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November 11, 2015


Market failure to allocate risk and resources in income distribution leading to today’s ravaging effects of  income inequality all across America is a textbook lesson of when policy invites the foxes (corporate America) into the henhouse (the”market”) to make such allocations free of government regulatory oversight. The foxes eat the chickens and get fat (the Dow) while such chickens who survive descend from middle class fowl into poverty fowl status, and we are told by Wall Street flacks that this is normal, that it is in the nature of capitalism where there are winners and losers as inevitable as “business cycles” to explain ups and downs and other bumps in the market etc. This is propaganda. Ups and downs and market instability are what happens when we leave unregulated or under-regulated private enterprise to allocate risk and resources for the market under the guise of “freedom.” Query – freedom for whom?

Market stability is within reach if capitalism is regulated and not left to prowling capitalists whose sole concern is profit, not fairness and equity in sharing the fruits of such endeavor.  Wall Street’s patron saint Adam Smith never favored what is going on today where all or virtually all of the fruits of the economy go to a narrow slice of the investment side of our economy from which labor should have its fair share but is excluded. Quite the contrary – he wrote that labor should be paid fair wages for its efforts and equitably share in the fruits of the economy, voicing a view that Wall Street flacks overlook with their PR chants allegedly based on history and the inherent nature of capitalism to provide cover for the current theft of both the economy’s income and wealth funneled into Wall Street bottom lines.

Let’s do some economic history. “Government” and “regulation” are four-letter words to libertarians who contend that they have no place in the economy. However (per Kuttner), “The fact is that the market itself is a creature of government.” Thus markets libertarians say should not be regulated could not even exist without states’ defining  the terms of property ownership and commerce, creating money, enforcing contracts, protecting patents and trademarks, and providing basic public  institutions. A Robinson Crusoe world never existed. The real issue is not whether government intrudes on the market – the capitalist system is impossible without government. The real question is whose interests the state serves.” He is right; no government, no market, a truth libertarian fantasies cannot change.

Professor Kuttner has nailed it; the libertarians have manufactured an issue that never existed in history and does not exist today. The core libertarian claim that markets are efficient without government regulation stands demolished by the evidence – and yet such claims persist. How could that be? It is clear that libertarian free market theory did not work in view of the under-regulation that led to one panic after another in our history and leading finally to the Great Depression, the ultimate lesson proving that the market cannot be entrusted to libertarian fantasies in which regulation by government in the public interest is a no-no, a lesson we should have relearned but didn’t, hence Bush’s Great Recession, a near-miss depression in which we once again trusted private enterprise (the Wall Street big banks) to allocate risk and resources for the market without adequate government oversight. We even took corporate socialism one step further – we bailed them out when their “allocations” soured.

Since then, and $10 trillion (and counting) in lost economic performance, bailouts, and mortgage foreclosures later, libertarians and their friends among the rich and corporate class are still pedaling the disproven fantasy that if government would just get out of the way and let private enterprise run the allocation of risk and resources via free market principles, everything would be dandy. Sorry. We tried that more than once and have been burned every time, so go pedal your propaganda elsewhere. The “market” proved to be anything but “free.” Lack of public oversight is an invitation to disaster, as we have seen repeatedly, so it’s time to end this laissez faire tactic of propagandizing the hoi polloi and finally recognize that only managed capitalism can assure market stability. We cannot allow foxes into the henhouse on their promises not to eat the chickens, because that’s what foxes (capitalists) do.

Libertarian theory that the market should be in charge of allocating risk and resources in the economy free of government regulation did in fact take a hit with the advent of the New Deal and Keynesian economics following WW II. The nation prospered greatly WITH tight and enforced government regulation and the application of Keynesian views of public investment following that war. The academic community of that day by and large felt the discredited libertarian views were dead, and they were, until the remnants of the free-market theory led by Friedrich Hayek engaged in a technical duel with John Maynard Keynes about whether markets were self-correcting after all. Hayek lost, but (per Kuttner) “hit pay dirt later with his argument that markets epitomized freedom, a claim that was taken a step further by Milton Friedman a generation later” (and adopted a generation after that by Ronald Reagan with his anti-government rhetoric and cheerleading of trickledown economics – a plan Robert Reich correctly notes has never worked). When are the apostles of greed going to understand that without government there is no market, and that without regulation of the market we are at constant risk of market instability (as proven by evidence contrary to their propaganda time after time)? When?

Professor Kuttner rightly observes that “In the idealized libertarian world, individuals are ‘free to choose’ – never mind that some are born with far more resources with which to choose than others. In the Hayek-Friedman world, government, except for its minimal role of keeping the peace and protecting property values, is the enemy of freedom” (see Paul’s almost incoherent rants).  Hayek wrote a book called The Road to Serfdom in 1944 which contended that democratic forms of planning were destined to lead down the same road to totalitarianism that ended with Stalin and Hitler, and its contentions still resonate with the right wing faithful to this day (see Cruz and Paul) even though there is not a single case cited where democratic planning ever led to dictatorship. These people make up issues and then attack them in a pointless exercise in academic fraud since the issues didn’t exist in the first place.

Finally, Professor Kuttner observes that “the anti-regulators are on the march” and “Republicans are promoting a general regulatory rollback.” Thus a Cato Institute (a libertarian think tank) website saying that “There is no greater impediment to American prosperity than the immense body of regulations chronicled in the Federal Register.” What they don’t tell us is (per Kuttner) that “nearly all of these regulations are there because of some market failure or corporate abuse that resulted in citizen pressure on Congress for reform.” Such incessant propaganda has caused even some Democrats to be seduced by the supposed inefficiency of regulation, even when they know that a failure of regulation has taken us from one economic crisis to another attributable primarily to Republican politicians.

So, regulation of the peoples’ business by representatives of the peoples’ interests, or by banks and the superrich whose sole interest is in getting richer? I have made my choice; what’s yours?    GERALD    E


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