America Witched By Voodoo Economics

October 4, 2008


The collapse of U.S. financial markets is as complete a repudiation of so-called “free market” capitalism as the collapse of the Berlin Wall was a repudiation of Soviet-style socialism.

It is plain for the world to see that financial markets self-regulate about as effectively as a room full of unsupervised 2 year olds.

And when I say Reaganomics Is Dead, I’m not just talking about the current financial meltdown. I’m also talking about exploding income inequality, accelerating shift of the nations wealth to the richest 3%, our collapsing market-driven healthcare system, and the conservative notion that competition is the fix for our apartheid-like education system.

Since the Reagan era we haven’t seen “trickle down” economics but rather Gusher Up economics.

The system is so heavily rigged in favor of the already rich, that the middle class is disappearing and poverty in the (formerly) richest country in the world is on the rise. It’s a national disgrace. an American Disgrace.

While Democrats have been seduced by the money flowing from the financial and other deregulated industries and rich elites, the Republicans really own this failure. Reaganomics festers at the core of their ideology. When the shit hit the fan last week, what did the ideologically pure Republicans propose as a fix? Capital gains tax cuts and more deregulation! As if there were capital gains to be taxed in the midst of this market meltdown. As if deregulation of the financial industry and look-the-other-way enforcement had nothing to do with the looting of the U.S. financial system and millions of credulous homebuyers.

The other great Republican fix for the financial crisis? – Role back “mark-to-market” accounting rules that force companies to value their securities holdings at current market value. In other words, the Republican (at least the pure “free market” conservatives who blocked the House bill) response to a financial crisis of lost trust is to allow companies to bury the bad news about their worthless subprime-based assets. This is a lame attempt to help the titans of the financial industry unload their garbage on unsuspecting buyers, as if there were any at the moment. Easing the mark-to-market rules would further undermine trust in the system an prolong the crisis. It is a truly dumb idea and really bad timing.

The Republicans’ ludicrous response to the crisis appears to be yet another example of what author Naomi Klein in her book The Shock Doctrine calls “disaster capitalism”, a strategy of the “free market” purists around the world to use any crisis to inject strict free market theology as a fix, regardless of the situation. These are the folks, like John McCain and particularly his former (now behind-the-scenes) economic advisor Phil “a nation of whiners” Gramm, brought us the brilliant idea of handing Social Security over to Wall Street. Thankfully, that never went anywhere. These are the folks who are pushing the “free market” as a fix for our barbaric healthcare system. As if we haven’t been trying a bastardized attempt at free market healthcare since day one, and we see where that’s gotten us: great care, if you can afford it; 47 million uninsured; 18,000 premature deaths a year due to limited access; and, of course, the most expensive healthcare system on the planet (but that’s the real purpose behind their market-only). Yes, Reaganomics is dead, but you can bet that the market theologists have the body on ice and are just waiting for the stench to disipate while their Executive Search Committee looks for their next Dr. Frankenstein.

It was comical to see how many market purists came rushing to the government for help when their house of cards came crashing down around them. A mighty cavalier and spartan lot they are when profits are pouring into their off-shore accounts. So assured they are that the markets have demonstrated their worth to society by bidding up their stratospheric pay packages. So convinced they are that “Joe Six-Pack” deserves a shrinking share of the pie because he’s dumb and lazy. Be damned any entitlements for the little guy, he gets what he deserves. The markets are an impartial judge and jury. At least until the markets turn against the market makers. Suddenly a little government assistance, a little socialism – just a few trillion $ to tide things over – seems like a good idea.


Now is the time for economic realists to break the 30 year spell of free market theology. People from Wall Street to Main Street are getting a good look at the soft underbelly of capitalist excesses. Economic realists or reality-based economists are folks who recognize that prudently regulated free markets do offer the most efficient and fair means to provide most goods and services, but we also understand that there are some essential needs, like national defense, healthcare, education, and public safety, that are more efficiently and fairly provided by a government of the people and for the people. We also understand that we have the power, the right, and the obligation to address the defects of our economic system, such as accelerating income inequality and rapid concentration of wealth in the hands of a few. Those aren’t accidents of our system or the natural result of free markets, they are glaring evidence of a system rigged in favor of the rich.I get the sense that a large and growing number of Americans are opening up to the idea that government has a vital role in society, that government is not, as the Reaganites would have you believe, the enemy, and that we, as a society, have the right to structure our economy, the mix of market and government, as we see fit. We are not mere rag dolls being tossed around by random market turbulence. We can, to a large extent, shape our economic systems to our desired ends, rather that allowing a rigged system to bend us for the profit of a few.

I suspect that Barack Obama is an economic realist, and I think his even-handed temperament and aura of thoughtfulness and authority just might allow him to pull off a major shift in the trajectory of American society, away from our current winner-take-all dead end. Small measures and baby-steps won’t cut it. We need a BIG BOLD AMBITIOUS initiative, not a New Deal, a Real Deal. I suggest he start with Universal Single-Payer Healthcare. Tweaks of the current rigged systems won’t cut it. We need to clean house and start from scratch. Market-driven healthcare is an abject failure. Scrap it. Copy the best systems in Europe (French and Danish offer good examples). Sell it to the American public and harness our voices to force Congress to get behind it. I think it could happen, but suspect that, sadly, it will take a much deeper crisis to really wake Americans up.

Reaganites will scream, “socialism!” You see it in the papers every day in the discussion of the Wall Street Bailout. Now that’s a rich irony. But as an economic realist I look at it this way: we can either seize control and shape the system to serve the whole of American, or we can continue to let the financial engineers and the power brokers in Washington run the show for their profit, and theirs alone. We didn’t get here by accident, folks; the system was designed (rigged) this way. Time for a rework.

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