The Rich Under Attack II: "The Gods of Greed"

Posted on by

The UK’s Guardian is publishing three extracts from a new book by , Larry Elliott and Dan Atkinson, “The Gods That Failed: How Blind Faith in Markets Has Cost Us Our Future.”

It seemed worthy of note because it illustrates the backlash against the Wall Street types caricatured by Tom Wolfe as “Masters of the Universe.” But his Sherman McCoy clearly had an exaggerated sense of his place in the world and suffered a nasty fall from grace.

Here, Elliott and Atkinson go after a super-elite they call the New Olympians which they don’t define very precisely but they depict as the perpetrators and beneficiaries of a system that was billed as delivering benefits to the population as a whole but in fact siphoned wealth upward. They put the uber-rich, the IMF and the World Bank in the same boat. Without an explanation of how their interests came to coincide, this story starts to veer into conspiracy theory land.

Now perhaps the split between the promoters/winners and the chumps looks more clear cut in England than on the other side of the Atlantic. In the US, the lines aren’t as clear. A whole cohort of academics and commentators, the vast majority of which are neither super-wealthy nor ensconced in global organzations, zealously defend free market ideology. And the Republicans, at least until recently, have used bugagoos like gay marriage to get red staes, which have lower average incomes and higher proportions of the population on welfare than blue states, to go against their economic interests and cast their lot with Republicans.

So if you scrutinize the argument, you’ll see a lot of bold strokes and bright color, more cartoon than a well-detailed portrait. But guess what? The free market ideology is often crudely drawn and similarly suffers under close examination.

The libertarian fantasy is that we can do away with government except for things like defense, roads, etc. So how are people supposed to conduct business? Let’s say A has made a brand new type of laptop and B is interested. How is B going to verify that A’s laptop lives up to its promises? Well, in the absence of consumer protection and retail sales laws, B would have to have an expert inspect and test it. And even if the computer was OK at the time of purchase but crapped out two weeks later, B would have no recourse.

Without some level of legal protection, people would only do business only in areas where they were competent to evaluate the product. Beyond that, they’d deal only with vendors they knew by reputation to be honorable, which would limit them in most cases to one degree of separation. That might work just fine in a pre-industrial economy, but if you are dealing with goods of any complexity, it quickly breaks down. We need rules and an enforcement mechanisms to allow for impersonal transactions. Otherwise the cost of contracting becomes extremely high.

So the best way to read this excerpt isn’t as rigorous analysis – it certainly isn’t – but as a narrative designed to compete with the free market ideology.

I worry about these appeals to emotion, even when they are well larded with facts. But it may take some exhortation and rabble rousing to get the public to start thinking about what is and isn’t working. Notice the sense of outrage over the way average blokes have been shortchanged. That sentiment is real and will get even stronger as the economy weakens.

From the Guardian:

On March 17, [2008.] Dame Carol Black, the government’s national director for health and work, declared that absence and worklessness related to sickness were costing the country £100bn a year, and it was announced that ministers were to look at replacing the doctor’s sick note with a “fit note”, detailing what people can do rather than what they cannot when they are on leave for health reasons…

Four days later, the chief executives of Britain’s five largest banking institutions – Barclays, HBOS, HSBC, Lloyds TSB and Royal Bank of Scotland – met the Bank of England. In the jargon of the City, they wanted governor Mervyn King to widen the types of collateral against which the Bank would lend to the clearing banks. In plain English, they wanted him to lend taxpayers’ money against much flakier assets than would normally be considered acceptable.

Why did they need this handout? Because banks themselves had stopped lending each other money…..Those banks that escaped unharmed were sure of only one thing: with so many of their peers exposed to incalculable risks, there was more bad news to come.

That fear seems amply justified. Speculation has left the global economy more vulnerable to a financial collapse than at any time since 1929. According to the supposedly sophisticated models used by market practitioners, a stock-market crash such as the one in 1929 was likely once in 10,000 years. They said the same, however, about the stock market crash of 1987, the collapse of the hedge fund Long Term Capital Management in 1998 and the subprime crisis. The obvious conclusion is that these models are flawed. The International Monetary Fund (IMF) recently described the crisis that erupted last August as “the largest financial shock since the Great Depression”…..

Fortunately for the banks, in Brown’s Britain they are seen as a cut above the average benefits scrounger. A month after they visited King, the governor announced a £50bn “special liquidity scheme” to provide emergency loans to struggling institutions. It was a similar story across the Atlantic. Over the weekend of March 15 and 16, America’s central bank, the Federal Reserve Board, launched a rescue for Bear Stearns, the country’s fifth-largest investment bank. To smooth a takeover by JP Morgan Chase, the Fed assumed up to $30bn (£15bn) of Bear’s more doubtful assets. Were this act of corporate welfare not sufficient, the Fed also announced that it was to provide emergency liquidity to the market. For good measure, it cut interest rates.

What was most extraordinary about all of this was not the bailing-out of City and Wall Street types who had spent decades, like surly teenagers, insisting that they wanted only to be free from the stuffy, paternal state institutions to which they now turned for help. Rather it was the failure of those same institutions to insist on any quid pro quo. In the real world, when a wild-child son or daughter comes home, tail between their legs, their “boring” parents usually require them to clean up their act in return for financial support and use of their old bedroom. Not so in the world of banking and finance. In remarks to the press in March, the British treasury actually ruled out tougher controls.

But then there is plenty of evidence that, in Britain as elsewhere, those in government could see little wrong with the system as it is. Democratically elected governments have, over the past three decades, willingly ceded control of the world economy to a new elite of freebooting super-rich free-market operatives and their colleagues in national and international institutions like the IMF, the World Bank and the World Trade Organisation. These New Olympians, who earn that title by their remoteness from everyday life and their lack of accountability, have gained this control on a prospectus every bit as false as much of the promotional material for the “exotic securities” of which they are so fond. The charge sheet is as follows:

· They promised economic stability – and have delivered chaos and volatility.

· They promised an economic order based on enterprise, thrift and personal effort – and have delivered one based on chronic indebtedness and wild speculation.

· They promised a “transparent” future in which all costs and prices would be clearly laid out – and have delivered a world of bizarre, occult financial knowledge.

· They promised a greatly expanded middle class of property- and share-owning individuals – and have unleashed havoc on professional and white-collar career structures.

But then none of this ought to be surprising. The New Olympians are unconcerned with – in fact, hostile to – job security (other than their own), social tranquillity and the traditional aspiration for both the good life and the quiet life. They roll their eyes when they hear that the Detroit car worker, the Argentinian shopkeeper or the Cornish fisherman is complaining that their way of life is under threat. Like it or lump it, the New Olympians say. That’s just the way it has to be. Meanwhile, elected politicians bend over backwards to make life as pleasant as possible for them.

That was vividly illustrated in February when the British government backtracked on its extremely modest proposals to increase taxes on some of the heroes of business and finance. These were the wealthy “non-domiciled residents” who, while living in the UK, claimed their residence to be elsewhere and paid tax only on income shown to have been earned in Britain. In his pre-Budget report in October 2007, the chancellor, Alistair Darling, had proposed a tougher regime for those 20,000-odd non-doms who had been in Britain for seven years or more, a regime that included the payment of an annual £30,000 flat tax to the exchequer. The backlash from the assembled bankers, ship-owners and other tycoons was predictable, as their political and media apologists lauded their contribution to economic growth and employment and warned of disaster should these philanthropists take themselves elsewhere.

Vince Cable, the Liberal Democrats’ treasury spokesman, noted the bizarre nature of the campaign being waged: “We hear stories that a high proportion of non-doms will flee … It is also claimed that public discussion of non-dom taxation is dangerous because it might frighten these fragile creatures away. This is effective propaganda. We are in the absurd position that some taxpayers on modest incomes have started to feel sorry for the wealthy tax-avoiders.”….

Growth under the Blair and Brown governments has relied excessively on speculation in two forms: that in the City and that by home-owners. Economically, the legacy is a debt-sodden, lopsided and unequal country in which the pay of those at the top rises at 10 times the rate of those at the bottom. Instead of taking on the City, however, the government has turned its attentions to the workforce – both blue-collar and white-collar – which has to be made ready for the global challenge from China and India by being re-skilled and re-educated and by learning how to be “entrepreneurial”. Furthermore, the majority is routinely subjected to ever more illiberal, intrusive and obnoxious interference from state agencies, whether in terms of visual surveillance and the proposed identity card scheme, or in terms of being instructed to change their “attitudes” on a range of subjects.

In the period before the New Olympian takeover, market capitalism proved remarkably good at providing both peace of mind and material advancement. Living standards rose rapidly, financial crises were rare, banking crises rarer still. The New Olympian regime, by contrast, has offered neither faster growth in living standards (for at least 99% of the population) nor peace of mind. The modern era has been characterised by slower growth in average real incomes, higher levels of debt to maintain living standards, greater job insecurity and financial crises that have become more frequent and more far-reaching. The only class that has benefited unambiguously from the new world order has been that of the New Olympians, just as the only creed that has been accepted has been their creed.

The ancient Greeks believed their 12 most important gods and goddesses lived on Mount Olympus….Today, there are another dozen governing spirits that hover above and direct our daily lives.

First among these modern gods is globalisation…From the acceptance that economic power had shifted from the nation state to the global market, everything else stems. Governments that seek to meddle with the global market do so at their peril. Rather than tame globalisation, they are supposed to ready their citizens to compete in a world of cut-throat competition. Rather than putting tariffs on foreign steel or banning a foreign company from buying their ports (as the US has done) or seeking to prevent cheap food from undercutting their farmers (as the French have done), they should invest in education, skills and science in the belief that this will “brain-up” their population and create a knowledge economy that will find an upmarket niche in a world awash with cut-price goods….

The twin brother of globalisation is communication….

Nation states, despite the impact of globalisation and communication, retain considerable power…..These are, however, impediments to the smoother running of the global market and thus need to be removed. The World Trade Organisation – a supranational body with punitive powers for governments that transgress its rules – started a new round of talks in November 2001 designed to open up markets in agriculture, manufacturing and services. The IMF and the World Bank insist that poor countries receiving financial assistance should abandon state control of their mines, banks and energy companies. In Brussels, the European Commission is dedicated to the removal of the restrictive practices and state subsidies that throw sand into the machinery of the single market. The next three gods are, therefore, liberalisation, privatisation and competition.

Yves here. Although this section is a bit overwrought, Dani Rodrik has made a similar observation: you can’t have deep integration of markets, national sovereignity, and democracy at the same time. One has to go.

The sector of the economy to benefit most from these developments was finance. International banks had always tended to have global reach, they could benefit more than any other sector from more rapid communication, it was in their interests to have barriers on capital removed, they picked up hefty fees for organising privatisations, and competition allowed them to wipe out weaker competition. What was not really apparent until last year was how powerful this sixth god – financialisation – had become. In countries like Britain, the expansion of the City of London had been the engine of the economy’s growth – the fastest-growing parts of the finance sector expanded at around 7% a year between 1996 and 2006. Meanwhile, manufacturing output stagnated. Financialisation, it was argued by its proponents, was good for a country like Britain. It allowed the country to specialise in what it was good at, made London the hub of global finance, encouraged innovation and – by allowing the market to decide where capital should go – made the economy more stable. Whether this proves to be true in the long term remains to be seen. In the short term, economic growth did not accelerate, productivity did not surge, there was no miracle cure to the balance of payments and only rare glimpses of trickle-down.

Until last year, it was easy to argue that these first six gods were beneficial to the global economy, and at worst, neutral. Privatisation in developing countries, for example, was heralded as a way of preventing corrupt ruling cliques from siphoning off profits into Swiss bank accounts. Globalisation was specialisation on a grand scale: the logical conclusion to the sort of division of labour that Adam Smith and David Ricardo had envisaged 200 years ago. The modern world not only means that we can keep in touch by email with our cousins in Cape Town and buy an agreeable Malbec from an Argentinian vineyard in the foothills of the Andes, but also allows our pension fund to buy shares in an Indian software company. On paper, this life of greater choice, freedom and opportunity sounds splendid. It is certainly preferable that modern communication technology allows Mozart’s clarinet concerto to be heard on a CD player in any living room rather than being the exclusive preserve of the court of the Austro-Hungarian emperor in Vienna. In reality, however, the world doesn’t work this way – and that’s because the remaining six gods have such potentially dangerous properties. These are speculation, recklessness, greed, arrogance, oligarchy and excess

Speculation is not always harmful. Britain’s 15 years of uninterrupted economic growth from 1992 onwards was the direct consequence of sterling being forced to leave the European exchange rate mechanism following an attack on the pound orchestrated by Soros. Freed from the need to use excessively high interest rates to defend sterling, growth picked up and unemployment came down. Yet the activities of the big banks and the hedge funds in the first half of 2007 had no noble purpose….

It would be naive to believe that greed could ever be expunged from financial markets… Nor is it uncommon to find that the brokers and dealers do rather better out of asset-price bubbles than their customers…. Every so often, however, the money lust becomes so pronounced that it crosses the dividing line between cupidity and criminality…..

In January, panellists at the World Economic Forum in Davos were asked how the big banks of North America and Europe had failed to spot the potential losses from subprime lending. The one-word answer from a group that included the chairman of Lloyd’s of London and the chief risk officer of the insurance company Swiss Re was “greed”. As one participant put it: “Those running the big banks didn’t have the first idea what their dealers were up to, but didn’t care because the profits were so high.”

It goes without saying that those responsible for the speculative bubble of early 2007 could not conceive that one day it would burst. That was where the arrogance kicked in. The super-heroes of the New Olympian order were the brightest and the best of their generation…Even when cracks did start to appear, the New Olympian class managed to blame everyone but themselves….

The response to the market meltdown helps illustrate the final two principles that govern the modern world. One is that, despite the lip-service paid to democracy, western societies are in effect run by moneyed oligarchies, who have as little time for their wage slaves as did the ruling elite of ancient Athens. In February 2008, two weeks after Darling’s U-turn on the taxation of non-doms, Brown and his ministers opposed a private member’s bill designed to give greater rights in the workplace to agency workers – part-timers who face some of the lowest wages and toughest working conditions of any group.

….our 12th and last principle is excess. It is an axiom of the global order that there is never too much of anything: never too much growth, never too much speculation, never too high a salary, never too many flights, never too many cars, never too much trade. It was for that reason, perhaps, that the financial crisis was accompanied by rising inflation – as demand for oil and food pushed up prices globally – and by almost daily evidence of the impact of global warming. Losses in the financial markets; hardship for pensioners facing dearer heating and food; climate change. There were no prizes for guessing which the New Olympians considered the most pressing issue for policy makers.

The gods promised us paradise if only we would obey and pamper their hero-servants and allow their strange titans and monsters to flourish. We did as they asked, and have placidly swallowed the prescriptions of the lavishly rewarded bankers, central bankers, hedge fund managers and private equity tycoons, while turning a blind eye to the rampaging of the exotic derivatives, the offshore trusts and the toxic financial instruments. Had they delivered, there would, at least, be a debate to be held as to whether the price was too high, in terms of the loss of democratic control and widening social inequality. But they have not. Chronic financial instability and the prospect of, at best, years of sluggish economic activity are the fruits of their guidance.

These gods have failed. It is time to live without them.

Print Friendly
Tweet about this on TwitterDigg thisShare on Reddit0Share on StumbleUpon0Share on Facebook0Share on LinkedIn0Share on Google+0Buffer this pageEmail this to someone

16 comments

  1. Richard Kline

    I have no love for plutocrats; that said, provoking a them vs. us model of ‘the problem’ is a bad idea. The difference between a piggy hedgie maximizing income and externalizing loss and a small-timer signing for a non-residential property they hope to flip before the cash burn rate takes their capital negative is one of degree, not one of kind. It’s important not to overemphasize the ‘mastery of universals’ attributed to imputed oligarchs, either. We see the kind of manure they are in, now: they got their of their own volition. Sure Big Capital works to shape the econo-political space to their advantage; this is news? It’s the avarice of the many for a shortcut to the country club that makes me ill; those millions of my countryfolk who have been screaming for lower regulation and tax cuts who need to get out of bed on the other side so they can walk around and kick themselves in the ass to get started down the road to a better life. If Big Capital promised y’all a chicken in every pot, why ever were you fool enough to think they cared, let alone that they would or could deliver?

    Too many of us have worshiped false gods. It’s that obeisance to Mymoney(TM) that is the real issue. Buy out of that and oxygen starts flowing to your brain again.

  2. Danny

    Yves,

    The only time I don’t enjoy reading your blog is when you begin to venture into the realm of political philosophy. It is pretty clear that it is not your expertise, and neither is libertarianism. I would be remiss to say that your caricatures are not common, but they are based on bad theory. There are always bad libertarian theorists and bad ideas, not unlike any branch of political thought, most of which are embraced by people who don’t truly understand libertarianism. I’m not an Ayn Rand fan, not every libertarian is as soulless and godless as she is. I think you would do well for yourself by reading Hayek and Mises, from an economic perspective, although I prefer the political theorists, like a Bastiat.

    And saying that those who believe in free markets are ideologues or market fundamentalists is just a perversion of what libertarians really believe, that is, the fundamental right of individuals to make the proper choice regarding their specific situation. The market is just a means for them to do that, not some abstract, collective fanatic belief in the supremacy of markets.

  3. Anonymous

    Danny:

    I’d be interested in learning more about what you’d consider to be a more appropriate libertarian set of prescriptions for the current mess we’re in. That is, you take Yves to task for simplifying what real libertarians believe. Fair enough.

    But, for those of us who suffer from the equation between libertarian idealism as it pertains to ‘totally free markets’, it’d be a favor if you could shed more light on the nuances. And, in doing so, it’d be really great if you could apply those nuances to specific prescriptions as opposed to generalizations.

    Thanks in advance.

  4. tz

    I would second that Hayek, Hazzlitt, and Bastiat would be the more practical and logical side of Free Markets.

    But you make the same error as you pointed out in your letter for the Milken institute gathering.

    What are called “free markets” are actually private profits and socialized risks. Or something distorted – like the junk bonds not traded on an exchange with a visible bid an ask, but traded exclusively across Milken’s desk.

    Also you miss the big one – David Cay Johnston’s recent book (and interviews on podcasts), “Free Lunch” how the rich get richer at taxpayer’s expense.

    The last thing the Plutocrats want is a free market. One where they would lose their house and yacht if their hedge fund became bankrupt. One where credit cards, home loans, student loans, and CDS/CDO/whatever were treated the same in bankruptcy.

    You look at a system horrible disfigured and distorted and call it a “free market” or “capitalism”?

    I don’t know how to fix the discussion, but the problem is the gamed system is sold as freedom and prosperity. It isn’t but they can afford to pay the lobbyists to sell what must be a zero-sum game as win-win. (True capitalism is win-win since value is added and we exchange what we both desire more – the zero-sum is like a futures contract where there will be a winner and loser and both equal, or like printing money doesn’t increase GDP one bit).

  5. Danny

    For some reason, a comment I posted earlier did not make it on the board in response to Anon @ 8:11. I know blogger has been acting up lately. I don’t have time to re-write the response, but here is a good article

    http://mises.org/story/2987

  6. Anonymous

    I don’t see any of the defenders of free markets mentioning Friedman or the Chicago School, and Friedman advocated a radical anti-government line. That group is the one who has pushed it in the US, so if you are going to talk about free markets and what people in the US think they mean, they are the ones you need to talk about. They shaped the discussion.

  7. Marshall

    I think those of you libertarian defenders are missing Yves’ point. How may times when you read the press (as opposed, say to special-interest blogs) do you see any mention of Hayek or Mies? Yves seems to be talking about the ideology cultivated in the public imagination that has been used to cow anyone who wants regulation.

    And where were those who claim there’s a difference between the version of free markets presented in the media which has helped shift money to the very rich and the version that the Austrians advocated (who per Anon above isn’t the only group advocating free markets) were when these policies were implemented? My impression is that libertarians as well as other free markets advocates were plenty happy to see regulations pulled down. It’s only now that the chickens are coming home to roost that some are trying to distance themselves from what happened.

  8. Danny

    Anon @9:56,

    Austrians have no lost love for Friedman. In many ways, he has been more destructive to the freedom movement than any outsider could be, because he advocated much more state intervention than any Austrian ever would. He has been more influential because many of his recommendations have helped the state to become better at what it does (i.e., withholding taxes). His policy prescriptions are pretty much in line with what we are seeing from Bernanke right now, which are most certainly not free market. A central bank can never be.

    Marshall,

    Austrians have always been there, criticizing, yet ignored. Case in point is Ron Paul, whose candidacy was virtually ignored by the media outlets, while he was ahead of Obama on youtube and google.

    You can’t pull down regulations, while increasing moral hazard and expect nothing to happen. Like I mentioned before, there are many so-called libertarians whose theory and policy prescriptions are unsound. If those are the people that have been chosen as the stewards of libertarianism by TPTB, that is not the fault of Austrians, but of the establishment in separating good ideas from bad.

  9. Yves Smith

    Danny,

    Thanks for your comments, but I do not believe you have addressed the point in the post. How do you have anonymous transactions, or transactions involving goods in which you lack expertise, in the libertarian framework?

    As Amar Bhide discussed at length in his article, “Efficient Markets, Deficient Governance,” the model most people look to when they think of a well functioning market is the US stock market, which in fact is very heavily regulated. Similarly, I don’t think most people recognize the laws that protect them when they engage in routine purchases, such as going to a grocery store (food safety, truth in advertising, retail store regulations). As the brouhaha over Chinese heparin and pets dying from tainted additives shows, most people are not in a position, for instance, to independently check the safety of their food. I don’t see how you get around these issues in a modern, industrial society.

  10. Danny

    Yves,

    I think the main point of contention here is that of cause and effect. I am reminded of my favorite idea/quote from Plato: “Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws”.

    I do not see legislation or laws as the answer to every problem that arises w/in human interaction. Take for example, the food issue. Right now, food stuffs coming in from abroad are highly regulated. That regulation has failed, so now the FDA wants more money? When the next problem emerges, they will want more. This is the nature of all bureaucracies.

    What is the solution? Hold people and companies responsible for their actions. Regulations are usually written by companies to protect themselves, both from legal issues, and to increase barriers to entry that new companies are forced to navigate. Libertarians believe in the rule of law, and when there is an act of aggression (physical, legal, etc.) against another’s property, a mediating authority needs to step in (whether that be the government, or SRO). So when poisonous products were sold to unsuspecting consumers, I have no problem with those companies being sued for fraud, or something along those lines. They either go bankrupt, learn their lesson, or eventually go bankrupt because people won’t buy their products. Right now, Mattel is still doing fine, the FDA is asking for more and more money, and the only solution is a few more regulations to solve a problem that the market has already made Mattel solve. There will be a new problem eventually, that instead of, say, Mattel, acting proactively to stop out of fear of lawsuit or tarnishing their reputation, will find out the hard way, when regulations fail, and people are hurt. The answer will be the same, that is, new regulations, not accountability.

    In the end, it is the people that dictate what the market should deliver, and the people who invest in the US want a properly functioning, transparent market. The maze of rules, products, regulations (most of which are not enforced, I am reading Einhorn’s Fooling Some of the People All of the Time, which is a great example) make enforcement of laws essentially arbitrary. Different regulators will enforce different regulations, because it is literally impossible to know all of the rules, and more importantly, to enforce them accurately. It also leaves a lot of room for so called ‘stretching’ of rules.

    Now I’ve rambled a little bit there, but the point is that regulations are always claiming to protect the consumer, but they actually protect the producer. Not to mention that consumers are also paying for that regulation, both through taxes, and an increase in the cost of the product. I think it is a mistake to assume that because the markets are heavily regulated (by the government), they are transparent and safe. Rather, it is the demand for a transparent market where fraud is punished that ends up in its creation. Now is it out of the realm of government to enforce laws regarding fraud? I am less certain on this, as I would prefer an SRO, mostly to avoid mission creep, but I also like the idea of locking up white collar criminals and throwing away the key.

    BTW, I hope I wasn’t too forthright earlier. I am a big fan of the blog, but each of us has our pet issues, this just happens to be mine!

  11. Francois

    “The difference between a piggy hedgie maximizing income and externalizing loss and a small-timer signing for a non-residential property they hope to flip before the cash burn rate takes their capital negative is one of degree, not one of kind. It’s important not to overemphasize the ‘mastery of universals’ attributed to imputed oligarchs, either.”

    I must disagree with this assertion for a simple reason; access to and capacity to influence the political deciders makes the difference one of kind, not of degree.

    Witness the cabal mounted by the hedge funds managers over their personal taxes treated as capital gains versus income. A difference between 35% versus 15%. Of course, the assistant admins for these managers keep their “right” to pay the higher rate, thanks precisely to their lack of access and influence. Note how fast (3 weeks, if that) the leadership in the Senate shelved the irritating proposals for “another time”.

    That is just about taxes. The same kind of influence can be seen when it comes to “debate” what to do for homeowners stuck underwater, where you can hear all sorts of moral hazard arguments put forth, ( a useful tool for denial of help) while bankers and financiers just have to raise their voice a little to make politicians backtrack on the topic of regulations. These same politicians do not appear to have any qualm whatsoever when some ordinary people raise their voice.

    Truth be told, who can blame the politicos? They get a a non-negligible chunck their campaign money from the uber-rich. And even when they don’t, they know full well that going after, or even only displeasing the elite is bad for business. Just look how much of a thorn in the side of the democrats Mellon-Scaife has been for so long.

    Influence here, influence there, and soon enough, you get a series of changes that convert any notion of gradual modification to a completely different situation. A mutation from degree to new specie.

  12. Francois

    “I do not see legislation or laws as the answer to every problem that arises w/in human interaction. Take for example, the food issue. Right now, food stuffs coming in from abroad are highly regulated. That regulation has failed, so now the FDA wants more money? When the next problem emerges, they will want more. This is the nature of all bureaucracies.”

    This is a fallacious argument. Law is one thing, its enforcement is another.

    FDA wants more money for enforcement. You’ll have to trust me if I tell you this is the crux of the matter: Congress has repeatedly denied the FDA more money for effective enforcement. At the same time, Congress has NOT done its job in vetting the Administration nominations at the same Agency.

    The result is pretty damning: as a former clinician, I can assure you the FDA I knew when I started was vastly superior and far more respected than today’s edition. Ask any physician that has been around > 15 years.

    Yes! They want more money (eeeek!) …because this time, they badly need it and for good reasons.

  13. Danny

    Francois,

    You say my argument is fallacious…exactly how? I point out the exact problem you note, about how we need to enforce the laws on the books. But when there are so many laws to enforce, how can they actually be enforced? You want the government to spend more money? They already do a miserable job with the unbelievable amount they already spend. I don’t think the answer is to give them more. They need to balance the budget, and stop spending what they don’t have before they should even think about spending more.

    I think you should re-read my entire post so you understand what I am saying. I am actually of the opinion that the FDA should not exist whatsoever. It has consistently proven ineffective and downright dangerous in the very recent past. In a free market, the FDA would have gone out of business long ago because of its inefficacy and incompetence.

  14. Anonymous

    Danny,

    You clearly have NO understanding of the pharmaceutical industry. You don’t have the foggiest idea of the controls involved in drug manufacture. Without an FDA, if you bought, say, Lipitor, you’d have NO IDEA if what you were getting was what the label said it was (or even if it was Lipitor, whether the dose was what was claimed). Read up on the dietary supplements industry, which has no such requirements. Those sort of problems are rife there.

    The FDA’s failings are lack of funding and lack of nerve. You may be happy to live in a place where dangerous unregulated chemicals can be mixed with drugs, as routinely happens in China, but that isn’t how the vast majority of Americans want to live.

  15. Danny

    Anon @ 9:11,

    You obviously don’t know me, what I do and do not know about the pharmaceutical industry, nor do you have any idea what would happen in a free market, which China obviously does not have. There would be private alternatives to the FDA, which would most probably do a far better job vetting drugs, while not restricting access to new drugs that can save people’s lives, as long as they are willing to take that risk.

    As far as mislabeled drugs, like I said above, fraud needs to prosecuted, and prosecuted much more diligently than it currently is. I find many of the FDA drugs to be frauds, because the FDA is in the pocket of most of the large pharmas. The whole anti-depressant industry is absurdly profitable, while providing minimal efficacy.

    So no, everything would not go to hell and handbasket like everyone thinks it would if competition to the FDA were allowed to exist. If the FDA picked up its game, and were able to compete with private alternatives, I would be less averse to its existence. But in its current form and purpose, it does far more harm than good, and lulls consumers into a false sense of security. Reminds me quite a bit of the financial industry to be honest…

  16. Dave Raithel

    I’ll chime in a day late (sorry, been making a living.) Though I suspect the discussion is done, I’m doing this to get THE PROBLEM with Libertarian Political Philosophy, as I see it, on the record in the archives.

    The PROBLEM is the one that Nozick did not and could not solve in his book, “Anarchy, State, and Utopia.” I don’t claim to have identified the problem; others have pointed to it, but I’ll take the rap for my explication of it. On the Libertarian model, each succesive association of persons in time is moral/just only if it comes about through the voluntary (uncoerced) actions of all persons. No coercion is permissible to bring about the next state of association. Suppose then there is a dispute (The Lipitor killed my wife; the computer won’t display the porn I want, whatever.) Who is to adjudge the merits of the dispute? Of course, only those parties to whom the disputants give consent. And so if one or the other party will not give consent? …. Locke solved this problem with a theory of natural rights, which in turn substantiated an argument that sometimes, some people can do things to people without their consent. There are other “solutions”, but they all require that some other standard, value, moral good, SOMETHING other than consent of the parties comes to “trump” consent as the final measure.

    Defenders of Libetarian political philosophy may and can quibble that odd cases don’t count, that people will enter into adjudicating services, etc., but THAT is an empirical question and does not address the lacunae in the theory itself: Each of is, by it, the last judge and jury in cases about oneself. As a strong defender of freedom of consciousness, I want to say: Count me in. As a member of a community, I have to say: What if you’re conning me?

    I am naturally an anarchist, but knowing people, I suspect anarchy degenerates to chaos, and out of chaos comes tyranny. Give me inefficient, bloated bureaucracies, ultimately reviewable by the people they serve, well or badly as the case may be, most any day. All the faults of government by consent are, after all, our own.

Comments are closed.