About This Blog
In my previous understanding of free market capitalism, business had the opportunity to succeed or fail on it's own merits. If a company was well-run and consumers desired it's products, the company was successful. If not, the company wasn't successful, and it failed. It was survival of the fittest. That Darwinian concept led to the existence of the best and strongest companies, who provided the best and strongest products. The notion is part and parcel of Adam Smith's "invisible hand" free-market economic theory. While free market capitalism is not perfection (some businesses will fail and there is an inherent inequity of wealth), from a historical viewpoint, free market capitalism seems to be far superior to any other economic alternative that has yet been devised. The United States Of America, the world's lone superpower (for now) stands as profound evidence of that fact. We didn't win the Cold War because we were lucky. We won because we had a superior economic model.
But, as I said, that was my previous understanding. It was pure, perhaps a little naive. My current understanding is this - we don't have a free market capitalist economy at all. Not at the higher levels, and by osmosis, not at the bottom either. Contrary to Barack Obama's statement that he will grow the economy from "the bottom up", all prevailing evidence suggests our economy is grown from the top down. If it wasn't, then it wouldn't matter if the financial and credit markets froze up or not. We wouldn't be facing a second Great Depression over it, because we could still grow the economy from the bottom, as Obama says. We all know that can't be done, because when the top fails, there is no access to capital from the top to start new businesses at the bottom, and there is reduced access to jobs from the top to accumulate individual wealth at the bottom. When the top can no longer perform it's economic functions, it's the bottom that feels the heat the most. As much as I detest the term "trickle down" economics, that is exactly the way it works. Trickle down isn't just some Republican shibboleth, it's the nature of capitalism. If a little guy needs $30,000 to start a small business, and the big guy doesn't have the $30,000 to lend, it's game over. No new business for the little guy. As is often said, nobody ever got a job from a poor person. In the vast majority of cases, jobs and businesses are created from existing wealth, not out of nothing. Obama even disproves his "from the bottom up" economic theories with his own policies, which require intervention from the federal government, the ultimate top, to be implemented.
Enter Henry Paulson, Secretary of the Treasury, and his massive $800 billion bailout, along with all the other bailouts and "stimulus packages" from Democrats and Republicans, which at this point will soon reach $2 trillion in expense to taxpayers. There is nothing about these bailouts that smack of free market capitalism. Instead, they replace free markets with centralized government planning. In one of the largest of all ironies, it was government interference in the mortgage market which led to the housing bubble and subsequent collapse in the first place. Government abetted the housing situation every single step of the way in the name of the beneficent goal of increasing home ownewship in America. Democrats abetted it, Republicans abetted it, and they both patted themselves on the back, saying "look what wonderful men and women we are, America. We're doing such good things for you. Re-elect us." Then, when it blew up in their faces, as was inevitable, those same politicians claimed no responsibility and disingenuously blamed it all on "the failures of the free market." The pols, in their infinite wisdom, decided that the solution to the financial crisis, which was brought into being by government intrusion into the free market, was MORE GOVERNMENT INTRUSION. Why we are looking to people like Barney Frank (D-MA) and Chris Dodd (D-CT) for solutions to the financial crisis totally escapes me. I sure wouldn't look to Ken Lay to fix Enron. This is the same thing. Pols like Frank and Dodd are the problem, not the solution.
We have now discovered that the real purpose of Paulsen's bailout wasn't to buy up distressed mortgages, it was merely to hand hundreds of billions of taxpayer dollars to selected big financial outfits, even if some of those outfits, like J.P. Morgan/Chase, didn't want or need the money. We don't know how much of our money each financial institution received, because the promised bailout transparency has not been provided by the government. We don't have any of the promised Congressional oversight of the bailout, because that committee hasn't even been formed yet. What we do have is another screaming example of how special interests control Washington D.C., and how the federal government controls the economy (poorly). As for our two presidential candidates, Barack 'Change" Obama and John 'Maverick' McCain both voted FOR the bailout. The only saving grace is that the majority of Republicans in Congress voted AGAINST it. Too bad those Republicans don't have much power anymore. No good deed goes unpunished. Republicans were also the ONLY ones who tried to reign in the subprime mortgage insanity before the meltdown occurred. Too bad the American people didn't know any of that before the elections. But they knew Obama stood for "hope" and "change." That's a tribute to our American media. We knew how much the RNC allocated for clothes for VP candidate Sarah Palin, but we didn't know a damned thing about how the financial crisis happened. Obama told us it was all the fault of Bush's failed policies of deregulation, which leaves out SO much of the story as to be a virtual lie. Obama failed to mention that Democrats were for mortgage deregulation too, going all the way back to the Carter administration, and that Democrats fought tooth and nail against regulation of the housing markets during the Bush administration. McCain said he tried to reform Fannie and Freddie, which is true, but McCain should have jumped on the financial crisis issue with both feet, and he didn't, allowing Obama to claim the issue, and the presidency. Maybe Mac really doesn't understand the economy. I doubt Obama does either, but the Big O had a better handle on the partisan blame game, regardless of the facts.
Predictably, a bunch of other interests are lining up at the federal government's bailout trough now, and the feds are even talking about starting a new Department Of Other People's Money (they'll probably settle on another, more politically correct name, though) to bailout any company who DESERVES one. The automakers will receive $50 billion, and apparently without any real business plan to show how their companies will become suddenly profitable following their huge infusion of taxpayer cash. Several different state governments are lining up to receive federal funds, since their coffers have been reduced by the recession. On the horizon, the airlines and credit card companies are waiting for theirs.
In the end, our estimable federal government has pronouned that the way out of our economic problems, which, in the final analysis, have been brought about by living beyond our means, both collectively and individually, is to LIVE EVEN FURTHER BEYOND OUR MEANS. Their solutions to spending money we don't have is to SPEND EVEN MORE MONEY THAT WE DON'T HAVE, and on steriods this time. And then they throw in a couple meaningless caveats about living responsibly, so they don't sound like the crazed corporatist shills they are. I suggest we tell the federal government that we will start living responsibly when the government does, and not a moment sooner. I'm 55 years old, and I've yet to see the federal government accomplish anything nearing financial responsiblity, no matter how many trillions of dollars they appropriate from the forgotten man, the taxpayer. Politicians don't get elected by promising responsibility. They get elected by promising free stuff and goodies. They get elected by deception, and by telling the electorate anything that will make the electorate feel a little better, no matter how irresponsible the political pronouncements may be. That's why we have a $10 trillion debt, $53 trillion in unfunded liabilities, $620 billion annually in interest on the debt alone, an insane self-destructive energy policy, and we just elected as our next president the guy who promised us the most new free stuff. We might as well be voting for the new American Idol winner, the one with the prettiest voice. In fact, I think we just did.