I said it was mostly unregulated, and there was great growth.
Please show me where anything that I have set between quotation marks was anything but a direct cut and paste of your statements. You have not been misquoted at all. I may have misunderstood the extent of some of your arguments, but that is all.
I agree with mojorider and disagree with your concept of private market uber alles as much as I do the idea that more and more government will solve our deepest problems. Both assumptions are based on the premise that the real trouble is with the system. If we can just devise a “better system” then we can set things to right.
I am rather more inclined to believe that the problems are inherent in human nature. The same men who now make corrupt politicians would become equally corrupt bunsinessmen in your free market nirvana. There would be no improvement because the primary defect is the men and not the system in which they operate. Your system would improve nothing, it’s like changing the water in the fish tank in hopes that the pirhana will stop eating the guppies.
Conversely, the same men who are today corrupt and greedy businessmen would readily become equally corrupt bureaucrats in the event of an expanding government solution. It makes absolutely no difference if the they are liberal or conservative, black, white, latino, or asian. People are corruptible and greedy by nature, we act in our own self-interest. Wolves prey on sheep, economic and/or politcal sytems do not change that foundational predicament—it doesn’t matter how many countries you have.
You’d be right… but businesses in an unregulated market have to earn money. They do this by pleasing customers. So I don’t really know what you mean by “corrupt” businessmen except for those who profit through government intervention which skews the market in their favor. Tell me how a businessman could be corrupt without a government, and I’ll tell you how people could protect themselves against corruption, also without a government.
“You’d be right… but businesses in an unregulated market have to earn money. They do this by pleasing customers. So I don’t really know what you mean by “corrupt” businessmen except for those who profit through government intervention which skews the market in their favor. Tell me how a businessman could be corrupt without a government, and I’ll tell you how people could protect themselves against corruption, also without a government.”
I suspect that you are being intentionally obtuse, because the alternative would be for me to believe that you don’t know what the word “corrupt” means. Nevertheless, I’ll play along, if you like.
A corrupt businessperson is one who does business unethically. This usually means that there is an element of dishonesty to his business. In other words, they only “please their customers” by either lying or not telling the whole story.
An example would be a businessperson who is making clothes for very reasonable prices, but is not telling his customers that he is enslaving people of color in the third world in order to achieve the low cost. If the customers knew how the clothes were made, 90% of them would not buy the garments. So the corrupt businessman simply never discloses to his customers how the clothes are made so cheapy. That is an example of a “corrupt businessman.”
How many more examples do you want me to list?
You mean “sweatshops”. This is not the same as “slavery”. Your use of the word is the modern meaning, which implies that workers don’t have choices because there are too many WalMarts.
This isn’t really corruption since he does not physically enslave the workers. Rather the businessman pays at a rate you consider “unfair” or “unethical”, but it’s a rate the third-worlder considers high and very fair, since the alternative is working at the trash pile or pulling wagons about. Third-worlders choose these sweatshop jobs because they pay more and they can work with roofs over their heads. They are not required to take the jobs.
It doesn’t matter where the stuff is made. It’s been good for both sides for jobs to be outsourced. It frees up our labor to do more productive things, gives the third world higher paying jobs, and makes products cheaper. 30 years ago Indians did the manufacturing work. Now they program most of the web pages you come across. China is finally experimenting with real capitalism because outsourcing to their country has been wildly successful both for them and for us, yet I’m assuming you’d rather they not have these jobs since they’re “unethical”.
Sweatshops are better than anything else the people of color have in their villages. If they were worse, people of color would choose not to work in them and instead would collect trash or sell fruit, unless their brutal government required they take the manufacturing jobs. But a government wouldn’t spend its resources forcing people to take an outsourced job unless it was paid by the businessman, which is far less efficient than simply paying the people of color a (very) competitive wage.
You mean “sweatshops”. This is not the same as “slavery”.
No, I don’t—I mean slavery… you know?…where the people working can’t leave. If I would have meant sweatshops I would have said that. My scenario was based on slavery:
http://www.opendemocracy.net/democracy_power/china_inside/slave_labour_china
http://www.renewamerica.com/columns/kralis/060719
http://hub.witness.org/en/node/11365
That would be an example of a “corrupt business.”
You asked me: ” Tell me how a businessman could be corrupt without a government”
So I gave you an example. But now you have explained that what I really meant was something else entirely, then gone on to explain why the something else is really O.K.
Is the use of SLAVERY an example a corrupt business practice, or is it not? Please answer.
Sorry for assuming you meant sweatshops. Usually people confuse the two. You’re intelligent enough to differentiate them.
It’s sad that today we have slavery in the world, but we usually only have it in places where property rights aren’t highly regarded or well enforced. Keep in mind that despite the fact that these countries have VERY big governments that reach into every facet of human existence, slavery still exists. These governments are natural byproducts of small governments that soon balloon out of control. Would slavery exist in an anarchist state? Maybe. But I argue that property rights would be held in much higher regard and defended more rigorously, and improved property rights would be the best weapon against slavery.
Also, private courts would have no interest in furthering slavery. States often do, since limited property rights equate to limited resistance to state. It’s only when slavery becomes too expensive to maintain that states drop the idea.
That’s my shaky argument for why there would be less (not zero) slavery in an impossibly utopian free market. As for business disclosure, there are already non-governmental agencies that rate businesses based on ethics. The Better Business Bureau is one. They’re quite successful at finding information on businesses, whether the business wants that information disclosed or not. A global BBB company that investigates all sources of a product and sells stamps of approval (or disapproval) would be very highly regarded and profitable, and would most likely have to compete with other ratings agencies.
The business rating model works well for organic products. Even though they’re stamped with the trusty gubberment “USDA Organic”, that means jack for any knowing consumer. Independent parties investigate these companies and give their own approval ratings, and it becomes profitable for companies to both engage in sound business practices by ACTUALLY being organic and pay for the stamp of approval should they deserve it.
Buyer beware is the law under an anarchy. If you don’t know enough about the vendor, don’t buy from him. Spread the word and maybe he and his slave trade will go out of business.
“It’s sad that today we have slavery in the world, but we usually only have it in places where property rights aren’t highly regarded or well enforced.”
Usually it is the government who enforces property rights.
“Keep in mind that despite the fact that these countries have VERY big governments that reach into every facet of human existence, slavery still exists.”
Actually, slavery does, and has existed, in almost every culture, whether they have had a large govermental structure or not. From the largest empires to the poorest and most primitive tribes, slavery has been ubiquitous in the human experience.
Perhaps you should explain what you mean by “Anarchy.” Most of us read that word and imagine that you are talking about the world of Mad Max (before the Thunderdome, of course). Anarchy can describe many things. You better be more specific.
The state was supposed to enforce property rights, yet it continually fails to do so today because it increasingly monopolizes defense and legal arbitration while engaging in risky behavior in order to expand. This behavior costs money, and the only way the state makes money is through taxation. Increased taxation requires diminished property rights, paving the way for intruders and criminals to enter our lives and enslave us.
Yes slavery has always existed. So have murder and robbery. Justice, however, decreases as the size of the state increases, and it becomes impossible to prosecute crimes when your property rights have already been diminished by the state. And the state controls the courts where you’re bringing your case, so it has no real reason to rule in favor of property rights since it actively works against them.
Anarchy – absence of government. Some would argue socialism will arise, some capitalism. Regardless, a legal system would evolve in order for people to engage in commerce and enforce their property rights. Always has. Legal systems exist in the smallest of tribes, which are arguably also “anarchistic”. Emerged before democracy, even monarchy. Property rights go hand in hand with legal systems.
Insurance companies would emerge to provide property protection, just like today, the only difference being that without regulations they would be free to group people according to risk, and they would not insure against many risks considered avoidable, such as alcoholism (not the case today). This not only keeps rates low for low-risk consumers but also incentivizes consumers to make themselves less risky. You end up with smarter consumers.
This is all speculation but it’s roughly the same thing that happens in any location despite the presence of a state monopoly.
To add: these things emerge despite state monopoly, but continue to diminish as the state increases.
EJ and King,
Interesting discussion.
It seems as if the discussion is really between Milton Friedman laissez-faire and Keynes and government intervention. The problem with economics that I see is that the interpretations of so called empirical data is so filtered thru philosophical biases, it’s hard to know what to objectively believe as the average person. And like all ideologies, political economics seems to be very idealistic, in theory, how the aim of said ideology can create such great things for society. For someone who is tabula rasa, listening to proponents of unregulated free markets, you’d think, “Well, yeah, that makes sense.” And then when lectured upon by proponents of Marxism, you’d think, “Well, yeah, Marx has a good point here.” And when confronted with someone advocating ideology X, and you’d think, “Oh, never considered that. That sounds reasonable.” And then you get caught up in picking apart all these ideologies to the point where you don’t know what to believe!
No doubt, the market does work and it works pretty damn well. But obviously, some have seen flaws in it and therefore decided that intervention is needed sometimes (eg, raising interest rates to help curb inflation). Yet, we’ve also seen how too much intervention can stifle competition and innovation and growth (former Soviet Union). So, that makes me think there needs to be a balance and even that balance of what we have today is flawed because it’s hard to judge if intervention is too much. It all goes back to our biases.
From my viewpoint and what little I know, you can’t have a completely free market without some sort of intervention. I asked before if the free market has a conscience. It seems that it is amoral and therefore is reliant upon the benevolence of human beings. Well, some are and some aren’t but I don’t wanna have to put my faith in and trust that my fellow human being is a good person. King had discussed the corruption of some businessmen and if one truly believes that the greatest impulse in man is his own self interest, then at what cost should we allow an individual to maximize said interest? EJ suggested that maybe we shouldn’t try to control greed, that market forces might weed out the bad actors due to competition.
Why do we have child labor laws? What are the origins of unions and why did they arise? Why do we have occupational safety regulations? The market doesn’t care, but humans do. A SOCIETY cares for its citizens. There’s a duality here in that we are free to pursue our self interests and yet there are times when we work for the common good.
I subscribe to the idea that humans are endowed with reason. So why can’t we come up with some improvements over what we have now? As posted previously (and these are just musings, really), does it have to be a zero sum game? An either/or predicament? Those economic philosophies arose from the time period in which Adam Smith and Karl Marx and Keynes lived. They were writing from their perspectives of what they saw. I’m wondering if maybe we’re entering into a new era where with a dying planet and depletion of natural resources if we might see some new global economic philosophies to reflect OUR uncertain times. We evolved from feudalism, mercantilism, etc…why do we think we’ve hit the peak of human evolution?
Unions aren’t government entities. However they prop up politicians with huge donations, and therefore they get favors that make a great return on investment.
Frivolous lawsuits are commonplace in our country because we do not have a “loser pays” system like in other countries, whereby a loser in a lawsuit must pay the opposition’s legal fees. Because of this, usually we have settlements, which are unproductive and silly. The reason we don’t have a “loser pays” system is because lawyers make huge donations to politicians, and also get favors that make a great return on investment.
Poor people, using the same logic, vote for the politician who will give them more subsidies, higher minimum wage, and other redistributive benefits.
For the same reason, we have state sponsored corporations like Haliburton, Enron, Phillip Morris, big farm companies – these all allocate a huge amount of money to lobbying, and are thereby able to maintain their destructive holds backed by state power. Fortunately Enron fell, but then everybody mistakenly blamed deregulation, when in fact Enron took advantage of every regulation in the book, even added some, to get its monopoly power.
You cannot have welfare and state-sponsored unions without state-sponsored mega-corporations and monopolies. The two are byproducts of the same system, which is why Democrats and Republicans exist everywhere where there’s democracy. You always have one side being lobbied by the unions and consumer rights advocates, and the other side lobbied by business. The simple fact that every citizen can contribute to their favorite politician, and every citizen can vote for that politician, causes this problem. The redistribution is completely inefficient and results in economic stagnation, a quality of any aging democracy.
Thank you.
But I think that what you are doing is looking at one side of an imbalance while ignoring the other side. Is it true that a government can become too large for it’s own good? Of course. But is it also true that a government can become too small to do it’s job effectivel? Equally true. That is what I’ve been arguing. Stop focusing ONLY on big government and allow for the possibility that small or no government can also produce serious problems. In other words, we have to go back to that dreaded word, “balance!”
When you have too large a system, it becomes cumbersome. Anyone who has served on a committee can appreciate that once the committee exceeds it’s ideal size, it becomes difficult to get anything done besides arguing. However, being on a comittee of 3 when you really ned 8 is no fun either. Why can’t you just acknowlege that BOTH are true?
Anarchy – absence of government.
Eric, there is no such thing as Anarchy, as you have desribed it. There is one, and only one, form of human government (at the most basic level) and that is Monarchy. There is always a “Royal” who rules the “Kingdom” and he is advised by a court of “Nobles” who both counsel and share power with the king.
It doesn’t matter if the strongman is called Chieftain, Pharoah, Emperor, Shogun or President. The basis of a single ruling figure leading a council of the priveledged and powerful who, in turn, rule the greater society is the inescapable rule, and not the exception.
Haven’t you read Aristotle? “Man is by nature a political animal.” There is no such thing as Anarchy, as you have described it—human nature does not allow it. We are as prone to hierarchical (governing systems) as bees are to hive life. The fact that you have “a country” or “kindom” or “tribe” means that you have a government OF SOME KIND
“Regardless, a legal system would evolve in order for people to engage in commerce and enforce their property rights.”
A legal system cannot exist without government. The word “legal” implies “laws” and therefore a legislature, monarch, pontif, or chieftain. Either way, if you have laws and the means to enforce them, then you have a government.
“Legal systems exist in the smallest of tribes, which are arguably also “anarchistic”.”
Yes, it is arguable because it is not true. All tribes have rules. They also have punishments for breaking the rules. They also have a structure for deciding who has broken the rules. That is government.
I don’t think that you really understand what govenment is.
King,
I think you’re right, there has to be balance. I dunno why that’s such a bad word. It’s better than imbalance!
But that’s essentially the gist of my postings; I don’t think you can have the extremes work and its extremely idealistic to think that laissez faire works or that planned or controlled economies work fine as is. So this blended economy or whatever you want to call what we have now is the best we can do for our times until there’s another evolution in human history that takes us into a different direction and a different economic order.
EJ,
I know that the unregulated market is what you believe works best and that’s fine. I still think that there needs to be some sort of checks and balances in society. And yes, of course, unions are not government entities, but my point was why did they originate? Someone must have seen that people who control the means of production also control the fate of people’s livelihood and that concentration of power in captains of industries can lead to abuses, if not outright abuses of the labor force and workplace conditions. I’m not going to divert into the merits or non-merits of unions, but I used unions as an example to illustrate that the market is amoral. It can’t fix the social consequences—intended or unintended—that comes about with big business entities that wield lots of power and that power is sometimes exerted against the laborer, individuals, or communities. What’s the incentive for a company to devote its resources to safely handling their toxic waste generated by their facotories? There isn’t any. That’s not to say that all corporations will engage in malfeasance, but I don’t want to have to trust that big entities are always benevolent and ethical. It’s only when a regulating body oversees how these corporations dispose of their waste is there some sort of compliance and adhererence to a standard of conduct. I don’t see the market self regulating bad behavior.
But your analysis of the state run monopolies was interesting, ref: Halliburton. And it’s true, politicians are prone to being corporate shills and that’s where campaign finance reforms needs to be undertaken. I wouldn’t necessarily blame it all on the nature of government (no political system is perfect).
Sen. Al Franken (D-Minn) just had an amendement pass in the Senate against defense contractors. The amendment would deny federal funds from defense contractors who restrict their employees from taking workplace sexual assault and batter and discrimination to the legal system in favor of arbitration. This arose from the allegation of gang rape by a female employee of Halliburton. Thirty Republican senators voted against it. Uh, so that means they’re NOT in favor of due process of the law but are on the side of big businesses enforcing arbitration as a condition of employment? That tells me those 30 senators are in beholden to the big corporate interests.
http://www.minnpost.com/stories/2009/10/06/12247/senate_passes_franken_amendment_aimed_at_defense_contractors
I dunno why that’s such a bad word. It’s better than imbalance! But that’s essentially the gist of my postings; I don’t think you can have the extremes work and its extremely idealistic to think that laissez faire works or that planned or controlled economies work fine as is. So this blended economy or whatever you want to call what we have now is the best we can do for our times until there’s another evolution in human history that takes us into a different direction and a different economic order.
I find myself in agreement with most of your statements on this one, mojorider
Eric, I don’t necessarily disagree with many of your observations about big government. I get it. And I agree that the private sector is much better at a lot of things—I mean, if the government was designing cars, they’d all look like mail trucks. But you’ve gone overboard when you think that you can exist in a complex society without government of any kind.
The problem is that you think of government only as The Federal government, State government, or local government. You fail to see that corporations are themselves a kind of government. If you removed the layers of government above the corporations then the corporations would become THE GOVERNMENT. We would all revert to a kind of feudalism run by corporate warlords locked in a war for territory, wealth, and power. The private sector would become the defacto public sector.
That is the error in your thinking. You believe that the private sector is some sort of superior model, when in reality, they are only fulfilling their role in the larger model. They are what they are because the public sector also fulfills a certain role. Both enteties fulfilling their roles is what makes the entire system possible.
My definition of government: a monopolistic protection racket. Derives its funds from taxing people involuntarily and then forcing protection upon them. As government expands, its protection worsens, and its costs rise, which raises taxes, worsening living conditions. Exiting becomes more costly until it’s illegal.
Not all government is monarchy. Undemocratic Monarchy is not freely open to civilians. Rather, it’s rule by elite. Democracy, on the other hand, is open to all. Even the most moronic of people like GW Bush and Obama can become presidents, and the worst mathematicians can be treasurers like Paulson or Fed chairmen like Bernanke. Morons can enter government in a democracy. Monarchy is closed off because it’s a private ownership of land that gets passed through the family. Bad rulers are ousted in a monarchy. Bad rulers get elected in a democracy.
My argument for monarchy over democracy:
Kings own the land, and therefore have an incentive to create economic conditions that lead to growth, since they benefit directly. If the kingdom fails, family members oust the king, or kill him, to cut their losses. This is why Europe exploded so quickly before 1850 or so. Kings also are naturally limited in how much land they can govern, which is why there were THOUSANDS OF STATES. Having thousands of states provides another incentive: freedom of exit. Civilians were free to move to another state, which incentivized kings and nobles to make living conditions as good as possible and provide the best property rights.
In a democracy, the president has an incentive to grow the economy for 8 years or until he is out of office. He favors short-term growth through Fed spending and ridiculous stimulus programs over long-term growth through low taxation and efficient law and contract enforcement. He must expand the size of government because it’s widely open for entry by all civilians through the educational system, transportation networks, police department, and hoards of other blocks that comprise democracy, and if he does not expand it there will be a movement to remove him from office. Democracy naturally inflates government until it moves to socialism, causing economic downfall and ruin.
Monarchy is closely related to anarchy. Kings were reluctant to interfere with the daily lives of their citizens because they feared the citizens would move to another kingdom and pay rents there, since the nearest kingdom was only miles away. In addition, there was natural resistance from the people toward the king because nobody likes being ruled by a family that prevents public entry. This natural push from the populace was a check and balance system we do not have today. Today, 75% or so of people vote, thereby supporting the government. In monarchies, it became a matter of finding the least evil king to live under, and this allowed for rapid economic growth in Europe, especially in Germany, where they had hundreds of tiny kingdoms.
Thus, as exiting becomes easier, property rights improve, moving a society closer to “anarchy”, full self rule. As exiting becomes more difficult, property rights dissolve, and the resulting mess is what we’re starting to see today: banks responding to government incentives that REQUIRE predatory lending, the Fed printing the dollar into oblivion, mass unemployment, and a huge welfare state that only breeds hostility and increasing poverty. People should look at the banking crisis of 1920 a little more often. The government didn’t stick its nose in at all, and the US recovered in roughly 1 year.
Utopian anarchy might never happen, but its theory provides a framework that is easily transferable to a monarchy. Say Bill Gates were to buy an oil rig in international water, convert it to a city block, and open it for commerce. Businesses move there for the tax incentive and pay rents to Gates. Steve Jobs opens another oil rig 50 miles away. Now the two compete for commerce, trying to make property rights better than the other. As more oil rigs open for commerce, property rights flourish. The theories we come up with in our anarchy model work almost perfectly in the monarchy. Insurance companies, insurance-provided police, private roads, these all make Bill Gatesville more desirable than Steve Jobsia because the profit motive in Gatesville has resulted in incredible efficiency, and everyone moves there to pay rents to Gates.
Whether anarchy is possible is irrelevant. Anarchist theory works in the private sector where people are still “ruled” by natural elite. However, the “archy” I’m talking about is monopolized protection that extracts wealth from citizens. Monarchy does this in an extremely limited sense, perhaps the most limited possible of a government.
Hey All,
This is only somewhat related, but check out the latest episode of Justice (you don’t need to see the previous episodes to understand it):
http://www.bigwowo.com/2009/10/justice-episode-3/
I’m watching some of it right now. So far it’s about libertarianism and the distribution of wealth.
“My definition of government: a monopolistic protection racket. Derives its funds from taxing people involuntarily and then forcing protection upon them. As government expands, its protection worsens, and its costs rise, which raises taxes, worsening living conditions. Exiting becomes more costly until it’s illegal.”
Again, there is some fiction in your truth, and some truth in your fiction.
But what you are missing is that, in the alternative, you don’t get a small-business nirvana state. You get the exact same thing, done in the name of business. The taxes simply become tolls and charges for services rendered. The control comes from “company store” economics. Ask the sharecroppers how easy it was to get out of that private sector system!
You will not accept the fact that your simple solution is not the end all and be all. Yes, there is some truth in it, but it is not THE TRUTH. But you have come to accept it as the answer to the woes of the world, and now it is so dear to you, that you can never see that it has flaws.
“Not all government is monarchy. Undemocratic Monarchy is not freely open to civilians. Rather, it’s rule by elite. Democracy, on the other hand, is open to all. Even the most moronic of people like GW Bush and Obama can become presidents…”
That is naive. It is an obvious myth that anyone can be President. Democracy is only open to all in the sense that the illusion of equality is open for all to participate in. Do you really think that your plumber can be President? How about Ryan Seacrest? Have a look at the POTUS list and ask yourself, “What do all of these men have in common?”
“Morons can enter government in a democracy. Monarchy is closed off because it’s a private ownership of land that gets passed through the family. Bad rulers are ousted in a monarchy. Bad rulers get elected in a democracy.”
Yeah… because the sons of monarchs are never morons or bad rulers, just like the sons of rock stars are never bad drummers. And now you believe that revolution is easier than an election? Are you thinking this through, or is this just free association?
“Kings own the land, and therefore have an incentive to create economic conditions that lead to growth, since they benefit directly. If the kingdom fails, family members oust the king, or kill him, to cut their losses.
Say the word if you’d like me to compile a long list of monarchs who ran their kingdom into eventual bankruptcy in IN SPITE OF THE INCENTIVES. The problem is that you’re supposing as if people always act logically—they often don’t. And that’s when all these theories, based on pure economic logic models, fall apart. There have been kings who have sold their kingdoms chasing a woman, or because of pride, or jealousy, or greed. How does that fit into your world or reason and “incentives?”
I’ll say it one more time IT’S NOT THE SYSTEM: Powere corrupts or at least it draws the corruptable.
If there is any genius in the American system, it’s that it doesn’t trust people to do the right thing. Instead, it pits the fools on either side of the argument against each other, as part of it’s structure. The conservative fools are counterbalanced by the liberal fools and vice versa.
It’s like having a pot of gold and trying to decide who will guard it for you, an Enron executive or a politician. No solution is going to stop you from losing some of your money, but if you give them both incentives to report the thefts of the other, then your treasure will last longer. There is no perfect solution, but some solutions are better than others.
Senate seats, house seats, presidency, mayorship, assembly chair, all positions are open to the public. The person who is able to amass the most friends, then, gets the position in democracy. That is the only way for a Democracy to exist, as that’s the very definition.
“Say the word if you’d like me to compile a long list of monarchs who ran their kingdom into eventual bankruptcy in IN SPITE OF THE INCENTIVES.”
This underscores my entire point: civilization experienced amazing growth under monarchies because bad monarchies went under, and good ones prospered. The good ones had better property rights. Bad kingdoms had bad property rights. Bad rulers were ruined. On the contrary, bad rulers in a Democracy are rewarded with an extra term and a wonderful retirement package. Good rulers are rewarded similarly, so there’s no incentive to be a good ruler since that takes extra effort. Expanding democracy results in reduced property rights.
The difference between monarchies and democracy, again, is the monopolistic tendencies of democracy and the resulting loss in property rights. Unlike monarchies, these tendencies of democracy are reinforced by its open entry to the public. It amasses widespread support and grows without end. Monarchies have a hard time doing such a thing because 1. the profit per person drops as it grows and 2. it causes a shitty monarchy, and the king loses his head.
Monarchy would be better than democracy. Anarchy would be better than monarchy. Perhaps something would be better than anarchy, I’m open to that. But the profit motive is what produced the growth that we’ve still been able to take advantage of to this day. When property rights degrade, the growth slows to a halt, which we’re starting to see. My overarching point of all this is the “genius” system which you approve of, since it’s now exactly the system that you’d “prefer” it to be only in it’s natural mature form, is the cause of this extended recession, which will only end when property rights are restored. Under the “genius” system, that is extremely unlikely.
Isn’t this Eric Jacobus the same guy who basically said that racism in Hollywood was okay because there is no market for Asian American films or Asian American actors and actresses? Wow, and you guys are having this most ideological fart session with him why?
mT,
Yeah, you’re right. It’s become one of those late night college dorm debates where it’s pointless. And that’s the problem as you put it, this is an “ideological” thing.
As I’ve posted, the problem is that ideology is great and sounds fantastic. But it’s rather highly idealistic. Once you apply it to the real world, it falls apart. No one ideology has all the answers. It might have some, but it can’t account for everything.
EJ,
we’ll just agree to disagree. We see the world differently based on our personal experiences and colored thru our own upbringings. I just don’t think that greed, maximizing self interest, or whatever you want to call it, is as productive as you seem to think in an unregulated market. We’ll never know, of course, but I don’t trust human beings, especially powerful ones, to always do the right thing.
mT: I have a policy of never using this popular online three-letter acronym/abbreviation because, for some weird reason, I just can’t… but, in this case, I have to make an exception. LOL. Thank you for that.
“Isn’t this Eric Jacobus the same guy who basically said that racism in Hollywood was okay because there is no market for Asian American films or Asian American actors and actresses? Wow, and you guys are having this most ideological fart session with him why?”
Ugh, that again. I think I’ll just leave you guys to your opinions, because it seems people here are still unwilling to drop that issue. Feel free to email me stuntpeople at yahoo and I’d be happy to debate anybody privately until the end of time. Doing it here is frustrating.
Monarchy? Anarchy? There’s already a name for the 20th & 21st century…. its called fascism. It’s where corporations have all the rights and people have none. When reporters asked Mussolini “what is fascism?”, he just called it “the corporate state”. What you’re proposing, Jacobus, is nothing new. It’s simply letting capitalism run amok without democratic controls which keeps the vast majority of people from getting exploited and enslaved.
It’s happening now. There is a huge transfer of wealth to the Wall streeters who created these unregulated derivatives traded in what’s basically a “wild west scenario” with no government controls other than a “socialism for corporations” bailout from our hard earned money. The banksters are getting rich while the rest are getting poorer with a rising unemployment rate and a declining median income over the last decade. We’re getting fucked over.
Eric J. wrote:”banks responding to government incentives that REQUIRE predatory lending, the Fed printing the dollar into oblivion, mass unemployment, and a huge welfare state that only breeds hostility and increasing poverty. People should look at the banking crisis of 1920 a little more often. The government didn’t stick its nose in at all, and the US recovered in roughly 1 year.”
How do you figure government incentives required predatory lending? That’s bullshit blaming the government. Blame the Ivy League grads who invented derivatives that pooled a bunch of toxic AR mortgages & called them “AAA” and traded these securities as such. It’s a scam. So its no “experiment” cuz its already done & its already fucked us over pretty good and you propose more of that. Fuck that.
And maybe you should look a little further in the 1930s & what happened after that. With Roosevelt’s New Deal and the social programs and strong unions in place, the foundations of a strong economy was in place and with it: the economy grew, the middle class came into prominence, the civil rights movement gave minorities better opportunities. It was the longest economic expansion in U.S. history. It was cuz money went to the people, not to some souless corporation that only seeks to replicate itself and create more low-paying jobs in the 3rd world & keeping the status quo of poverty in place. No sirree…. if money flows to the people, the economy will do well.
70% of U.S. GDP is consumer spending and there has to be programs that prop up the middle class & poor for the real economy to grow. There has to be low cost schooling, high paying blue collar jobs, child care for single parents & many things that Obama promised (yet to deliver…”HEY OBAMA.. IM WAITING!!!). If those social programs are not in place, we will not recover from this financial shitstorm.
Also, we need to go back to the turn of the century where the government broke up trusts. Today, we have 4 banks that control much of the financial industry. They need to be broken up. They have too much power.
This argument for “Kings” is nothing more than support for overturning the U.S. Constitution, getting rid of the Bill of Rights, eliminating democracy & installing a fascist dictatorship which allows corporations to do as they please. That is shit.
I can’t let this one go. I just can’t.
“There is a huge transfer of wealth to the Wall streeters who created these unregulated derivatives traded in what’s basically a “wild west scenario” with no government controls other than a “socialism for corporations” bailout from our hard earned money.”
Wall Street is already heavily regulated already through the SEC. Plan on seeing even more regulation that will screw the economy even further.
“Blame the Ivy League grads who invented derivatives that pooled a bunch of toxic AR mortgages & called them “AAA” and traded these securities as such.”
The ratings agency that gave out the “AAA” ratings was a government-sponsored monopoly, which restricted competition in the ratings industry. The ratings system was bust because it was government sanctioned.
“There has to be low cost schooling, high paying blue collar jobs, child care for single parents & many things that Obama promised”
Those things are in place already and are being expanded to include housing subsidies, wage fixing (min wage went up 70 cents to $7.55), and various other social programs that you think will work, but when they don’t you simply demand more.
“Today, we have 4 banks that control much of the financial industry. They need to be broken up.”
I agree. The Federal Reserve is to blame for the monopolizing of the dollar and bailing out its corporate buddies, which allows them to grow to the size they are now. Government at work.
All your complaints about capitalism are actually complaints against government.
OVCP,
I think it’s pointless to continue the debate. EJ never really addressed my concerns about how the unregulated market creates social consequences and does nothing to remedy it. He basically admitted he didn’t know if an unregulated market could solve societal ills…but then goes on to say that we shouldn’t control greed, which gets to the root of what causes these social consequences to begin with! And that’s really the crux of the problem that King and I addressed, I think: it’s a question of how much intervention there needs to be. And that intervention has to come from some form of government.
But, since we’re piling on…
I’ll do it politely.
If EJ wants to subscribe to anarchist philosophies, Ayn Rand stuff, etc…fine. But I just don’t see how it could ever work with the way human history has evolved. If it is the best system ever, wouldn’t the world have gravitated towards that model? Somewhere along the line, societies saw that there needed to be some intervention on the market. That’s why I brought up the point about child labor laws, the rise of unions to deal with management. You know, why do we have occupational safety standards at the workplace? Why do we have laws against price fixing and collusion?
Maybe some of those anarchist or libertarian philosophies could work on a micro level IF the conditions were right. And that would mean a paradigmn shift in the global economy (ie, some new world economic order as the result of global and environmental catastrophes, and in human and spiritual consciousness). But for now, humans can’t control greed and self interest. Just look at the health care industry right now. Look at executive compensation.
Warren Buffet had stated this recently in an interview:
“Exactly a year ago when I was at this conference, I had a proposal for the so‑called “toxic assets.” I called three people in the financial world who were going to write Secretary Paulson about it. I wrote them on October 6th. I called three people to help out on this, and it would have required a lot of effort on their part and some commitment of money and time and energy. I asked all three of them if this went forward to do it absolutely pro‑bono. I asked them not to make one dime out of it. And they all said yes to me. So, they are good people. Many are motivated by greed. None of us are perfect, you know? I always say that, “Every saint has a past, every sinner has a future.” We have got some sinners back there, but they are not all bad. They went along with a bubble that they helped create – but the whole American public did. You still have to have the right rewards and penalties for behavior. That’s how you get decent behavior. So, I don’t look at Wall Street as “evil.” I look at Wall Street as given to huge excess sometimes. I don’t want to get rid of it. We need something to allocate capital and distribute securities and all of that throughout the system. We have got a big capitalist system and we have to have a big capital market – but there is plenty of room for improvement.
“What you have to change in Wall Street is you have to make sure that in addition to carrots, there are sticks. And it can’t be a one‑way street where they are making ungodly amounts of money when things are good and then they move on to someplace else for a while when things are bad. You have to create a downside. I hope there are some practices put into place – and I’ll have a few thoughts on them myself – but Congress undoubtedly will have a few thoughts too. You have to put in something where there is downside to people who really mess up large institutions and we need some new help in that. Too many people have walked away from the troubles they have created for society, not just for their own institution, and they have walked away rich. They may not be as rich as they were before, but they have walked away better than they should have. There have to be incentives –not only to get rich, but to behave well.”
The problem with discussing economic theories, apart from the obvious ancillary factors, is that it always ends up being all ideology, and precious little reality. It’s like discussing how archery would work in a perfect vacuum—when the real world is full of air and wind.
There are a lot of things that effect business decisions that have nothing to do with business. I personally know of a case of an older relative of mine who was a very highly skilled bookkeeper in a smaller town where nobody else had that level of skill. My relative was even willing to do the work at home so that it wouldn’t be quite so obvious that the company had hired a black man to do the accounting. But in the end, it didn’t work out, even though the company would have saved considerable money by using him. The owner just didn’t want to take the risk that people in town might find out and think that he was a “nigger lover.” Most of the people he actually sold product to were far away and would never have even known. The decision was made based on social pressure, not market pressures. This was back in the mid 1950s.
That is why these theories about building the better mousetrap, and the highest skills set can demand the highest pay, doesn’t always work. There are a lot more things to consider, and most of them are not found in economics books.
” “Isn’t this Eric Jacobus the same guy who basically said that racism in Hollywood was okay because there is no market for Asian American films or Asian American actors and actresses? Wow, and you guys are having this most ideological fart session with him why?”
Ugh, that again. I think I’ll just leave you guys to your opinions, because it seems people here are still unwilling to drop that issue. Feel free to email me stuntpeople at yahoo and I’d be happy to debate anybody privately until the end of time. Doing it here is frustrating.”
^Above…lol!
I am not going to put it nicely. Jacobus is a property/ states rights anarcho capitalist baffoon. On one end of the spectrum you have the anarcho socialists. On the other end you have these types of baffoons. Both groups are ‘absolute’ nuts in many ways except that with anarcho socialists, their hearts are at least in the right place as they actually want to make people’s lives better and they aren’t greedy, apathetic morons.
mT: There’s no such thing as an “anarcho socialist” (oxymoronic) or a “anarcho capitalist”. Giving something a new name covers up the historical fact of fascism’s evil intent and result. The right-wing element that gave rise to people like Timothy McVeigh use different ways of explaining the same ideology. EJ is trying to make something dangerous look benign. If you strip away the euphemistic outer layer that EJ covers himself with, you have a fascist. EJ is not just a states-rights secessionist. He takes it further & proposes a violent overthrow of the United States and its democratic institutions that keeps corporate power in check. This results in continuous civil war. Unfortunately, EJ is not alone and a whole bunch of “nuts” adds up to a dangerous movement. These same elements show up at these “Tea Parties” & a few of them bring along their AR15s.
These are dead giveaways of a fascist:
Democratic government bad.
Corporations have all the rights to do as they please.
People subservient to corporation.
mojorider:
Warren Buffet is nothing more than an apologist for one of his own. He’s saying that the public is as much to blame for these toxic mortgages. That’s bullshit cuz people got these houses because the banks that came up with these ARMs told people that “Hey good news!! You’re Qualified!!”…. and folks just thought that since they “qualified”, they must be alright. Banks are trustworthy right? It was Wall St. that invented this shit. Wall St. is responsible.
And what the fuck is this shit about “bad behavior”? Wall St. just behaved badly? WTF is that?! As far as the laissez faire proponents go, these Wall St. types did exactly like they were supposed to. They were maximizing profits and being as greedy as possible. As Gordon Gekko quoting Friedman said, “greed is good!” It’s not about behavior. It’s about regulating this derivatives market…… actually outlawing this shit and bring back the Glass-Steagal Act & whatever controls we had from the pre-Reagan days. Let our laws & our democracy control the greed. cuz if we allow the banksters to control themselves, greed will win every time.
As if the 100+ TRILLION dollar derivatives market is not already too big, Buffet still wants a “big capital market” after proposing a undisclosed solution for these toxic assets. He wants to take care of it himself ( not with government intervention)…….. which is a huge conflict of interest……. so he can keep doing whatever the hell he’s been doing to get his billions. He’s helping himself out with nothing for the rest of us. He’s bullshit.
Many good articles here with the solution to this economic crisis. Here’s one of ‘em:
[b]Greed: The Fundamental Flaw of Free Market Fundamentalism[/b]
http://www.newdeal20.org/?p=5716
All the arguments against “excess risk” fail to take into account the fact that our government set up the incentives that gave rise to the risk-taking that brought down our economy. The same thing happened during the Great Depression.
People point to the “unregulated” market of Wall Street, but nothing could be further from the truth. Wall Street is regulated to the bone. The whole economy is. Here’s just a small chunk of regulations that are huge contributors to heavy risk-taking:
- The Fed insures $100,000 (or is it $250K now?) of deposits in banks, meaning investors use multiple banks and use less scrutiny in choosing banks.
- Fannie and Freddy’s losses were backed by tax dollars, causing them to make riskier purchases of mortgages.
- The CRA forced banks to lend to risky borrowers, by law.
- Capital gains tax cut in 1997 for homes ONLY meant market was distorted toward home purchases. If you’re gonna cut taxes, cut all of em.
- Fed Reserve injecting money into economy artificially through interest rate tinkering.
- Fed bailing out insolvent banks and institutions, creating moral hazard for the largest and most influential.
Nobody cares about these, though. The standard answer, one that everyone here advocates, is to have government intervene and impose more restrictions. That’s what will happen, and it will cause the same problems.