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“Greed Has Not Been So Good”: The Private Sector Does Not Produce Public Virtue

Ever since he first proposed it in the same year Thomas Jefferson declared all men to be created equal, people have been delighted and beguiled by the hidden workings of Adam Smith’s famous “invisible hand.”

For a millennia or more, humans who marveled at the orderly movements of the heavens sought to invent some system to explain and predict the comings and goings of the planets. And so, it was entirely inevitable that in the fullness of time people would seek to impose the cosmic reliability of celestial mechanics onto more terrestrial phenomenon as well, like economics.

“Let the market decide!” That has been the battle cry of free market aficionados from the day Adam Smith first suggested that private avarice might transubstantiate into public virtue right through to the unspoken suppositions buried deep within Congressman Paul Ryan’s god-awful budget that tax cuts pay for themselves and the whole point of national fiscal policy is to lift from the minds of America’s job-producing investor class the dark clouds of “uncertainty.”

But what if the laissez faire conception of the free market doesn’t hold up any better than did the Ptolemaic vision of an earth-centered solar system that very nearly got Galileo burned at the stake for contradicting?

What if private vice doesn’t produce public virtue at all, as Adam Smith surmised, but rather invites a heedless and reckless pursuit of private profit that leads inexorably to public catastrophe? That was the conclusion which the Chicago-school conservative Richard Posner reluctantly reached after sifting through the rubble following the collapse of capitalism in 2008.

In his 2009 diagnosis of the most recent financial crisis, The Failure of Capitalism, Posner concluded that the fundamental problem with free market capitalism is that behavior which is perfectly rational when pursued by individuals, and individual firms, is disastrous when that behavior is aggregated across the entire society.

The micro-economic laws of supply and demand that tell an economic participant how to use the price mechanism to maximize profits, in other words, are worse than worthless as a macro-economic guide for the national policymaker whose aim is, not profits, but the productivity and prosperity of the economy as a whole.

It makes perfect sense for the consumer to buy when the market is strong and save when it is weak, “but by doing this they make the downturn worse,” says Posner, since from the standpoint of the overall society “we want people to save when times are good and spend when times are bad.”

Likewise, it can be rational to ride one of the serial economic bubbles that have become all too commonplace since high finance replaced making things as America’s signature industry — even if you know it is a bubble — since the individual investor can never know when that bubble will burst. And until it does, says Posner, there are lots of profits to lose if one climbs off the bubble too soon.

As a former Citigroup CEO put it: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing you got to get up and dance. And we’re still dancing.”

Because risk and return are positively correlated, Posner says a firm that plays it safe is, paradoxically, “courting failure because investors will turn elsewhere.”

Likewise, while a “cascade” of bank failures could bring the economy to a halt, Posner says “no individual bank has an incentive to take measures to avoid such a consequence.”

That is why, he says, it may be risky to follow the herd, but it is not irrational.

Since the 2008 collapse, the media has been on high alert (unlike the government) for the scoundrels and knaves who brought our economy to grief. But in apportioning blame, Posner says “there is no need to bring cognitive quirks, emotional forces, or character flaws into the causal analysis.”

The “rational maximization” of businessmen and consumers all legally pursuing their self-interest, together and intelligently, within a framework of property and contract rights, was all it took to “set the stage for economic catastrophe.”

It’s this “rational indifference” to the consequences of one’s own business and consumption behavior — an indifference baked into the very nature of the “free” market itself — that explains why government has a duty to do more than merely prevent fraud, theft and other infringements of property and contract rights, even though this “is the only duty that libertarians believe government has,” as Posner says.

Government also has an obligation to regulate financial behavior, says Posner, for without such regulation “the rational behavior of law abiding financiers and consumers can precipitate economic disaster.”

Given the structural deficiencies of the free market and the perverse, self-destructive incentives it creates, it was probably smart for conservatives to shift the focus of their cheerleading away from capitalism’s economic performance and towards laissez faire’s imagined moral underpinnings instead — freedom, liberty, individualism and all of that. That’s because, as an economic incentive that promises broad-based prosperity, greed, it turns out, has not been so good.

 

By: Ted Frier, Open Salon Blog, Salon, March 21, 2013

March 23, 2013 Posted by | Capitalism, Economy | , , , , , , , | Leave a comment

“Ryan Shrugged”: Paul Ryan Suddenly Does Not Embrace Ayn Rand’s Teachings

Rep. Paul Ryan (R-Wis.) tried to send the message this week that, contrary to “urban legend,”he is not obsessed with philosopher and author Ayn Rand.

“I reject her philosophy,” Ryan told National Review on Thursday. “It’s an atheist philosophy. It reduces human interactions down to mere contracts and it is antithetical to my worldview. If somebody is going to try to paste a person’s view on epistemology to me, then give me Thomas Aquinas. Don’t give me Ayn Rand.”

Best known for her novels “The Fountainhead” and “Atlas Shrugged,” Rand advocated a philosophy that emphasizes the individual over the collective, and viewed capitalism as the only system truly based on the protection of the individual. She has been a significant influence on libertarians and conservatives.

Ryan, whose name has been floated as a possible running mate for GOP presidential candidate Mitt Romney, appeared to be distancing himself from Rand in response to a public letter he received this week from nearly 90 faculty and administrators at Georgetown University. In their letter, they criticize him for misusing Catholic social teaching in defending his budget, which hurts the poor by proposing significant cuts to anti-hunger programs, slashing Pell Grants for low-income students and calling for a replacement of Medicare with a voucher-like system. They also invoke Rand’s name.

“As scholars, we want to join the Catholic bishops in pointing out that his budget has a devastating impact on programs for the poor,” said Jesuit Father Thomas J. Reese, one of the organizers of the letter. “Your budget appears to reflect the values of your favorite philosopher, Ayn Rand, rather than the Gospel of Jesus Christ. Her call to selfishness and her antagonism toward religion are antithetical to the Gospel values of compassion and love.”

But any urban legend about Ryan’s affinity for Rand surely started with Ryan himself, who, prior to this week, had no qualms about gushing about Rand’s influence on his guiding principles.

“The reason I got involved in public service, by and large, if I had to credit one thinker, one person, it would be Ayn Rand,” Ryan said during a 2005 event honoring Rand in Washington, D.C., the Milwaukee Journal Sentinel reported in April 2009.

During the 2005 gathering, Ryan told the audience, “Almost every fight we are involved in here on Capitol Hill … is a fight that usually comes down to one conflict — individualism versus collectivism.” The event was hosted by The Atlas Society, which prominently features a photo of Rand on its website and describes itself as a group that “promotes open Objectivism: the philosophy of reason, achievement, individualism, and freedom.”

Ryan also said during a 2003 interview with the Weekly Standard, “I give out ‘Atlas Shrugged’ as Christmas presents, and I make all my interns read it. Well … I try to make my interns read it.” He noted that he “looked into” Rand’s work when he was younger, but reiterated that he is a Christian and reads the Bible often.

In 2009, Ryan posted two videos on his Facebook page raving about the importance of Rand’s views.

“If ‘Atlas Shrugged’ author Ayn Rand were alive today, here’s the urgent message I think she’d be conveying,” Ryan wrote alongside the first video, titled “Ayn Rand’s relevance in 2009.”

He says in the video:

What’s unique about what’s happening today in government, in the world, in America, is it’s as if we’re living in an Ayn Rand novel right now. I think Ayn Rand did the best job of anybody to build the moral case for capitalism. And that morality of capitalism is under assault. And we are going to replace it with a crony capitalism, collectivist, government-run system which is creeping its way into government. And so if Ayn Rand were here today, I think she would do a great job in showing us just how wrong what government is doing is. Not the quantitative analysis, not the numbers, but the morality of what is wrong with what government is doing today.

In the second video, titled “Ayn Rand & 2009 America, Part 2,” Ryan says it doesn’t surprise him that sales of “The Fountainhead” and “Atlas Shrugged” have “surged” since President Barack Obama took office.

“It’s that kind of thinking, that kind of writing, that is sorely needed right now. And I think a lot of people would observe that we are living in an Ayn Rand novel right now, metaphorically speaking,” Ryan says. “The attack on Democratic capitalism, on individualism and freedom in America is an attack on the moral foundation of America. And Ayn Rand more than anyone else did a fantastic job of explaining the morality of capitalism, the morality of individualism. This, to me, is what matters most.”

Some of Ryan’s critics took a shot at him for suddenly distancing himself from Rand.

“Not pure enough on entitlement cuts @philipaklein @robertcostaNRO Paul Ryan on Ayn Rand: ‘I reject her philosophy,'” Austan Goolsbee, the former chairman of Obama’s Council of Economic Advisers, tweeted Thursday.

UPDATE: 5:14 p.m. — Ryan spokesman Kevin Seifert downplayed the lawmaker’s apparent change of tune on Rand.

“I wouldn’t make too much of this one way or another. Congressman Ryan was not ‘distancing himself’ from Rand, merely correcting several false storylines that are out there, such as the myth that he requires all of his staffers to read Atlas Shrugged. Saying he ‘rejects Ayn Rand’s philosophy’ was simply meant to correct a popular falsehood that Congressman Ryan is an Objectivist — he isn’t now and never claimed to be,” Seifert said in a statement to The Huffington Post.

 

By: Jennifer Bendery, The Huffington Post, April 27, 2012

April 28, 2012 Posted by | Capitalism | , , , , , , , | Leave a comment

“The New Elite Aristocracy”: Mitt Romney’s Wealth Problem

Americans have come to expect a certain patrician baseline from their political class. Congress is stocked full of millionaires, and in the 2008 campaign Joe Biden was considered working class for riding Amtrak, despite having a net worth in the hundreds of thousands. No one bats an eye now when Rick Santorum whines about his meager means on the debate stage then releases tax returns revealing that he rakes in over $900K a year.

Yet, Mitt Romney’s wealth has served as an albatross to his campaign. We might be used to millionaires running for president, but Romney would rank among the richest handful of presidents if elected. His vast fortune is more than double the total worth of the past eight presidents combined. Newt Gingrich played on resentments of Romney’s wealth to great success in South Carolina before dialing back his attacks once the Republican establishment turned on him, accusing the former speaker of employing leftist critiques of capitalism.

Romney’s campaign has danced around the issue throughout the campaign, but over the weekend TPM‘s Pema Levy noticed a new strategy emerging from Romney and his friends:

On Friday, Romney had another one of his out-of-touch moments when he said that his wife Ann “drives a couple of Cadillacs.” But rather than try to walk back the comment, team Romney appears to have a new tactic for dealing with this problem.

When Romney and a surrogate were asked about Ann’s Cadillacs on the Sunday talk shows, their response was not to hide or apologize for Romney’s wealth. Instead, their message boiled down to: Yes he’s rich, get over it.

When questioned about the line on Fox News, Romney said, “If people think there’s something wrong with being successful in America then they better vote for the other guy.”

Mitt Romney wants to have it both ways. He sees himself as the fulfillment of the American ideal; the personification of the 1% that many middle class Americans believe they will one day reach, even if upward social mobility is increasingly difficult.

Yet, Romney also presents himself as attuned to the travails of normal working folks. He calls himself unemployed, claims to have once worried about receiving a pink slip, and litters his stump speeches with folksy tales of his normal upbringing (leaving out the years spent in a governors mansion) and starting his own, typical small business.

While the two personas appear to be at odds, Romney could get away with the contradiction if his wealth had been earned through other means. The self-made millionaire is a bedrock part of the American tale. But Romney’s struggles are as much about how he accumulated his vast fortune. Private equity is a largely unknown sector of the American economy, and its mysterious practices have a whiff of the under-the-table financial Wall Street instruments that brought economic ruin to the country. Romney earned most of his $21 million 2010 income, not from direct earnings, but from gains accrued off his investments. Rather than exemplifying the entrepreneurial spirit Americans love, the continued growth of Romney’s bank account highlights the divide between the normal working class and the new elite aristocracy whose fortunes continue to rise based on their already accumulated wealth.

 

By: Patrick Caldwell, The American Prospect, February 27, 2012

February 28, 2012 Posted by | Capitalism, Election 2012 | , , , , , , , | 1 Comment

Mitt Romney’s “Post-Truth Campaign”

Suppose that President Obama were to say the following: “Mitt Romney believes that corporations are people, and he believes that only corporations and the wealthy should have any rights. He wants to reduce middle-class Americans to serfs, forced to accept whatever wages corporations choose to pay, no matter how low.”

How would this statement be received? I believe, and hope, that it would be almost universally condemned, by liberals as well as conservatives. Mr. Romney did once say that corporations are people, but he didn’t mean it literally; he supports policies that would be good for corporations and the wealthy and bad for the middle class, but that’s a long way from saying that he wants to introduce feudalism.

But now consider what Mr. Romney actually said on Tuesday: “President Obama believes that government should create equal outcomes. In an entitlement society, everyone receives the same or similar rewards, regardless of education, effort, and willingness to take risk. That which is earned by some is redistributed to the others.”

And in an interview the same day, Mr. Romney declared that the president “is going to put free enterprise on trial.”

This is every bit as bad as my imaginary Obama statement. Mr. Obama has never said anything suggesting that he holds such views, and, in fact, he goes out of his way to praise free enterprise and say that there’s nothing wrong with getting rich. His actual policy proposals do involve a rise in taxes on high-income Americans, but only back to their levels of the 1990s. And no matter how much the former Massachusetts governor may deny it, the Affordable Care Act established a national health system essentially identical to the one he himself established at a state level in 2006.

Over all, Mr. Obama’s positions on economic policy resemble those that moderate Republicans used to espouse. Yet Mr. Romney portrays the president as the second coming of Fidel Castro and seems confident that he will pay no price for making stuff up.

Welcome to post-truth politics.

Why does Mr. Romney think he can get away with this kind of thing? Well, he has already gotten away with a series of equally fraudulent attacks. In fact, he has based pretty much his whole campaign around a strategy of attacking Mr. Obama for doing things that the president hasn’t done and believing things he doesn’t believe.

For example, in October Mr. Romney pledged that as president, “I will reverse President Obama’s massive defense cuts.” That line presumably plays well with Republican audiences, but what is he talking about? The defense budget has continued to grow steadily since Mr. Obama took office.

Then there’s Mr. Romney’s frequent suggestion that the president has gone around the world “apologizing for America.” This is a popular theme on the right — but the so-called Obama apology tour is a complete fabrication, assembled by taking quotes out of context.

As Greg Sargent of The Washington Post has pointed out, there’s a common theme to these whoppers and a number of other things Mr. Romney has said: the strategy is clearly to portray the president as a suspect character, someone who doesn’t share American values. And since Mr. Obama has done and said nothing to justify this portrait, Mr. Romney just invents stuff to make his case.

But won’t there be some blowback? Won’t Mr. Romney pay a price for running a campaign based entirely on falsehoods? He obviously thinks not, and I’m afraid he may be right.

Oh, Mr. Romney will probably be called on some falsehoods. But, if past experience is any guide, most of the news media will feel as though their reporting must be “balanced,” which means that every time they point out that a Republican lied they have to match it with a comparable accusation against a Democrat — even if what the Democrat said was actually true or, at worst, a minor misstatement.

This isn’t an abstract speculation. Politifact, the project that is supposed to enforce truth in politics, has declared Democratic claims that Republicans voted to end Medicare its “Lie of the Year.” It did so even though Republicans did indeed vote to dismantle Medicare as we know it and replace it with a voucher scheme that would still be called “Medicare,” but would look nothing like the current program — and would no longer guarantee affordable care.

So here’s my forecast for next year: If Mr. Romney is in fact the Republican presidential nominee, he will make wildly false claims about Mr. Obama and, occasionally, get some flack for doing so. But news organizations will compensate by treating it as a comparable offense when, say, the president misstates the income share of the top 1 percent by a percentage point or two.

The end result will be no real penalty for running an utterly fraudulent campaign. As I said, welcome to post-truth politics.

By: Paul Krugman, Op-Ed Columnist, The New York Times, December 22, 2011

December 23, 2011 Posted by | Capitalism, Class Warfare | , , , , , | Leave a comment

GOP Governors Taught How To Describe Occupy Wall Street

During a meeting of the Republican Governors Association in Orlando this week, Frank Luntz, one of the most well known political communications strategist in the country, talked to GOPers about how they could do a better job talking about the Occupy Wall Street movement.

Yahoo News’ Chris Moody reports that “Luntz offered tips on how Republicans could discuss the grievances of the Occupiers, and help the governors better handle all these new questions from constituents about ‘income inequality’ and ‘paying your fair share.’”

“I’m so scared of this anti-Wall Street effort. I’m frightened to death,” said Luntz, a Republican strategist and one of the nation’s foremost experts on crafting the perfect political message. “They’re having an impact on what the American people think of capitalism.”

According to Moody, this was Luntz’s advice:

1. Don’t say ‘capitalism.’

“I’m trying to get that word removed and we’re replacing it with either ‘economic freedom’ or ‘free market,’ ” Luntz said. “The public . . . still prefers capitalism to socialism, but they think capitalism is immoral. And if we’re seen as defenders of quote, Wall Street, end quote, we’ve got a problem.”

2. Don’t say that the government ‘taxes the rich.’ Instead, tell them that the government ‘takes from the rich.’

“If you talk about raising taxes on the rich,” the public responds favorably, Luntz cautioned. But  ”if you talk about government taking the money from hardworking Americans, the public says no. Taxing, the public will say yes.”

3. Republicans should forget about winning the battle over the ‘middle class.’ Call them ‘hardworking taxpayers.’

“They cannot win if the fight is on hardworking taxpayers. We can say we defend the ‘middle class’ and the public will say, I’m not sure about that. But defending ‘hardworking taxpayers’ and Republicans have the advantage.”

4. Don’t talk about ‘jobs.’ Talk about ‘careers.’

“Everyone in this room talks about ‘jobs,’” Luntz said. “Watch this.”

He then asked everyone to raise their hand if they want a “job.” Few hands went up. Then he asked who wants a “career.” Almost every hand was raised.

“So why are we talking about jobs?”

5. Don’t say ‘government spending.’ Call it ‘waste.’

“It’s not about ‘government spending.’ It’s about ‘waste.’ That’s what makes people angry.”

6. Don’t ever say you’re willing to ‘compromise.’

“If you talk about ‘compromise,’ they’ll say you’re selling out. Your side doesn’t want you to ‘compromise.’ What you use in that to replace it with is ‘cooperation.’ It means the same thing. But cooperation means you stick to your principles but still get the job done. Compromise says that you’re selling out those principles.”

7. The three most important words you can say to an Occupier: ‘I get it.’

“First off, here are three words for you all: ‘I get it.’ . . . ‘I get that you’re. I get that you’ve seen inequality. I get that you want to fix the system.”

Then, he instructed, offer Republican solutions to the problem.

8. Out: ‘Entrepreneur.’ In: ‘Job creator.’

Use the phrases “small business owners” and “job creators” instead of “entrepreneurs” and “innovators.”

9. Don’t ever ask anyone you want them to ‘sacrifice.’

“There isn’t an America today in November of 2011 who doesn’t think they’ve already sacrificed. If you tell them you want them to ‘sacrifice,’ they’re going to be be pretty angry at you. You talk about how ‘we’re all in this together.’ We either succeed together or we fail together.”

10. Always blame Washington.

Tell them, “You shouldn’t be occupying Wall Street, you should be occupying Washington. You should occupy the White House because it’s the policies over the past few years that have created this problem.”

The Occupy movement has scored a number of small victories since September, when the Occupy Wall Street protesters first assembled in downtown New York. Bank of America announced it would not be charging debit card fees, one of the many triggers that sparked the protests, and a congressman introduced an amendment called the OCCUPIED Amendment that would reform campaign finance laws. Campaign finance rules that favor corporate power are a chief Occupy Wall Street target.

 

By: The Washington Independent, Admin, December 1, 2011

December 2, 2011 Posted by | Capitalism | , , , , , , | Leave a comment

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