The Social Gardener, Part 1

Nearly every day I hear some conservative argue for “free markets” in one form or another.  “Get government off the backs of bidness,” they say. “Free markets are more efficient.” “The Free Market Does It Better.”

George Will recently wrote a scathing piece on liberalism, which ended with this:

Society — hundreds of millions of people making billions of decisions daily — is a marvel of spontaneous order among individuals in voluntary cooperation. Government facilitates this cooperation with roads, schools, police, etc. — and by getting out of its way. This is a sensible, dynamic, prosperous society’s “underlying social contract.”

Okay. That sounds good, on first reading. But let’s look at a part of American life that unquestionably commands the attention of a large majority of the population: sports.

Baseball games, football games, games of all sorts, are managed competitions, not free-for-alls in which anything goes. It is the fact that they are managed competitions that makes them so popular.  If the New England Patriots won every game they played and thus won the Super Bowl every year, football would die.

It’s not just that NFL owners provide the venue  and the equipment (society’s “roads, schools, police,” as Will put it) to play the game. There are elaborate rules and regulations, salary caps, revenue sharing and other managed aspects of the sport, which far from undermining the benefits of competition, actually serve to make competition more beneficial—and more rewarding for everyone involved: owners, players, and in terms of enjoyment, the fans.

This is contrary to the assertion made by laissez-faire advocates, whose voices never tire of telling us that government regulation and intervention stymies creativity and growth and wealth-creation in the larger economy. But the enormous popularity of the highly regulated National Football League disproves the general idea that managing and supervising competition is bad for us.

Now, all of that is relatively easy to understand. We can see it every Sunday this time of year.

What is harder to understand is why the idea continues to thrive in some very visible and noisy sectors that unregulated or nearly unregulated economies are superior to managed economies, despite the empirical evidence against that idea.

There is, of course, the Great Depression, which should have settled the matter forever. But more recently we have the evidence of the Great Recession and its continuing effects, which even laissez-faire high priest Alan Greenspan admitted put him into “a state of shocked disbelief.” Why? The New York Times expressed it this way back in October of 2008:

…as chairman of the Federal Reserve, a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.

A copy of The Road to Serfdom, by Friedrich Hayek, sits on or near my desk all the time. Hayek’s name is invoked often by free-marketeers, but those folks should actually read what Hayek wrote. He wasn’t exactly a believer in laissez-faire, as this passage from the book makes clear (note: I substituted the word “libertarian” for “liberal” in this passage, to make the meaning clearer to contemporary readers):

The fundamental principle that in the ordering of our affairs we should make as much use as possible of the spontaneous forces of society, and resort as little as possible to coercion, is capable of an infinite variety of applications. There is, in particular, all the difference between deliberately creating a system within which competition will work as beneficially as possible and passively accepting institutions as they are. Probably nothing has done so much harm to the [libertarian] cause as the wooden insistence of some [libertarians] on certain rough rules of thumb, above all the principle of laissez faire.

Uh-oh. Did he really mean to say that? Yep:

The attitude of the [libertarian] toward society is like that of a gardener who tends a plant and, in order to create the conditions most favorable to its growth, must know as much as possible about its structure and the way it functions.

That sounds exactly like what I, as a liberal today, believe. We should “make as much use as possible of the spontaneous forces of society, and resort as little as possible to coercion.” And we should “create the conditions most favorable” to the growth of society.

What Hayek was referencing was the growth of our understanding of “social forces and the conditions most favorable to their working in a desirable manner.” In other words, the wise social gardener will learn—and continue to learn—what he can about how society, including our capitalist system, works and improve conditions that will help it grow.

What’s wrong with that?

Alan Greenspan And The Un-American Mob

“For who hath despised the day of small things?”

—Zechariah 4:10

Herman Cain will never be president. 

But he does serve to represent something important—at least in terms of temperament and values, if not in complexion—about a rather large constituency in the Republican Party.  He famously remarked to the Associated Press that the Occupy Wall Street protesters were “un-American” and anti-capitalist, and, naturally, it’s all Obama’s fault:

I don’t have facts to back this up, but I happen to believe that these demonstrations are planned and orchestrated to distract from the failed policies of the Obama administration. Don’t blame Wall Street, don’t blame the big banks, if you don’t have a job and you’re not rich, blame yourself! It is not a person’s fault if they succeeded, it is a person’s fault if they failed.

I don’t have facts to back this up, but I happen to believe…”  That introductory clause represents a terrifying peek into the Republican mind these days.  Beliefs need not be supported by facts.

But beyond what Cain’s remarks reveal about the quality of analysis of the average GOP presidential candidate and the average GOP primary voter, Cain essentially voices what a lot of Rightists believe about the 99% of folks who don’t enjoy the best of the best in American society: If you aren’t scarfing down the majority of Grandma Margie’s Magic Pie, then it’s because your fork is too small.

Either get a bigger fork or get up from the table.

Majority Leader Eric Cantor says he is “increasingly concerned about the growing mobs,” and Glenn Beck, hiding somewhere on the Internet, said:

Capitalists, if you think that you can play footsies with these people, you’re wrong. They will come for you and drag you into the streets and kill you.

But believe it or not, most revealing and disturbing of all  is what Republican Congressman Peter King of New York said:

It’s really important for us not to give any legitimacy to these people in the streets. I remember what happened in the 1960s when the left-wing took to the streets, and somehow the media glorified them and it ended up shaping policy. We can’t allow that to happen.

No legitimacy.  That’s why Fox “News” ridicules the Wall Street protesters, whose diverse faces look like the America to come, not the America that was.  After months and months of promoting the pale-faced Tea Party movement with orgasmic fervor, suddenly Fox goes limp over the sudden appearance of a leftish backlash against greed and inequality.

The Right must not, as King pointed out, allow the media to “glorify” the Wall Street protesters, lest they end up “shaping policy.”

Well, notwithstanding the remonstrations of Mr. King and Mr. Cantor and Mr. Beck and other voices of the moneyed class, the mostly young and diverse folks that make up the Occupy Wall Street movement—whose unfocused demands are rooted in a very focused moral outrage about what greedy banksters have done to the country—will play a role in shaping policy.

Whether it will be through this current fire of protests, or whether it will be through a fire to come, frustrated young folks will do what they have done throughout American history: help clear the social forest of underbrush in this tall-tree democracy.

Forget Peter King’s fear of the protest movements in the streets of the 1960s. The best analogy to what is happening now is from the 1930s. Robert Cohen wrote of the great student movements at that time:

During its peak years, from spring 1936 to spring 1939, the movement mobilized at least 500,000 collegians (about half of the American student body) in annual one-hour strikes against war. The movement also organized students on behalf of an extensive reform agenda, which included federal aid to education, government job programs for youth, abolition of the compulsory Reserve Officers’ Training Corps (ROTC), academic freedom, racial equality, and collective bargaining rights.

The impetus, of course, for this youthful activity was the Great Depression:

Undergraduates in the early 1930s faced hard times, with the collapse of the job market and the exhaustion of student loan funds and parental financial support. In 1932 and 1933 even the student body itself began to diminish because of the sinking economy; some eighty thousand youths who in more prosperous times would have attended college were in these years unable to enroll. The economic crisis and its growing impact on campus led students to start questioning both the logic and value of American capitalism.

Sounds eerily familiar today, doesn’t it?

Young folks should question “both the logic and value of American capitalism.” And sober adults should be able to answer their questions, not with a knee-jerk response like Herman Cain’s or a stupid assertion like Glenn Beck’s or with expressions of fear from Republican congressmen, but with an acknowledgement that American capitalism is sick and it needs a regimen of life-saving treatment.

Some of us want to save it and have been arguing accordingly.

In the late 1990s, Alan Greenspan—who is to laissez-faire capitalism what Herman Cain is to pizza—was worrying about the uneven distribution of America’s wealth and income, and none other than The Wall Street Journal would jump his Randian behind for “blathering about income inequality.”

In 2002 Greenspan said of the increasing compensation for corporate executives:

It is not that humans have become any more greedy than in generations past. It is that the avenues to express greed had grown so enormously.

And in 2005 he dared to say:

In a democratic society, a stark bifurcation of wealth and income trends among large segments of the population can fuel resentment and political polarization. These social developments can lead to political clashes and misguided economic policies that work to the detriment of the economy and society as a whole.

About the widely divergent outcomes of people in the labor market, Greenspan told a Joint Economic Committee in 2005:

As I’ve often said, this is not the type of thing which a democratic society – a capitalist democratic society – can really accept without addressing.

The way Republicans these days have chosen to address the fruit of Alan Greenspan’s fears—the Wall Street protesters around the country—is by calling them an un-American mob who must be delegitimized and ridiculed at all costs.

A sure sign that the protesters are having an effect.

Turn To Page 1 In Your Hymnbook

Gene Lyons, whose column appeared in today’s Joplin Globe, as usual, gets it right:  

Increasingly, one of our two great political parties appears to be governed by what Charles P. Pierce calls the “Three Great Premises” of talk radio: “First Great Premise: Any theory is valid if it moves units … Second Great Premise: Anything can be true if someone says it loudly enough … Third Great Premise: Fact is that which enough people believe. Truth is measured by how fervently they believe it.”

No doubt, if we could measure the fervency of Republican presidential candidate Ron Paul’s beliefs, we would have one whopper of a Truth.  A couple of days ago, I heard Paul say the following on Dylan Ratigan’s show:

I think the debate is going my way…When the financial bubble burst—and the housing bubble burst—all of a sudden Austrian, free-market economics gained a lot of credibility…

Yep. In the mind of Ron Paul, all we need to solve our troubles is more of the same stuff that caused our troubles: free-market economics.  And, of course, he is not the only one singing from the Gospel According to Ayn Rand hymnal.  Nearly every Republican leader, and potential presidential candidate, is singing from that hymnbook, which really only has one song: An Anthem to Greed.

Fortunately, though, in a moment of repentance, the contemporary high priest of Randian economics, Alan Greenspan, put down his free-market hymnal in October of 2008.  Contrary to Ron Paul and the Republican Party, he said the following to the House Oversight and Government Reform Committee:

REP. HENRY WAXMAN: The question I have for you is, you had an ideology, you had a belief that free, competitive — and this is your statement — “I do have an ideology. My judgment is that free, competitive markets are by far the unrivaled way to organize economies. We’ve tried regulation. None meaningfully worked.” That was your quote.

You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others. And now our whole economy is paying its price.

Do you feel that your ideology pushed you to make decisions that you wish you had not made?

ALAN GREENSPAN: Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. Everyone has one. You have to — to exist, you need an ideology. The question is whether it is accurate or not.

And what I’m saying to you is, yes, I found a flaw. I don’t know how significant or permanent it is, but I’ve been very distressed by that fact.

REP. HENRY WAXMAN: You found a flaw in the reality…

ALAN GREENSPAN: Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.

REP. HENRY WAXMAN: In other words, you found that your view of the world, your ideology, was not right, it was not working?

ALAN GREENSPAN: That is — precisely. No, that’s precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.

Remembering The Confession of Alan Greenspan

Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself especially, are in a state of shocked disbelief. 

—Alan Greenspan, October 23, 2008

As we ponder the strange fact that rich folks are winning the war on poverty—the ratio between the income of the richest and poorest Americans has doubled since 1968, the widest disparity on record—we should also ponder an event almost two years old now.

Alan Greenspan’s now famous “I Found A Flaw” confession is still fresh in my mind.  Appearing before the Oversight and Government Reform committee in the House of Representatives on October 28, 2008, here is the exchange between the committee’s chairman and Mr. Greenspan:

REP. HENRY WAXMAN: The question I have for you is, you had an ideology, you had a belief that free, competitive — and this is your statement — “I do have an ideology. My judgment is that free, competitive markets are by far the unrivaled way to organize economies. We’ve tried regulation. None meaningfully worked.” That was your quote.

You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others. And now our whole economy is paying its price.

Do you feel that your ideology pushed you to make decisions that you wish you had not made?

ALAN GREENSPAN: Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. Everyone has one. You have to — to exist, you need an ideology. The question is whether it is accurate or not.

And what I’m saying to you is, yes, I found a flaw. I don’t know how significant or permanent it is, but I’ve been very distressed by that fact.

REP. HENRY WAXMAN: You found a flaw in the reality…

ALAN GREENSPAN: Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.

REP. HENRY WAXMAN: In other words, you found that your view of the world, your ideology, was not right, it was not working?

ALAN GREENSPAN: That is — precisely. No, that’s precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.

When Mr. Greenspan explains that he “bad been going for 40 years or more” with his ideology, he means of course his faith in laissez-faire economics, in unfettered free markets.  His love affair with laissez-faire began in the 1950s, when he struck up a relationship with Ayn Rand, the Russian-born philosopher and still fashionable darling of libertarians everywhere.  Her extremist views on limited government and her fierce hatred of regulations of any sort sound a lot like what many Republicans are saying these days—even as they seek government jobs via the November elections.

Greenspan was once considered a “rock star,” whose opinions were unassailable and whose mere intonations could send shockwaves up and down Wall Street.  And by all reports, Greenspan was an accomplished clarinet and saxophone player, who never blew more loudly, if not more competently, than he did when he was blowing about Ayn Rand’s hands-off economic philosophy.

Up until his admission to America that there was a “flaw” in his ideology, he consistently opposed government regulation of all kinds, especially in the financial industry.  Arguably, for more than thirty years, measured from the time he was sworn in as chairman of Gerald Ford’s Council of Economic Advisers in 1974 (with Ayn Rand at his side) until his term at the Federal Reserve ended in 2006, Greenspan’s flawed ideology and his misplaced faith in unregulated markets influenced our nation’s economic policies more than any other player in Washington.  Ronald Reagan appointed him chairman of the Board of Governors of the Federal Reserve in 1987, where he stayed for almost 19 years.

Famously, during the Clinton administration, when Brooksley Born tried to warn us about the then-$27 trillion dollar OTC derivatives “dark market,” which was a wonderful example of Randian principles at work, Greenspan, along with Robert Rubin, Arthur Levitt, and Larry Summers, three high-profile Clinton officials, essentially shut her down because she expressed the need to bring regulatory light to derivatives trading. 

By 2007, the OTC derivatives market was reportedly around $600 trillion (yes, that’s right), and no laissez-faire-loving economist apparently had an inkling that economic disaster was just a swap away.

That all changed, of course, in the fall of 2008.  And with Greenspan’s confession—and that confession has been underplayed by liberals and Democrats—the limpness of laissez faire logic was exposed for all to see.  It’s as if Moses had come down from the mountain with the news that God was not there, not anywhere. Unfortunately, not enough people were paying attention, or if they were, they soon turned away, unwilling to abandon their philosophy.

Because today we hear the same calls for deregulation and free markets that characterized Greenspan’s career, before his once-invincible faith in laissez faire was sent reeling by the blows of betrayal that his banker friends dealt him in their self-mismanagement of the unregulated, unfettered OTC derivatives market.

In some odd way, it was kind of sad to watch Greenspan confess to a crack in is ideological armor, a crack wide enough for an economy to fall through.  But it is even sadder to contemplate the casualties of his—and many, many others’—misplaced faith in an ideology that portrayed—and still portrays—government as the enemy of Wall Street moneymaking rather than a friend of America’s larger interests.

Alan Greenspan Throws Republicans Under The Bus on Bush Tax Cuts

More than a week ago, Treasury Secretary Timothy Geithner reiterated the administration’s plan to let the infamous Bush tax cuts expire—that expiration, of course, was part of the legislation that Republicans crafted and passed and signed into law years ago—with exceptions for those individuals earning less than $200,000 and couples earning less than $250,000.  Those folks will continue paying at the same rate they do now.

Only the top two or three percent of income earners will see their tax rates go back to the Clinton era, when deficit spending was on the wane and jobs were plentiful.  The expiration of the tax cuts for folks in that category will net the Treasury about $680 billion over the next ten years.  Were the entire package of Bush tax cuts allowed to die its natural legislative death, the Treasury would net about $3.7 trillion or so over the next decade. 

In other words, it costs a lot to cut people’s taxes, especially the top two or three percent of the wealthiest Americans. Republicans, because their conservative constituency includes many of those wealthiest Americans, naturally are characterizing the expiration of the tax cuts as a tax increase.   

Their salient, supply-side argument is that to “raise taxes” now would jeopardize the economic recovery (which recovery they don’t acknowledge in any other context) because tax cuts stimulate economic growth and essentially pay for themselves. In other words, if you believe magic is real (voodoo economics, anyone?), then you can also believe in the supply-side theory that cutting taxes for the wealthy increases government revenue.

If you had the stomach for it, you could have heard Sarah Palin make that argument this morning on her network, Fox “News.”  But if you wanted a more, shall we say, learned opinion, you could have listened to Alan Greenspan, former five-term Fed chairman and Ayn Rand enthusiast, who said this today on Meet The Press:

MR. GREGORY:  All right.  Well, Dr. Greenspan, it’s not often that you hear Democrats and liberals quoting you.  But, in this case, they did when it come to–came to tax cuts because of an interview you gave recently with Judy Woodruff on Bloomberg television.  Here was the question:  “Tax cuts [that] are due to expire at the end of this year.  Should they be extended?  What should Congress do?” You said, “I should say they should follow the law and then let them lapse.” Question:  “So to those interests who say but wait a minute, if you let these taxes go my taxes go up, it’s going to depress growth?” You said, “Yes, it probably will, but I think we have no choice in doing that, because we have to recognize there are no solutions which are optimum.  These are choices between bad and worse.” You’re saying let them all go, let them all lapse?

MR. GREENSPAN:  Look, I’m very much in favor of tax cuts, but not with borrowed money.  And the problem that we’ve gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money, and at the end of the day, that proves disastrous.  And my view is I don’t think we can play subtle policy here on it.

MR. GREGORY:  You don’t agree with Republican leaders who say tax cuts pay for themselves?

MR. GREENSPAN:  They do not.

For those of you in a comedic mood, or those who just can’t get enough of the fractional governor’s palm-inscribed wisdom, here is a snippet from this morning:

 

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