The Limits Of Free-Market Capitalism
Until a few years ago, my spiritual devotions were limited to the free market and the music of Patsy Cline. I’m sorry to say it’s just me and Patsy now.
Karl Marx may have been wrong where it really mattered—communism, to paraphrase Churchill, is government “of the duds, by the duds, and for the duds”—but he was spot on about the pitfalls of capitalism, particularly when it came to the entrenchment of social classes, the fetish of consumption, the frequency of recession, and the concentration of industry. Yet, like trained seals, we continue to leap through the flaming rings of a system that is contemptuous of the public good while rewarding those who feed off “free” markets and the politicians who rig them. Nearly three years after the global economy almost collapsed under the weight of a corrupt and inbred financial order, Washington is still mired between the false choice of the state or private enterprise as the proper steward of the general welfare.
It should be clear to anyone who has lost a cell phone signal in our nation’s capital or been denied health coverage because of a pre-existing ailment that capitalism’s endgame is not freedom of choice and efficiency, but oligarchy. Many of America’s top industries—agriculture, airlines, media, medical care, banking, defense, auto production, telecommunications—are controlled by a handful of corporations who fix prices like cartels. As Marx predicted, the natural inclination of players in a market-driven economy is not to compete but to collude.
Reporting in Asia and the Middle East for many years, I prayed to the same kitchen gods of untrammeled commerce that now bewitch the Republican Party faithful and the neoliberals who inhabit the Obama White House. In Asia more than a decade ago, I covered the liquidation of state assets as prescribed by the International Monetary Fund, perhaps the largest-ever transfer of wealth from public to private hands, as if it were a new religion that would transform economies from the Korean peninsula to the Indian subcontinent. Laissez-faireism, I wrote, would liberate consumers and domesticate once overweening state-owned enterprises.
In fact, privatization merely shifted economic control from corrupt apparatchiks to their allies in business, a transaction lubricated with kick-backs and sweetheart deals. That’s what happened in the Middle East, and it became the spore that engendered the Arab uprising.
The corruption of capitalism in America is all the more appalling for its legality. With the economy still struggling to recover from a housing crisis fomented largely by Wall Street’s craving for mortgage-backed securities, prosecution of those responsible has been confined to a single lawsuit filed by the Securities Exchange Commission against a lone financier. The system is still lousy with loopholes, and the Republican Party, which demographically as well as ideologically is becoming a gated community for white, southern males, is calling for more deregulation, not less.
Which brings us to the central failure of American capitalism: the excoriation of the state.
So deep is the mythology of the free market that we ignore the consequences of starving our schools, libraries, public media, and roads and railways. We expect our teachers to assume the burdens of parenthood and then blame them for failing education. We lament our dependence on foreign oil and the aviation cartels, but we refuse to underwrite a passenger-rail equivalent of the interstate highway system. We disparage the coarse reductionism of corporate-owned news outlets while neglecting public broadcasting, an isolated archipelago of smart, responsible journalism.
Our hostility to the public sector—fountainhead of the Hoover Dam, Mount Rushmore, the Golden Gate Bridge, the Los Angeles Coliseum, our national parks, and countless other public utilities and services in addition to the federal highway system—is inversely proportional to our reverence for private consumption. As the economist John Kenneth Galbraith wrote in his 1958 book The Affluent Society, “Vacuum cleaners to ensure clean houses are praiseworthy and essential in our standard of living. Street cleaners to ensure clean streets are an unfortunate expense. Partly as a result, our houses are generally clean and our streets are generally filthy.” Galbraith also noted the uniquely American conceit of sanctioning debt when households and private investors hold it but condemning it when governments do.
Should the feds nationalize banks and appropriate soy fields? Certainly not. At its essence, there is probably no more efficient way of establishing the price of a particular good or service than market economics. Not all transactions are so simple, however, and there are some services—healthcare, for example, or transportation—that often fare better more as public goods than as private commodities. In order to save American capitalism, we must appreciate its limits even as we struggle to harness its power.
By: Stephen Glain, U. S. News and World Report, June 2, 2011
Are Members Of Congress Engaged In Insider Trading?
When Congress isn’t sending billions in taxpayer money to bail out Wall Street firms, some of its legislators appear to be using information unavailable to the general public to personally profit on stock trades.
So says a study just published in Business and Politics. A portfolio that imitates the stock purchases of House members outperforms the market by more than 6 percent in the course of a year, its authors found. “A previous study of the stock returns of U.S. Senators in a leading finance journal indicates that their portfolios show some of the highest excess returns ever recorded over a long period of time, significantly outperforming even hedge fund managers,” they wrote. “Until now, there has been no similar study of Members of the U.S. House of Representatives.”
Now we know that from 1985 to 2001, the specific interval used to generate the data, senators do the best, House members follow, and the average American investor brings up the rear. In defense of Congress, however, most legislators weren’t exploiting their advantage: on average only 27 percent of senators and 16 percent of House members bought and sold common stock. Interestingly, in the House “by far the most successful traders were those Representatives with the least seniority.” The authors acknowledge that result is counterintuitive, and posit this explanation:
Whereas Representatives with the longest seniority (in this case more than 16 years), have no trouble raising funds for campaigns, junkets and whatever other causes they may deem desirable owed to the power they wield, the financial condition of a freshman Congressman is far more precarious. His or her position is by no means secure, financially or otherwise. House Members with the least seniority may have fewer opportunities to trade on privileged information, but they may be the most highly motivated to do so when the opportunities arise.
So what should be done?
It’s presented as a thorny problem. “To restrain Members from taking personal advantage of non-public information and using their positions for personal gain, Congress has decided that such unethical behavior is best discouraged by the public disclosure of financial investments by Representatives and the discipline of the electoral process,” the authors point out, but “to form a reasonable opinion of a Representative’s conflicts of interest, voters must familiarize themselves with their Representative’s personal asset holdings, the details of each law under consideration in the House and the voting record of the Representative. This could be difficult for any voter.”
That’s why faster disclosure would work best here. Forget filing periodic reports. Just force Members of Congress to be transparent about their stock trades in real time. Voter oversight wouldn’t even be needed — the idea is that self-interested traders would closely monitor the buying and selling of stock by legislators, who’d thereby lose a lot of their ability to get a jump on other investors.
Right?
By: Conor Friedersdorf, The Atlantic, May 27, 2011
Joplin And Natural Disasters: They’re Called “Emergencies” For A Reason
I’ve been writing a lot this week about congressional Republicans’ new approach to disaster relief funds in large part because I find it rather amazing, even for a contemporary GOP that no longer seems capable of surprising.
For all of our differences over party, ideology, and creed, we know that when disaster strikes and our neighbors face a genuine emergency, America responds. We don’t ask what’s in it for us; we don’t weigh the political considerations; we don’t pause to ponder the larger ideological implications.
We act. It’s who we are; it’s what we do.
The problem isn’t that conservative Republicans necessarily disagree with this principle. Rather, the problem is, they place other principles above this one when prioritizing how and whether to act.
While much of Joplin, Mo., is still under rubble from a devastating tornado, conservatives in Congress are starting to argue for a tougher approach to disaster aid, demanding that any funding be offset by cutting federal money elsewhere.
Disasters will no longer be considered “emergencies” if conservatives win this battle to redefine the way Congress funds aid packages for states and cities stricken by natural and man-made catastrophes. […]
Traditionally, the government has responded to disasters — hurricanes, tornadoes, floods and acts of terrorism — by using its power of the purse to aid the affected areas with “emergency” dollars that add to the debt because they don’t count against annual spending caps.
When hurricanes Katrina and Rita slammed into Louisiana and Mississippi in 2005, a vocal minority in the House called for offsetting tens of billions of dollars of spending with cuts to other programs. At the time, House Republican leaders shut them down. But now, as much of the Southern and Midwestern parts of the country have been hit by a series of catastrophic acts of nature, that vocal minority has become a controlling majority — at least in the House.
It was House Majority Leader Eric Cantor (R-Va.) who presented the new way of looking at disaster relief. He was willing to approve a $1 billion emergency package for Southwest Missouri, but on a condition — he wanted to cut money from a clean-energy program to pay for it. His party agreed.
The callousness becomes even clearer in the larger context. If the oil industry wants taxpayer subsidies, conservative Republicans don’t blink, and certainly don’t wonder how we’ll pay for the incentives. When Wall Street needed a bailout, the entire Republican leadership was on board with writing a very large check, without much thought to fiscal responsibility.
But when working-class communities get slammed by a natural disaster, through no fault of their own, suddenly the GOP grows miserly. Republicans’ first thought isn’t, “How can we help these struggling Americans get back on their feet?” Instead, it’s, “How will we block disaster relief aid unless we get corresponding spending cuts?”
By: Steve Benen, Contributing Writer, Washington Monthly-Political Animal, May 27, 2011
Blinded By The Right: Unwavering Support For Israel Hurts Wider U.S. Interests In The Middle East.
In 2003, Democrats upset about President George W. Bush’s plans to invade Iraq invited French President Jacques Chirac, an opponent of the war, to address a joint meeting of Congress. It was blatant political play, an attempt by the opposition to work with a foreign leader in offering a counterargument to the president’s invasion plans and limit his ability to carry though with his decision to go to war in the Middle East. Chirac was feted across Washington by liberal think tanks and pro-French lobbying groups as American politicians and Democratic activists fell over themselves to be identified with a strong anti-war leader.
This, of course, did not happen. The idea that Congress would openly side with a foreign leader against the president of the United States seems too far-fetched to believe. Remarkably, however, something not dissimilar happened in Washington Tuesday, May 24, as Israeli Prime Minister Benjamin Netanyahu spoke to a joint meeting of Congress (a speech interrupted more than 25 times by a rapturous standing ovation). While these types of congressional addresses are rare, this particular event is even a bit more unusual: The speech’s intention — with the full assistance and backing of the Republican leadership in Congress and implicit support of Democrats — was to give Netanyahu a public forum to offer a rebuttal to President Barack Obama’s recent proposals for moving forward with the Arab-Israeli peace process.
As the New York Times reported last week, the invitation was initially requested by Netanyahu of the GOP leadership before the president’s Middle East speech plans had even been formalized: It was “widely interpreted as an attempt to get out in front of Mr. Obama, by presenting an Israeli peace proposal that, while short of what the Palestinians want, would box in the president.” In turn, Obama’s May 19 speech was scheduled purposely so that the president could get out ahead of Bibi’s remarks.
It’s one thing for Republicans to oppose the president’s position on Arab-Israeli peace. In the hours after Obama’s Middle East speech, Republican presidential contenders like Tim Pawlenty and Mitt Romney did just that, arguing that the president had proverbially thrown Israel “under the bus.” (Never mind that Obama simply reiterated long-standing U.S. policy toward the Arab-Israeli peace process.) They were joined — in a bipartisan manner — by prominent Democrats, including Senate Majority Leader Harry Reid, in offering pushback on the president’s words.
It is certainly appropriate for members of Congress to disagree with the president’s foreign-policy agenda. But it’s something else altogether to be appearing to work in concert with the leader of another country in trying to put the president on the defensive –and seeking to score a partisan political advantage in the process. By openly siding with Netanyahu against Obama and making Arab-Israeli peace a partisan issue, Republicans in Congress are at serious risk of crossing a dangerous line and in the process undermining U.S. interests in the Middle East.
This behavior follows a concerning pattern. Last November, House Majority Leader Eric Cantor, after a meeting with Netanyahu, suggested that a Republican Congress would serve as a check on the Obama administration when it came to Israel policy (a position he later sought to walk back). In the fall of 2009, Cantor criticized the Obama administration for its rebuke of the Israeli government over the eviction of Palestinian families in East Jerusalem’s Sheikh Jarrah neighborhood. Most surprising of all, the attack was lodged from Jerusalem, where Cantor was heading a 25-person GOP delegation — an unusual violation of the unspoken rule that members of Congress should refrain from criticizing the U.S. government while on foreign soil. Former Arkansas Governor Mike Huckabee took a similar position this February while traveling in Israel. He called the Obama administration’s opposition to Israeli settlements (a position long held by Democratic and Republican presidents) equivalent to “racism” and “apartheid.”
Last week, as Netanyahu lectured Obama at a frosty White House news conference and issued statements on what he “expected to hear” from the president about his commitment to Israeli security, Republican lawmakers barely batted an eye at behavior that by any other foreign leader would spark outrage from their caucus — and instead aimed their attacks at Obama.
This seems at pace with the GOP’s default position on Israel. This February, writing in the pages of National Review, Romney stated that “Israel must now contend with the fact that its principal backer in the world, the United States, is seeking to ingratiate itself with Arab opinion at its expense.” It’s a view that no doubt would have been met with astonishment in Arab capitals, where America’s image remains largely negative. One can’t help but wonder whether the tail isn’t wagging the dog — after all, is there a reason that the United States shouldn’t seek to ingratiate itself with Arab public opinion? There is an implicit assumption here that no matter what Israel says or does the United States must continue to be blindly supportive — an odd stance for an American politician to take, particularly when Israel’s actions occasionally run counter to larger U.S. interests.
Although one cannot ignore the fact that strongly held empathy for Israel is, in part, motivating this position, there is of course a healthy dose of domestic politicking at work. Democrats have long relied on Jewish support — both electorally and financially. Republicans, though less reliant on Jewish voters, have successfully made support for Israel a litmus test for Democrats to prove their national security mettle. Moreover, with strong backing for Israel among the party’s conservative base, defending Israeli behavior has become a surefire way for Republicans to politically cater to social conservatives and evangelical voters. In fact, Israel probably enjoys more clear-cut support for its policies among social conservatives than it does among American Jews! (And Netanyahu, in particular, didn’t just fall into this love fest: He has long supported and helped spearhead the alliance between the Israeli right wing and American religious conservatives.)
All this is a very far cry from George H.W. Bush’s open conflict with Israel and the American Jewish community in 1991 over loan guarantees for Israeli settlements. That the perception continues to exist that Bush’s aggressive stance cost him severely in the 1992 presidential election no doubt haunts the Republican Party — and any American politician inclined to put public pressure on Israeli leaders.
But ultimately there is more than politics at stake here. At a critical moment in the political transformation of the Middle East, America’s steadfast and unyielding support for Israel — underwritten by both parties in Congress — risks undermining America’s long-term interests in the region. Last year, Gen. David Petraeus commented in congressional testimony that “Arab anger over the Palestinian question limits the strength and depth of U.S. partnerships with governments and peoples [in the region].” His statement provoked controversy in Washington, but ask any seasoned Middle East observer and you’d be hard-pressed to find one who disagrees with the general’s assessment. It is not Iraq, Afghanistan, or Libya which is the greatest source of anti-American attitudes in the Arab world — it is the continued lack of resolution of the Arab-Israeli conflict and the view of many in the region that the United States has its thumb on the scale in favor of Israel.
None of this is to suggest that Washington should turn its back on the Jewish state. But this is also a time when a more evenhanded position on the conflict is desperately needed — particularly as the United States will need to deal with a new government in Cairo that will likely be less supportive of Israel, a wave of unsteady democratic reforms spreading across the Mideast, and a U.N. General Assembly that appears ready to endorse Palestinian statehood this fall. These events will have serious repercussions not just for Israel but for U.S. policy in the region. Obama at least seems to realize this fact and has — albeit tepidly — challenged a recalcitrant Israel to get serious about peace. Yet Congress seems intent on restraining his leverage, effectively holding U.S. actions hostage to the whims of partisan politics — and in the process working in concert with a foreign leader to do it. At some point, it raises the legitimate question of who is looking out not for Israel’s interests, but America’s.
By: MIchael A. Cohen, Foreign Policy, May 24, 2011
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