For some it just means higher prices at the gas pumps. For others it entails the loss of their homes. For still others it is a matter of whether they will be able to find a job, or feed themselves and their families even if they do have a job. There are degrees of suffering, but pretty much everybody has been impacted by the recession, depression, collapse, or whatever one wishes to call the current economic dysfunction.

Something is profoundly wrong. Nobody is still saying there is no problem and only a few die-hards believe that an “adjustment” in the market will make it all right again. Is this awareness that something fundamental needs to change both too little and too late? Nobody knows. The time is out of joint, though. That this is generally recognized is, at least, a beginning, and a cause for some hope.

The article re-produced below, “The Death of Reganomics” Makes the point that even conservatives now understand that something needs fixing, and that the fixing may require significant changes in how we think about and practice economics.

What was even more interesting to me than the article were the comments that followed it when it was posted on Truthout. Before re-printing the article, then, I would like to share excerpts from some of the comments.

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“Reaganomics was a sham that only appeared to work because nearly a decade after the economy had been drained by the Vietnam War it was set to recover. Timing was everything, substance was nothing.”

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Some felt that the problem was that we never have practiced capitalism.

“We haven’t had capitalism since at least 1913 (Federal Reserve anyone). Since then we’ve been feed BS corporate fascism disguised as capitalism. If it were truly capitalism then the accumulation of wealth we have now wouldn’t have been possible...”

Or this:

The problem is that what we have is not capitalism. When Adam Smith wrote about the invisible hand, he envisioned competition at all levels. He had no idea of what has become essentially a monopoly market where the few big guys prevent any real competition from occuring.

Perhaps from the beginning it was not a realistic plan.

“.... the idea of a free market-as envisioned by Adam Smith was a myth. Why this is so was exposed later on by John Kenneth Gailbraith in his ground breaking tome The New Industrial State.”

“... [for example] every recession after the war was an invitation to the Fed to flood the markets with liquidity. When things improved, the right claimed the markets had self regulated. Reaganomics was just another fancy name for flim -flam in the name of greed and tilted ideology.”

			        *****

Some felt that for capitalism to work we need a moral fiber that is no longer characteristic of people in the modern world.

“When Adam Smith first conceived his economic theories, he believed that greedy excesses would be prevented by social condemnation, that capitalists were men of honor and there was such a thing as social conscience. None of those qualities have survived in the modern world, where men of power and authority connive to rape and pillage the environment and the public purse for selfish greed. They connive to write the law with loopholes for themselves or break it with impunity.”

			        *****

Whether what we have had is true capitalism or not, or whether such a thing is possible, there seems to be a consensus now that what we have been living with since Reagan has been a mistake – if not a deliberated scam.

“Reagonomics is and was a planned disaster! ...Even Reagan’s own budget director, David Storkman, roundly denounced Reagan’s program of tax cuts which benefited ONLY the very wealthiest... His [Reagan’s] famous ‘cadillac driving’ welfare grandmom was a bald faced lie. There was NO such person.”

And here is a longer quote that sums it up nicely.

“U. S. Capitalism: The colossus of pyramid schemes. We consume more than we can acquire the natural resources required for our cosumption. Then we export the way of life to the rest of the world. Next Europe. Now China. Now India. We can only keep the charade going by exploiting the labor and natural resources of third world countries. We are addicts, unwilling to admit to our addiction. Our newsmedia is owned by the same addicts, and they don’t want to the public to face the problem, or their business would go belly-up. We’re fat and unhealthy because the food industry won’t allow TV to tell us why we are fat and unhealthy. We’re governed by an idiot because the the politicians won’t allow TV to tell us that the president is an idiot. We’re living with poisoned air, water, and food because the energy companies won’t allow TV to tell us we are being poisoned. We have a bloated defense budget for the same reason. It goes on and on. This form of capitalism is taking us over the cliff.“

			        *****

So perhaps the time has come for another look at the.... well... you know. The “S” word.

“Socialist capitalism as practiced in Scandinavia is the only appropriate model for an economy of a democratic republic. Tax excessive wealth. Convert the taxes into benefits for those who live by wages. Profit is not entirely private property. It belongs to all who are involved in its creation.“

(See Sweden -- A Third Way )

		               *****

In any case, if a fair dose of something has made us ill, it seems unlikely that even more of it will make us well.

“Considering that the thing that brought us to this point is deregulation and allowing Big Corporate America to run over everyone however they wished, it is difficult to believe that there are people, other than those who have benefited from our distress, who actually recommend more of the same.“

				*****
 

So,

“It’s time to speak of many things, of cabbages and kings, and whether elephants have wings . . ..” Thankfully, the economic problem has been placed on the table for dissection and dissolution. Unbridled consumption in any form, including Reaganomics, does not work.”

				*****

Reaganomics does not work. Amen to that. It would seem that the Queen of Hearts still rules the world. But we are seeing a ray of hope. The question of what kind of economic system the world needs at this critical juncture is finally on the table for discussion. Hopefully the discussion will be radical enough to uncover the root causes of the economic malfunctions that are killing us.

Perhaps there are several “root causes” that have to be exposed and corrected. Surely though, some of the comments above that focus on the issue of greed are identifying the tap root. But to lament the greed of individuals is not enough. Indeed, to do so may even mislead us as to the true correction that is needed.

The problem is not that there are a few greedy people in the system that need control and punishment. The problem is that the whole system is predicated on greed. Businesses that do not outdo their competitors in the arena of greed do not survive. Whether the head CEO is a villain or a saint is irrelevant. S/he must act with absolute ruthlessness and in accordance with the dictates of greed, or s/he will have to be replaced. Either that, or the business will fail. The international corporations that rule the world have survived precisely because they are ruthless, exploitive, self-serving and indifferent the the suffering they cause to individuals and the damage they do to the environment. The question is whether we can depend on a system that is unabashedly predicated on greed to lead to a world that is equitable and sustainable.

This is why a radical analysis of what is now needed must focus not so much on the immorality of individuals in the system as on the immorality of the system itself.

TruthDig

July 10, 2008

By E.J. Dionne

The biggest political story of 2008 is getting little coverage. It involves the collapse of assumptions that have dominated our economic debate for three decades.

Since the Reagan years, free-market clichés have passed for sophisticated economic analysis. But in the current crisis, these ideas are falling, one by one, as even conservatives recognize that capitalism is ailing.

You know the talking points: Regulation is the problem and deregulation is the solution. The distribution of income and wealth doesn’t matter. Providing incentives for the investors of capital to “grow the pie” is the only policy that counts. Free trade produces well-distributed economic growth, and any dissent from this orthodoxy is “protectionism.”

The old script is in rewrite. “We are in a worldwide crisis now because of excessive deregulation,” Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee, said in an interview.

He notes that in 1999 when Congress replaced the New Deal-era Glass-Steagall Act with a looser set of banking rules, “we let investment banks get into a much wider range of activities without regulation.” This helped create the subprime mortgage mess and the cascading calamity in banking.

While Frank is a liberal, the same cannot be said of Ben Bernanke, the chairman of the Federal Reserve. Yet in a speech on Tuesday, Bernanke sounded like a born-again New Dealer in calling for “a more robust framework for the prudential supervision of investment banks and other large securities dealers.”

Bernanke said the Fed needed more authority to get inside “the structure and workings of financial markets” because “recent experience has clearly illustrated the importance, for the purpose of promoting financial stability, of having detailed information about money markets and the activities of borrowers and lenders in those markets.” Sure sounds like Big Government to me.

This is the third time in 100 years that support for taken-for-granted economic ideas has crumbled. The Great Depression discredited the radical laissez-faire doctrines of the Coolidge era. Stagflation in the 1970s and early ’80s undermined New Deal ideas and called forth a rebirth of radical free-market notions. What’s becoming the Panic of 2008 will mean an end to the latest Capital Rules era. What’s striking is that conservatives who revere capitalism are offering their own criticisms of the way the system is working. Irwin Stelzer, director of the Center for Economic Policy Studies at the Hudson Institute, says the subprime crisis arose in part because lenders quickly sold their mortgages to others and bore no risk if the loans went bad.

“You have to have the person who’s writing the risk bearing the risk,” he says.

“That means a whole host of regulations. There’s no way around that.”

While some conservatives now worry about the social and economic impact of growing inequalities, Stelzer isn’t one of them. But he is highly critical of “the process that produces inequality.”

“I don’t like three of your friends on a board voting you a zillion dollars,” Stelzer, who is also a business consultant, told me. “A cozy boardroom back-scratching operation offends me.” He argues that “the preservation of the capitalist system” requires finding new ways of “linking compensation to performance.”

Frank takes a similar view, arguing that CEOs “benefit substantially if the risks they take pay off” but “pay no penalty” if their risks lead to losses or even catastrophe—another sign that capitalism, in its current form, isn’t living by its own rules.

Frank also calls for new thinking on the impact of free trade. He argues it can no longer be denied that globalization “is a contributor to the stagnation of wages and it has produced large pools of highly mobile capital.” Mobile capital and the threat of moving a plant abroad give employers a huge advantage in negotiations with employees. “If you’re dealing with someone and you can pick up and leave and he can’t, you have the advantage.”

“Free trade has increased wealth, but it’s been monopolized by a very small number of people,” Frank said. The coming debate will focus not on shutting globalization down but rather on managing its effects with an eye toward the interests of “the most vulnerable people in the country.”

In the presidential campaign so far, John McCain has been clinging to the old economic orthodoxy while Barack Obama has proposed a modestly more active role for government. But the economic assumptions are changing faster than the rhetoric of the campaign. “Reality has broken in,” says Frank. And none too soon.

E.J. Dionne’s e-mail address is postchat(at)aol.com.