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August 21, 2013


We have a present-day Nostradamus among us who predicted the Bush-led debacle of 2008 in a book published in 2007. The description of insolvency of Wall Street big banks and the consequent financial meltdown internationally is so detailed that one wonders if the publication date is amiss. It isn’t. So who is our oracle? It is Robert Kuttner; and the book? It is “The Squandering of America.” I have just finished reading it, and it has been a tour de force. The book’s sub-title is “How the failure of our politics undermines our prosperity,” published a year before the Bush catastrophe and Great Recession of 2008.

Kuttner is a liberal Democrat, but he does not hesitate to criticize mistakes Democrats as well as Republicans made and are making (e.g., Clinton’s surrender to ex-Goldman Sachs operatives such as Bob Rubin and Al Greenspan in re NAFTA and WTO membership to China). No one escapes his sharp political scapel. Nor should they, given what they have done to America and its people, and continue to do under “let the market decide” fantasies in an age of monopoly power in production and pricing.

We have, to our everlasting detriment (the Great Depression, Great Recession and recurring “bank panics” of the 19th century etc.), “let the market decide” our economic policies, though those who would pretend this is policy did not let the market decide to bring China into a WTO preferred trade partner locus. That was not a market decision; it was a political decision. The “market” did not make that decision; politicians did. The laissez  faire among us did not let the market decide, but once politically decided, they insisted that we employ laissez faire “market” principles to the result of huge Chinese and other imports, i.e., no tariffs, total freedom of capital to roam the globe (and even credit derivatives masquerading as capital), among other deadly and continuing mistakes directly attributable to under-regulation, which led to our present day malaise and our descent from a relatively high-paying manufacturing economy to a service economy of minimum wages and consequent and disastrous reduction in collective income and in aggregate domestic demand.

The laissez faire exponents knew that once the genie was out of the economic bottle (established production and capital outlays in China and other cheap labor environments), it would be difficult for later policymakers to recapture the genie and put him back from whence he came. The ultimate result of such political (not market) shenanigans has been and still is economically devastating for America and its people, though historically profitable for Wall Street banks and their minions, and what the heck? If you overshoot, the people you are impoverishing will bail you out, so don’t worry about big risks on either a domestic or international scale – we’re covered. Besides, it wasn’t our fault. It was all that over-regulation by that socialist government that caused the recession. If the government had just left us alone, everything would be fine. (Right. The government dreamed up and peddled funny paper around the globe while Bush’s regulators took their siestas.) The fantasies woven by Wall Street’s PR flacks and apologists know no end.

The laissez faire among us are ambivalent to a fault; they are political and pro-government intervention when setting up the trade deals that send production and money to China, for instance, but then revert back to their classical economic views of “let the market decide” once the trading frameworks are established (and their continuity further cemented by campaign contributions by Wall Street and its multinational handmaidens to maintain the status quo). In other words, use the political resources only government can bring to the table to get the trading situation you want, then after you get it tell that same socialist government to butt out and leave “private enterprise” alone, forget regulations, accountability to the public etc., and if any of those dirty socialists claim that we have the undue advantage of monopoly pricing due to the slave labor employed in making products for export to America, just tell them to “let the market decide.”  We are busy making money, and we should “let the market decide” whether we buy Chinese or American-made goods. Oh, the economy is in systemic freefall with massive unemployment and falling demand? That’s your problem. Leave us alone.

Kuttner (and I) propose that we NOT “leave them alone.” This is our economy, not theirs, and though they may have a seat at our table of policymaking, we the people will make trade and other policy decisions based upon what is best for the American people and not the bottom lines of any participant in our marketplace. If participants can do well in a truly competitive and not monopolistic marketplace, fine. If not, then they are advised to seek another line of business, undergo a Chapter 11 realignment in bankruptcy, or whatever their situations may dictate.

We should embrace a more populist response to solution of our economic problems. Kuttner (at page 272 of his book): “You can put the entire Republican economic ideology on a bumper sticker: Markets Work, Governments Don’t. This easy-to-grasp economic philosophy is complemented by a simple social philosophy: Poor People Reflect Poor Values. If everyone would just stay in school, work hard, get married and respect traditional values and religious faith, poverty would vanish.”

At page 273: “The Republican ideology plainly contradicts the lived experience of most American voters.” He is right, and values judgments are good ideas for everyone, rich or poor, but their practice has little to do with an economy where the rich victimize the poor through monopoly power and pricing.

Finally, in comparing today’s lack of managed capitalism to that of our postwar experience of WW II, he writes: “Markets are useful engines of economic growth, but that are not reliable at providing employment security, much less decent wages, retirement, education, or health care. Nor can we trust markets to police the honesty of financial institutions, the cleanliness of air and water, the safety of workplaces, or the stability of the economy as a whole. So alongside markets, we need social investments financed with progressive taxation, as well as public regulation of the market’s self-cannibalizing tendencies. A well-managed economy operating according to these principles can be at least as efficient as a laissez-faire one (which underinvests in people) – and a lot fairer.”

The foregoing paragraph can be described as Words of Gold. Both reason and experience confirm that a managed capitalism is superior to an unregulated laissez faire approach to making an economy work for all Americans. I agree with every word of this paragraph in which he states facts, not theories. We know that managed capitalism works; we also know that “let the market decide” doesn’t. It’s a fact. Look at history. We know what works; what are we waiting on?

I will provide more insights to those in Kuttner’s book later. Stay tuned. GERALD  E


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