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THE POPE, THE DOW, AND THE NOBEL PRIZE IN ECONOMICS (PART I)

December 6, 2013

THE POPE, THE DOW, AND THE NOBEL PRIZE IN ECONOMICS (PART I)

We are at or near historic highs in the Dow and S & P measures of the stock market these days, and one would think that all the investors are happy. Most are, but some have lost their proverbial shirts. Those who bought shares in WorldCom, Sun Microsystems, Northern Telecom, Lucent Technologies and American International Group have as of today lost more than 90 percent of their investments.

This points up the reality that there are losers in a strong market and winners in a weak market and that even in a boom market one can make poor picks and lose money. We then say that “the market” has decided who are the winners and who are the losers as though “the market” is some mystical entity  sitting in the clouds waving its invisible hands (as theorized by Adam Smith) in favor of one investment over another. That (in the words of Adam Smith’s day) is poppycock. “The market” had nothing to do with anything. It was humans and/or their computers which made the choices that led to investment gain or loss. “Markets” are inventions of humans; they have no independent existence and decide nothing. (As will be seen, Pope Francis has a lot to say about “the markets.”)

A Jesuit priest turned Pope Francis understands the foregoing market chatter very well. Though a non-Catholic, the more I read of this activist pope’s economic views, the more impressed I am with his understanding of economics as well as his fearless advocacy for the poor and disfranchised. It is heart-warming to see a pope willing to go to the mat with Wall Street and other unsharing greed mongers whose sole reason for existing is to make more and more profit at the expense of the poor and middle class. He is on the right side in denying help to those who don’t need it and advocating help for those who do.

Pope Francis, I presume, has a lifetime job and neither Wall Street nor Wal-Mart can fire him though they probably would if they could because this pope is publicly denouncing trickle-down economics, wage inequality and other such Wall Street principles turned into practice that have been running up the value of their paper mills while sending the rest of America to the poorhouse. They don’t want any interference in this cozy arrangement, but I do, and so does the pope. From Wall Street’s point of view, it’s bad enough when some old blogger like Gerald E denounces their greed day and night; what’s far worse is condemnation by the Vicar of Christ (with his vastly larger audience).

I blogged of my admiration for the pope’s views several days ago and have now run across an expansion of his economic views which rings truer than ever. The following quotes (courtesy of Sam Pizzigati) are some of his further remarkable insights and observations:

(1) Inequality has no social value. Apologists for inequality like to argue that grand private concentrations of wealth serve as an incentive for the rest of us and supply the investments that keep economies thriving. Says the pope: ”Some people like to continue trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world.” He then concludes that this rich-people friendly take on the world “has never been confirmed by the facts.” He is right; the practice of inequality only makes the rich richer and the poor poorer – someone tell me how such a practice has social value.

(2) The pope questions why markets deserve our critical decision and how we can buy the proposition by its deep-pocketed apologists that we must leave the market alone to work its magic rather than upset the “natural order that markets in their inherent wisdom create.” Of course, this whole idea of Adam Smith’s “invisible hand” is hogwash. There exists neither “natural order” nor “wisdom” in the market, inherent or otherwise. Mysticism is not involved.

The truth is that markets follow rules and the rules they follow are set by those who have the economic and political power to set them. The pope correctly sees no reason to automatically accept the verdicts that markets deliver. The pope thinks we should examine the actual operation of these markets and challenge those operations that leave us with such staggering inequality these days. He writes that we need to reject “the absolute autonomy of markets” and confront “the structural causes of inequality;” and further opines that until we take these necessary steps, “no solution will be found for the world’s problems.”

He is again right. We have reached a tipping point. We cannot continue to favor programs and systems that continue to enrich the rich at an accelerated rate while impoverishing the poor at a correspondingly accelerated rate, especially with the huge multi-billion increase in world population predicted by 2050. Something has to give, and the poor and middle class have virtually nothing left to give. If we are to continue to have a market-based economy, then someone other than Wall Street must have a hand in setting the rules by which markets operate because Wall Street’s system only works for Wall Street while impoverishing and marginalizing the rest of us.

Speaking of tipping points, part I of this essay has reached one. Part II will set forth more papal views and my commentary about the economy we have fashioned (or allowed to be fashioned) that is dictating our very lives for the benefit of the few. Stay tuned.  GERALD  E

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