Floyd Norris, on the calamity now upon us:
Those who were complaining, only months ago, that excessive regulation was making American markets uncompetitive, had it exactly wrong. It was a lack of regulation of the shadow financial system and its players that allowed this to happen. The regulators might not have gotten it right if they had tried to put limits on leverage, or assure that it was clear what risks were being taken, in the world of derivatives and securitizations. But deciding not to even try, and assuming that risks traded secretly would somehow end up in the hands of those most able to bear them, reflected ideology, not analysis.
This is what I don't get about the economic ideology propounded by conservatives. A central conservative insight is that human nature is essentially flawed, and that given an atmosphere of absolute freedom, man will tend to do the wrong thing (that is, the selfish thing, the thing destructive of community interests and ultimately individual interests in the long term). This is what the Biblical insight about it being easier for a camel to go through the eye of a needle than a rich man to enter the kingdom of heaven is about. With money comes freedom of action, and people being what they are, it's hard to hew to a binding moral code when your financial resources give you the freedom to violate it with relative impunity.
I know that excessive regulation can choke off an economy. But there's a good reason for strong regulation, and we're living through it now. I wish it were the case that the Democrats had been a strong voice all along for a more credible regulatory system, but they weren't, not since the Clinton years, at least. Remember the recent reporting showing that on Fannie and Freddie, the Congressional Republicans were trying to do the right thing in reining them in, but Democrats wouldn't let them.
It seems to me that elites in both parties allowed Wall Street to do more or less whatever it wanted, because everybody was making money hand over fist. And now look.
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Z,
I've been calling him Yoda for years. Think about it.
old programmer's adage
As an old programmer, I'd say that's silly. One of the roles of govenment is to establish rules (e.g. traffic laws) and enforce them as well as possible (e.g. traffic cops, cameras at intersections) to provide enough order to keep us from stepping on each other.
Not all rules will be effective, but that's a balance that must be sought. Thinking that government regulation per se is a problem is elevating ideology over reality. What is your alternative?
Yes, we need regulation. I think that where people disagree is what specific regulations and "how much" of them we need.
Here's my take. I'm not an economist, nor am I involved in the financial industry. I'm probably going to recite a lot of "conventional wisdom." Would those of you in the know please correct me if I'm wrong?
After Enron, we came up with Sarbanes-Oxley. What I saw from it was that there was a lot of new steps to go through at a much higher cost, but not much benefit. This, in my mind, is regulation gone wrong.
So what sorts of regulation do I think we need? I am not one to put it in actual legal terms, but since when has that stopped any of us? :) Transparency is the key. All actions should be above board and visible. Even if only accountants can fully understand the actions and balance sheets, they should be able to look and say, "You're good on these points, but this number doesn't look appropriate." We also need enough regulation to make sure that the risk-takers are the risk-bearers as well. No more betting the farm and then asking Uncle Sam if he can give you a soft landing.
Even though we are fallen, we are fallen in different ways, and I think the market and regulatory structure can play this combination of weaknesses into a strength. For example, company A is playing fast and loose with the numbers because of dishonesty. Company B, because of pride, loves to go ferreting out dishonesty. Government C wants to regulate. Economist D balks at over-regulation. I'm not saying that fallenness is good, but that we can hopefully design a regulatory system that will use everyone's fallen nature together to minimize the effects of our individual wrong thinking.
Please apply standard disclaimers of Christianity and don't think I'm saying that human nature is perfectable or that mass wisdom is always right.
Albert: For example, there are antitrust laws to prevent the creation of anti-competitive monopolies... like the ones Rockefeller pursued.
Yes, there are such laws because reformers such as TR pursued them. And of course, they were opposed by businessmen who argued that they were interfering with their trade.
Citations of presidents like Roosevelt who pursued "reformist, regulatory policies" means nothing to me apart from information as to precisely what the policies were.
To go into this would be a course in history and economics, far beyond the scope of posts here. In a nutshell, in the period from about 1890 to about the New Deal era (1930's), the following reforms were gradually won: anti-trust laws, child labor laws, minimum wage laws, the right of unions to organize (see here for what corporations used to do to union organizers), and the five-day workweek, to name a few. I think most people would say all these were good things. Every single one of them, however, was opposed (sometimes with literal violence) by business, always on the grounds that it was "bad for business" or "forcing unneeded regulations" on business. The more things change....
But [the Scandinavian countries] aren't, economically and socially, doing fine. I'd be more specific, but I don't know what "fine" means to you.
The Scandinavian countries typically are about equal to the US in per capita GDP and they typically exceed the US on Quality of Life Index and livability. Of course, we could debate these all day long, and I'm not claiming Scandinavia is perfect. Just pointing out that semi-socialist countries on many objective measures are comparable to or better than us. Which is how I define "fine".
[Y]ou misunderstand what a free market involves, like many anti-free market moralists.
I'm not so much an "anti-free market moralist" as I am against market fundamentalism. George Soros uses this term a lot. I doubt you like him, but you can't call a multi-billionaire an "anti-free market moralist".
Even Christ the Lord refused to get tangled in economics!
Well... that's one view.
I'm tempted to ask exactly what economic program Jesus put forth, and to point out that the early church as described in Acts is not only not free market, but essentially a commune, but I figure it would lead to a pointless discussion with more heat than light.
Here's where your wrong, Rod. A conservative would have never wanted Fannie Mae/Freddie Mac in the first place! At least not with government's implicit backing.
Inflation, wealth inequality, the growth of suburbia (by propping up transportation and cheap oil), and the forthcoming Greatest Depression...all big government's fault.
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