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August 27, 2014


Tom Friedman comes across as an amiable fellow, quick yet thoughtful on the draw, personable, measured in his speech, a standout journalist/author and an all-around good guy. I know of no one who doesn’t like him. I like him. However, being a good guy, journalist and successful author does not an economist make. He is not a Galbraith, a Keynes or a Stiglitz. His two books (The Lexus and the Olive Tree, 1999, and The World is Flat, 2005) told us about how free trade (which doesn’t exist) and deregulation (which, unfortunately, does exist) constituted the optimum path toward global growth and social progress for rich and poor alike. Both books were published before the Bush disaster of 2007-2008 (aka the Great Recession), which laid waste to each and every prediction he made in his books as Alice gave way to Machiavelli and theory yielded to real world and brutal practice in the global marketplace.

ASIDE TO TOM: “Turn it all over to the tender and unregulated mercies of the Wall Street banks and corporate America, and Presto! Nirvana awaits everybody – right, Tom? That‘s going to be a hard sell among those fresh in from the rice paddies of the Far East who assemble Apple parts for next to nothing in wages, and perhaps even a harder sell among those laid-off Michigan former auto workers whose unemployment compensation checks have run out and whose utilities have been shut off for non-payment. Nirvana didn’t show up per your published schedule for hundreds of millions of people all around the globe (though it showed up quite well for Wall Street banks and our corporate nabobs). Whatever is the opposite of nirvana showed up instead for the vast majority of Americans as well as millions in Europe and emerging economies. You are still a nice guy, but you were wrong across the board. You were taken in by Wall Street sweet talk and joined the cheer leaders of economic delusion.”

“Apparently you went for the Wall Street propaganda line and embossed it with your gift for words, selling lots of books in the process. Unfortunately, your optimism of what the world would look like after “the magic of the market” and Adam Smith’s “invisible hand” weaved their own magic wands in making everybody on planet Earth happy, like so-called “free trade,” are based on theoretical concepts only; they are based on economic behavior in truly competitive economies and have no independent existence or application in the real world of today’s rough and tumble economics played out against a background of monopoly, restraint of trade, collusive pricing and other such activities we used to call anti-trust violations.”

“Contrary to what you and Wall Street set out for public consumption, the dismantling of tariffs, the deregulation of finance and the reduction of “government interference” in the marketplace did not work “free market magic.” Trade did not soar as you predicted among emerging nations and rich nations alike, with each one making what it manufactured best (following the old classical economic theory of comparative advantage). Capital did not flow wherever it was needed, information did not spread with equal ease, and wages did not rise everywhere (rather wage inequality has deepened).”

“There are reasons why your glowing accounts of how the world was set to prosper with the introduction of world-wide laissez faire policies via trade treaties and unregulated capital controls (intermixed with theories of classical economists such as Adam Smith and David Ricardo) failed as though in lockstep, and the major reason is this: All such policies and their undergirding logic for implementation came straight from Wall Street via their congressional lackeys, and their primary interest, I can assure you, is not to see the world prosper; it is to see their bottom lines prosper, and anyone reading this critique who thinks otherwise needs a synapse check. CEO Jamie Dimon and his JP Morgan Chase bank (the biggest of the Wall Street greed factories) are more interested in the margins of trading in derivatives and Greek debt than they are of the fortunes of peasants in South China and the unemployed in Spain and Michigan. Let’s get real!”

“I recall vividly in this connection an interchange between a journalist and a member of the corporate superrich years ago in which the zillionaire, when asked if what he was proposing would be good for America, answered that ‘he was in business to make money, not to hold America’s hand.’ I think that he spoke truth in setting his priorities, and if America and its peoples’ future are secondary at best to profit-making, imagine where on the Wall Street profit-making spectrum the future of a laborer on a banana plantation in Honduras would be. You cannot humanize greed, but nice try, Tom; you (along with millions of others) were simply conned by Wall Street – and millions still are.” END OF ASIDE.

From the perspective of the rich and corporate class, nirvana has arrived even sooner than scheduled and has greatly exceeded expectations of Wall Street banks and the corporate culture. Bankrolled with bailouts, their sizes increased by the Fed-induced forced mergers of failing small and mid-size banks during and after the Great Recession, their shaky mortgage and other paper bought at par by the Feds as measured in the trillions of dollars – Wall Street banks are more profitable than ever what with their Fed-induced gobbling up of smaller banks adding to their monopoly status as well as (temporary) weakening of regulations etc., all designed to save these “too big to fail” institutions (the same ones who brought on the crisis in the first place).

We seem to have entered a new era of rewarding the wrongdoers at the expense of those wronged, which flies in the face of my upbringing. What’s next? Shall we give bonuses to bank robbers based upon a sliding scale of how much loot they extracted from nervous tellers? I must have missed something during this transitional stage in business ethics. I was taught (verified by my experience as a lawyer) that the bad guys were punished and the good guys made as whole as possible. That does not seem to be the case nowadays. It appears that I can join Tom. Perhaps I’ve been conned, too.

Part III will return to the globalization theme and some of the trade and capital movements under GATT and its replacement, WTO, as well as some of the inner trade treaty brawls, including the problem that some countries (e.g., Germany) run huge trade surpluses and others (e.g., the United States) run huge trade deficits, and what can be done about it in the present economic climate, if anything. Stay tuned. GERALD   E

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