by Steven Jonas, MD, MPH
– November 19, 2008
The stock market crashed and may go down further (or may not ---
no investment advice given here). Unemployment has risen precipitously and will likely continue to
increase. Credit has been “frozen”
(in relative terms).
It shows no sign of thawing anytime soon.
A nebulous institution called the "free market" bears a
major responsibility for this state of affairs, perhaps the total
responsibility. So how did this happen? Isn't the "free market"
supposed to be self-regulatory? Isn't the "free market" supposed to
be the best determinant of the best distribution of goods and services in
society for everyone? Isn't the only way that the "free market" can
operate successfully (which on its promoters’ terms means allocating goods and
services to everyone’s benefit) is to be left alone by government so that it can
just go on its merry way?
Well, if the central goal of the "free market" were
really to be the best allocator of goods and services for all of society, and
indeed in practice it turned out to be, perhaps it might be true that it should
be left alone to function on its own. But history clearly shows that that is not the central goal of the
"free market." Sometimes it is a peripheral one. But if there are
side benefits for society as a whole, from successful professional sports teams
making money while bringing joy to a certain segment of the members of their
home community to major companies making technological breakthroughs that
benefit large numbers of people, that is just by-the-by.
The central goal of the "free market," which is made
absolutely crystal clear every time something like what is going on now happens
(and it happens with regularity in "free market" economies going back
to the early 19th century), is to make money for those who have enough capital
to participate in it. Despite what Milton Friedman and his clones, and their
historical predecessors going back to the early 19th century, like to tell us,
making money for its participants is IT. Nothing but it. Any side benefits are not it. They just are, for some folks, happy
accidents. What has happened to the financial system and economy of virtually
every country around the world over the past three months is a clear
demonstration of that fact.
For example, lots of people made lots of money in the "free
market" for something called "securitized mortgage instruments."
This is a type of security so complex that even a financial writer for Newsweek who I happened to have heard on Air America Radio some weeks ago confessed that
he did not fully understand all of its permutations and combinations and
certainly could not explain them to his listeners.
The recently former head of the bankrupt Lehman Brothers
investment bank, with only mild embarrassment, told a House Committee chaired
by Henry Waxman of California that yes indeed he had made somewhere between
$300 million and close to $500 million (he seemed not quite sure, although that
seems like a rather large range to me) over the past seven years (coincident
with Georgite reign, it should be added). He and his boys were collecting their
most recent "bonuses" at the same time that Lehman was going down the
drain. There were no restraints or constraints. So why the heck not? It is not
a question of "morality," as suggested by a recent panel at the John Templeton
Foundation, “Does the free market corrode moral
character?” Morality has nothing
to do with it, other than the morality of making money in the “free market”
itself. They were just participating in the "free market" to get what
doing so is precisely supposed to get them: more money.
On a broader scale, the "securitized mortgage
instruments" were being sold and re-sold in the “free market” at rising
prices, not because value was being added at each step. Rather, the prices went up, it seems,
because each purchaser was just sure that he (or she) could find someone next
in line to pay more for the thing regardless of its value. That is until the
bottom dropped out of the housing market and also the mis-sold and wrongly sold
subprime mortgages stopped paying off as their monthly payment rates suddenly
went sharply up.
As is well known, the other principal causes of the crisis are/were:
the rapidly mounting national debt (which among other things causes a decline
in the value of the dollar), the rapidly rising cost of oil (which is caused in
part by the rapidly declining value of the dollar, in which international oil
sales are denominated); the rapidly rising annual Federal deficits caused in
part by the massive tax cuts with which Bush rewarded what he has publicly
called his [real] "base" (as contrasted with his electoral base, the
Christian Right, to whom he has thrown bones now and again) and in part by the
borrowing of $10 billion (or more) per month to pay for the Georgite War on
Iraq; and by "globalization," which in reality has little to do with
"free trade" and a great deal to do with the free export of capital
from the U.S., that is American jobs going overseas.
But there should have been no surprise here. The "free
market" was doing exactly what it is designed to do, except of course in
the words of its propagandists who dominate the media and have dominated much
of the government and the Federal Reserve Board since the election of Ronald
Reagan.
And so we come to what should be done to remedy this catastrophe.
(Of course, most people’s financial nightmare is Grover "Shrink Government
to the Size of a Bathtub and then Drown it in the Bathtub" Norquist's wet
dream. As Obama becomes President, to have any money to work with, he has to
keep borrowing. This he must do,
of course, but all a sudden the Republicans, who have given Bush every dime he
wanted for the tax cuts and his wars, will all of a sudden become
screaming-bloody-murder deficit hawks. Grover will be so happy. But that's another story.) "Our
side" very sensibly says: re-regulate the stock and banking markets, get
rid of such exotic instruments as securitized mortgages, bring back the
Glass-Steagal Act (flushed down the toilet by McCain's principal economic
advisor Phil "Nation of Whiners" Gramm), which keeps commercial and
investment banking separate, regulate the currently unregulated and unexamined
"hedge funds," which may well be involved in market rigging, and so
on and so forth.
All of these measures and others to be sure would be necessary to
fix the mess and prevent it from happening again, that is until the next
historical period when the so-called "free marketeers" were able once
again to sell their snake oil to an unsuspecting public. And so what do the
"free marketeers" and their political "leaders" such as
McCain, Palin, Giuliani, Romney, Jeb Bush, and Gingrich, and their mouthpieces
such as Hannity, Limbaugh, O'Reilly, Savage, Glenn Beck, Michael Reagan and
Levin (pronounced Le-vin rather than Levin because presumably most Levins, such
as Sen. Carl Levin of Michigan, don't agree with Le-vin on politics and policy
and pronounce their name the usual Jewish way), and Kristol and the whole
Weekly Standard/Fox "News" Channel crowd tell us to do?
Why, cut taxes; eliminate regulation and let the "free market
function freely;" go after "Wall St. corruption" (except that
those folks were simply behaving like any well-respected "free
marketeer" would, but logic is not the other side’s long suit); and cut
government spending by "eliminating earmarks." Why do you know that
cutting out McCain's favorite target, the $3,000,000 gene study of bears in
Montana (designed to help preserve the species) would save the cost of about 10
minutes of the War on Iraq? (You could do the arithmetic like I did.) And oh
yes, of course they would still continue the War until "victory"
(left thoroughly undefined) is achieved (with more borrowed money, presumably).
These people have had the nation, and indeed the world, follow
their ideology over the cliff. And
what do they want to have done in order to remedy the situation? Why “cut taxes, free up the free
market, and (except for the war/military/prison/industrial complex) cut
spending to the bone (and balance the budget all of a sudden).” That is, they just want to keep
going down the cliff face, while taking all the rest of us with them. 
This column is based on “Dr. J.'s Commentary:
Follow Your Ideology Over the Cliff, and Then Keep Going,” which
appeared on BuzzFlash on Oct. 9, 2008.