Foggy Bottom Line

Politics, Economics, and Other Silly Things

Archive for category Free Market

Treason in Defense of Wealth

Jul 21

Posted by R. Stanton Scott in Capitalism, Economy, Free Market, Government, Public Policy, Reactionaries

Tyler Durden (this guy, or maybe this guy, or both, but definitely not the Fight Club guy) approvingly links to this ridiculous screed in the latest issue of Global Custodian magazine, a trade quarterly for the international securities industry (Roissy Approved as well!).

The core point in this rambling mess is that “unlimited democracy,” whatever that is, gives too many citizens the power to vote perks for themselves, and support “counterproductive” policies (read: policies Dominic Hobson doesn’t like).  For Hobson, unlimited Democracy is a “plague” which he wants to attack at its “moral foundation,” the “political equality of the citizen.”

This is a direct, and treasonous, attack on our Constitutional framework.  Hobson, Durden, and Roissy would relate political equality with property on the grounds that only those with a stake in society should have voting and other political rights.  This raises some interesting questions, such as how to define property, but the foundation of this argument is that only the successful (or the lucky) should have political power, as if they haven’t most of it already.

These selfish men only want to protect their wealth, and for all their talk about markets they don’t really want to compete with others for money.  They want to organize a political system that allows them to construct markets to their liking, whatever it means to others.  This is treason, pure and simple.

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Queen v. Queen: Why Conservatism is Slipping

Apr 27

Posted by R. Stanton Scott in American Apologists, Cognitive Dissonance, Culture Wars, Family, Free Market, Gay Marriage, Globalization, Marriage, Religious Conservatives, Wingnuts, Wingnuttia

The anti-gay marriage crowd went bonkers once again last week when Perez Hilton, an openly gay B-list celebrity and social commentator asked a Miss America contestant whether or not other states should follow Vermont by leagalizing same-sex marriaige.  The contestant, Carrie Prejean, answered,

“Well, I think it’s great that Americans are able to choose one or the other. We live in a land where you can choose same-sex marriage or opposite marriage. And you know what, in my country, in my family, I think that I believe that a marriage should be between a man and a woman. No offense to anyone out there, but that’s how I was raised, and that’s how I think it should be between a man and a woman.”

Mr. Hilton voted against her, she came in second to Miss North Carolina, and the right went ballistic once more about the homosexual agenda, political correctness, “gay totalitarians,” and attacks on traditional values, whatever those are.

It should surprise no one that this answer, which favored a reactionary religious stance without regard to the nuances of the issue or any discusson of the idea that this debate really does have two sides, cost this woman competition points.  The purpose of questions like this in beauty pageants is to uphold the pretense that the woman’s brain is at least as important as her appearance in skimpy outfits, the size of her boobs, or the silkiness of her hair.  The fact that Miss Prejean could offer no informed opinion on why she thought states should not legalize homosexual marriage beyond her own family tradition is what cost her the crown, not the actual opinion she expressed.

Of course, conservatives want to generate outrage over this, since they have no real answer to the discrimiation argument in support of gay marriage.  So they blame phantom agendas and totalitarians for Miss Prejean’s loss, and scream bloody murder about this newest example of how Hollywood liberals and gays are destroying the American way of life.  This probablygives them some satisfaction, but if they want to know why their popularity continues to slip they should look in the mirror at the angry people they have become.

Most of what you see on the blogs linked above–not only on this subject–is anger, rage, and reactive foot stomping over percieved criticism of or insults to America or Christianity.  They offer very little policy discussion except assertions that traditional ways are better because they are so…traditional.  Very little discussion of how to adapt conservative principles to modern society can be found here.  Instead, they want to stop time and preserve traditional gender roles, traditional market rules, and traditional goverment power without defending any of these policies on social utility grounds.  “We’ve always done it this way” is all they have.

This is a losing strategy because no one listens to the angry guy.  People dismiss angry ranting, however righteous its basis, because it offers no solutions.  Americans instinctively understand that the most outraged guy in the room usually has the least justification for his rage. 

The gay marriage debate is the perfect example: homosexuals face real discrimination with regard to inheritance, power of attorney, the right to contract, and protection of partnership assets–the State treats them differently than it treats straight people.  This is a simple fact that cannot be dismissed with “but gay men have the same right to marry women as straight men do.”  But instead of seeking or proposing sensible ways of ending this discrimination, such as separating the religious consecration of sexual unions from state sanction, conservatives rant about the meaning of “marriage” and loudly make the ridiculous claim that the “marriage” of two gay men somehow affects the rights or privilege of heterosexuals to marry.  For most people, this only sets them up for ridicule.

A lot of Americans, from the faithful to environmentalists to anti-globalists would like to see a managed social progress that protects those who want to hold on to traditional ways of life while allowing others to move forward and establish new traditions.  Wingnuts don’t help their cause with strident rage over non-insults.  “You kids get off my lawn” isn’t working.

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Usury and Capital

Mar 25

Posted by R. Stanton Scott in Economy, Free Market, Government, Manufacturing, Usury

Over the weekend I read two articles that gave me some new insight into how America got into its current economic fix and which policies might not just help us reverse the decline but also set the conditions for more effective markets in the future.

First, Thomas Geoghegan writes persuasively (Subscription Required) in Harper’s Magazine that the central cause of the current economic crisis is a shift of capital from manufacturing and production to financial markets after the repeal of usury laws made hedge funds and lending much more profitable than making stuff:

“That’s when we found out what happens when an advanced industrial economy tries to function with no cap at all on interest rates.  Here’s what happens: the financial sector bloats up.  With no law capping interest, the evil is not only that banks prey on the poor (they have always done so) but that capital gushes out of manufacturing and into banking.  When banks get 25 percent to 30percent on credit cards, and 500 or more percent on payday loans, capital flees from honest pursuits, like auto manufacturing.  Sure, GM is awful.  Sure, it doesn’t innovate.  But the people who could have saved GM and Ford went off to work at AIG, or Merrill Lynch, or even Goldman Sachs.  All of this used to be so obvious as not to merit comment.  What is history, really, but a turf war between manufacturing, labor, and the banks?  In the United States, we shrank manufacturing.  We got rid of labor.  Now it’s just the banks.”

This is not a socialist argument about how corporations exploit the poor by charging high rates of interest and constructing loan agreements to give consumers more information and power to make informed choices about whether and how they should borrow money.  Geoghegan is making a capitalist case that tax policy and regulatory institutions create incentives to which capital and investors will respond by shifting the components of production between sectors in search of the highest profits.  He is pointing out that the invisible hand sometimes slaps us.

In the same issue of Harper’s, Daniel Brook offers an example (Subscription Required) with the story of how Allan Jones invented the payday lending industry.  When Mr. Jones sought investment opportunities for his excess cash, he chose not to open a small factory, manufacturing plant, restaraunt or service industry firm (e.g., janitorial services).  Instead, he decided to lend it to people at usurious interest rates.  Jones might have opened his payday lending storefronts even with interest capped under 500 percent–the large numbers of transactions would deliver a profit even at a smaller margin.  And a careful reading of the story suggests that the high interest rates reflect exploitation of circumstances, not pricing of risk.

All of this suggests that the market predictably moved capital to its most profitable–if not its most efficient–use.  The problem then is not a structural problem with capitalism, but mismanagement of the capitalist system that delivered–whether or not intentionally–an unsustainable outcome.  We need to decide whether to accept market-delivered results like this just for the sake of ideology, or to make an effort to regulate the system sensibly so that we achieve mutually agreed upon goals.

Placing limits on interest rates could bring its own unintended consequences, and it is easy to see that this would likely limit access to needed short-term or consumer loans to those who need it least.  But Americans may find that moving capital back into making stuff makes the economy stronger and more resilient–and less dependent on too-big-to-fail banks.

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Representative Bill Posey Needs a Clue

Mar 24

Posted by R. Stanton Scott in Economy, Free Market, Government, Wingnuttia

Taking calls on Washington Journal this morning, Congressman Bill Posey (R-FL15) attempted to argue that too much regulation caused the current economic crisis.  He cited the Community Reinvestment Act as an example, and agreed with a caller’s claim that the Act forced lenders to make $200,ooo loans to people making $30,000 a year.*

This Business Week article points out the silliness of this notion:

“…most subprime loans were made by firms that aren’t subject to the CRA. University of Michigan law professor Michael Barr testified back in February before the House Committee on Financial Services that 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations. As former Fed Governor Ned Gramlich said in an August, 2007, speech shortly before he passed away: ‘In the subprime market where we badly need supervision, a majority of loans are made with very little supervision. It is like a city with a murder law, but no cops on the beat.’”

So besides the nonsense of blaming a 1977 law for a 2008 crisis, it was in fact government failure to supervise subprime lending that contributed to the problem, not an Act intended to force banks to lend back to members of the community the deposits they took in from the customers who lived there.

Republicans know they can get attention by saying stupid things–this is the foundation of Rush Limbaugh’s success.  But if they want to win back the confidence of Americans, they need to find talking points with some basis in reality.  Blaming this crisis on goverment regulation and poor people who could not repay loans won’t help solve the problem because this didn’t cause it: unregulated investment bankers who packaged these loans into new forms of gambling instruments that could not be accurately valued did.

*Video avaliable here.  Mr. Posey is first up.

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