Home > Plutonomy, Political Economy > Weekend Thoughts

Weekend Thoughts

from Peter Radford

Some quick thoughts for a summer weekend:

I am reading Richard Posner’s book: “The Crisis of Capitalist Democracy”. He and I do not agree on much, if anything, but the book is s decent read and gives a perspective worth knowing. But I could not avoid choking on my coffee when he describes the activities and policy decisions way back during the height of the crisis. Various actions were considered, most dismissed as inappropriate. My favorite, nationalization, was knocked down early. Why? Let Posner tell us: 

“That was a bad idea, and with few exceptions was rejected. Controlled by government, the banking industry would become politicized, and probably incompetently managed to boot …”

Oh my.

There’s not much need to go on. The old idea that an industry under government control is automatically politicized is trotted out every time a politician wants to avoid losing influence. Especially here in the US where the political donations flood in from industry, and where lobbyists write legislation so as to save their bought and paid for Senators and Congress-folks the bother. Yes that happens. A case in point being the change in the bankruptcy laws passed by the Bush regime. You see, it’s not as if the banking industry isn’t political. It is. Wildly so. What we have to avoid, apparently, is that it gets politicized. There’s a big difference.

Posner’s book title gives it away.

It’s OK for an industry to be political. That’s just an expression of free speech. And, as the ever perceptive Adam Smith pointed out a long time ago, capitalists have a tendency to want to twist the laws their way, which is why he warned us about them hanging around in groups. They want to rig the game. Using freedom of speech, mind you. It is another matter altogether for democratically elected politicians to twist things in favor of the voters. That’s called politicization. It’s not right. So rigging the game for capitalists is good. Rigging the game for everyone else is bad.

Got that?

Then there’s the second part of Posner’s sentence. The bit about the incompetency of government management. I assume he’s having a little giggle with this one. I mean, Richard, incompetency is endemic in banking. That’s how they managed to screw up so royally. And they haven’t exactly improved. The litany of foul-ups is way too long to go over here. Every week we learn of another. Let’s just say that when JP Morgan Chase is held up a paragon of bank management virtue and ‘only’ manages to lose about $6 billion on a shady, complex, and ill-understood deal, we should all reconsider what good management is. Because banks wouldn’t know. Or at least the big banks wouldn’t. It is screamingly funny, bordering on the absurd, to claim that we need to leave the failed big banks in the private sector, rather than bring them into the public sector, because the latter is the epicenter of incompetent management. They constantly mess things up despite all the subsidies we throw them. Just imagine what chaos they would cause if we didn’t subsidize them. Suffice to say that the words bank management deserve legendary oxymoronic status alongside bureaucratic efficiency and military intelligence.

Moving on.

I overheard two instances of misinformation that made my blood curdle.

One was when a person, in reference to the Euro crisis, put that blame for it squarely on the overly indulgent and presumably unaffordable social programs that ‘people over there vote for themselves’. Ugh. How this story makes its way around I have no idea. Yes, Greece is a case of rotten budgeting and a nation paying itself goodies with cash it doesn’t have, and has no intention of having. But the conversation wasn’t about Greece. It was about Spain. I have said this before, but in view of the continued misrepresentation of the facts I need to say it again: Spain wasn’t brought low by budgetary error. It was brought low by a real estate bubble with its roots in the inflows of capital consequent to the creation of the Euro. The Euro gave the illusion of a single economy, capital flowed to the margins in search of higher returns. The inflow allowed local wages to rise more rapidly than in the ‘core’ countries where the capital came from. This created an imbalance in competition, that, when the bubble burst, left the margins high and dry. Up a creek, so to speak, with no paddle. In this case the paddle being the chance to devalue a currency. The only way out is for the margins to deflate the hard and nasty way. Hence the problems we are seeing. This has nothing to do with social programs in the build up to the crisis. Nothing.

But the misinformation echoes about doing harm and reinforcing the narrative that we, in the US, need to tackle our ‘equally unaffordable’ social programs if we want to avoid being Spain. Of course the people repeating this story tend to be those who are predisposed to getting rid of social programs, and/or those living off of the bonds that have been expensively preserved at face value via the slashing of jobs and government spending everywhere.

Those that have want more and see a chance to grab it.

The second overheard conversation contained the wrongheaded but popular story that US businesses are not spending their piles of cash because of uncertainty surrounding their future tax status. This, as my father was wont to say, is utter tosh. It is a Republican meme, not a serious analytical position. In every study undertaken – that I am aware of – since the onset of crisis the resounding reason for business retrenchment and hesitation in investment is not uncertainty to do with taxes. It is uncertainty to do with lack of sales. We have a demand problem. No right minded business is going to build a new factory when it cannot yet sell all the output from its existing factories. That has nothing to do with taxes. It has everything to do with demand. This is not difficult to get to grips with, but it isn’t a good stick to beat Obama with. Hence the preference in some circles for the taxes canard.

Worse yet. The teller of the story proclaimed himself to be a ‘moderate’, who was enthused about Romney’s business experience. This experience will, he argued, enable him to make decisions that get us back to work. Quite how I think was left vague. This is probably because Romney has been, hitherto, the very definition of a policy fog. There seems to be a dense damp shroud hanging over every policy suggestion he supports. So dense that we cannot see it all. Only when it emerges will we know. Up until then the shroud protects Romney from having to be specific. About anything. But there is no shroud over Obama. He simply creates massive uncertainty, drains business confidence, and is therefore stopping, singlehandedly, the US economy from powering ahead on a giant wave of investment.

That much of that investment appears likely to be headed towards China and other destinations beyond our borders doesn’t worry a Romney supporter. Outsourcing, offshoring, all to the good. No?

What’s my lesson learned?

That no one should overhear such conversations. It’s maddening to listen to. And it says a lot about our electorate.

I should stick to reading. Not Posner though.

  1. Bruce E. Woych
    July 22, 2012 at 8:42 pm

    RICHARD POSNER is an intellectual monopolist and a true tyrant from the corrupted and perverted University of Chicago rationalists.

    In observing and reviewing this high status man, there does seem to appear some degree of backpedaling on his earlier tyrannical interpretations of social and political class structure (intensively social Darwinism or Spencerian if you prefer not to insult Darwin’s good name). Yet one must remain skeptical of any true distancing this utilitarian opportunist takes to manage his politically calculated reputation.

    I checked this book when it first was published out of curiosity. Given the just peaked climax of confusion it seemed apologistic and uncharacteristic for the high and mighty supremacy of Richard Posner (and his cold hearted alignment with all that was Greed and Stealth in the past).

    I decided there were irrational elements at work here ironically. First and foremost Richard Posner needed to redeem his position and status as intellectual leader in a world he helped create that had ALL gone wrong. If we are to give Posner any birth it would be that he had the integrity to indirectly admit that there was actually something WRONG. But his work is beyond an apologist’s treatise. It is a rationalization and a strategy. In the end, POSNER (just like Paulson’s garbage that was published as “history”) is a cover story. It is so much like all the right wing tactical ploys that usurp and co-opt the primary core “title” for an issue and write their own narrative for the naive innocent who search for the truth. His book, like a good CIA cover story…is merely a right wing redirect and an attempt to capture the language and the narrative of reality…and its rationalized perspective that preserves and serves Richard Posner et al.

    Explaining nothing…but managing to stay on TOP like the RAT that he is.

  2. Bruce E. Woych
    July 22, 2012 at 10:44 pm

    Asymmetrical Knowledge and Rational Choice: The Chicago Gangster Intellectuals dupe the country and the world!


    Bill Moyers / By Bill Moyers and Chris Hedges
    comments_image 68 COMMENTS
    Bill Moyers and Chris Hedges: How Whole Regions of America Have Been Destroyed in the Name of Quarterly Profits
    Hedges discusses his new book with Moyers and the totally unchecked corporate power that is destroying our democracy.
    (Transcript and video lead to watch the Moyer’s interview).
    July 21, 2012

  3. July 23, 2012 at 2:08 am

    George Carlin says it clearly. Check out some of his videos!

  4. July 23, 2012 at 3:02 am

    “It is uncertainty to do with lack of sales. We have a demand problem.”

    Luckily, without that mammals might already be dead.

  5. robert r locke
    July 23, 2012 at 5:12 am

    Probably the two most important economic developments after World War II were the recovery and Industrial expansion of Japan 1945-1990, and the Economic transformation of China, after the 1980s. Bureaucrats and the state played pivotal roles in both. Why? How can it be that state institutions and gifted bureaucrats can be the driving force of change and private enterprise can be, as in America today, the architect of stagnation and cluelessness. The explanatory apparatus that the US have developed in economics and social science not only failed to predict these two developments but do not do a very good job explaining them after the fact.. They just duck the topic. We rely on you hot shots to clarfify the event of our times not to ignore them. The record of state assisted economic development is really quite spectacular, only moron ideologue would miss it.

    • Bruce E. Woych
      July 23, 2012 at 7:31 am

      @robert r locke:
      …and yet we must wonder aloud how it is that the transformation of the Russian Economy actually requested by their state leader…without going into details…was botched by policies and consultations from our American Economists pushing the Pinochet / Friedman cure and shock doctrine upon a weary Russian people…all resulting not in the desired democratic reform economy…but in a violent oligarchy and austerity that even the poor Russian people thought was worse than the old regime they sought to escape.
      Privatization is a scam! Posner is a scam artist!

      The University of Chicago Economics political influence has caused great harm to a world seeking transition. And as you wisely state: “…only moron ideologue would miss it.”

      • robert r locke
        July 23, 2012 at 9:59 am

        An interesting contrast, the failed Russian transition and the successful Japanese and Chinese.

  6. July 23, 2012 at 10:49 am

    A quick note, based on very personal and direct experience of the issue of nationalization of banking. I know that Portugal is a small country by most international standards but the banking industry is there highly developed and tryly multifunctional. The entire national network of ATM’s and POS terminals (tens of thousands…) enables any users with debit cards to pay all kinds of bills «online» in any ATM (public utilities, insurance, taxes…), chech account movements, execute bank transfers, from any terminal of any bank to any other bank, etc etc… According to all foreign observers who visited the country this is a unique case of multibanking funcitonality that simply does not exist anywhere else. This, aparently, because banks are also supposed to be in permanent competition with one another.
    The point I am trying to make is precisely that this technological advance (one single network of comunications that enables banks users and bank officials to access all banks facilities – with security controls, of course) was only made possible as a result of a political decision. This was taken at the height of the April 1974 «Carnation» Revolution when all the bank were nationalized.
    I was then a marketing/account manager with IBM in charge of a segment of the banking sector, and could witness that although the banks were all nationalized (except for two foreign and a cooperative bank) they nevertheless continued to be extremley competitive. to the point of being «aggressive».towards each other. The only government interference was a decree that they shoud all participate in the new entity that was being created (under «private» management): th «Society for Inter Bank Services» or SIBS for short. After re-privatization of all those banks the new(old…) owners realized the advantages of the ew system and kept SIBS active and going… In summary let us not confuse «nationalization» with «burocratization»

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.