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Posts Tagged ‘Capitalism’

The rudderless Democratic leadership in Washington is grandstanding on the AIG affair in typical and predictable fashion.  But the whole thing is a charade, a distraction.  Obama and the House Democrats are playing a big game of three card monte.  We’re all supposed to be angry about $160mm in bonuses–and I am indeed angry about this, as I am annoyed about the whole principle of bailouts-while forgetting that AIG was given $160B by the government that in turn was given by AIG to Goldman Sachs and various foreign banks under various CDS contracts.  The whole sum is money from taxpayers to formerly rich people turned welfare cases.  And we’re supposed to get mad about this smallish amount of money–.1% of the bailout funds AIG received–that AIG was obliged to pay out in contracts to employees. The bonuses are the equivalent of a rounding error compared to the scale of the bailouts and stimulus packages as a whole.

Even worse, this show trial of AIG’s CEO is happening on the very day the Federal Reserve announced that it will depart from its prior practice and will now be buying long term treasuries outright to the tune of $1T!!! This is printing money folks, a confiscation from all of us.  The Federal Reserve’s actions takes from wealth-holders and our children in particular in order to keep this ponzi scheme of big government spending and fiat currency going as long as possible while avoiding the reckoning that Greenspan’s loose money policy has wrought.

The government is spending with abandon, but they want us all to think that a few measly bonus checks from a basket-case pass-through entity are the problem.  It’s exactly what I’d expect from the likes of the corruption-ridden Barney Frank and the Chicago shakedown artist  Barack Obama.

Bailouts are bad for many reasons.  But the two worst are that they cost a ton of money, and, second, they get government in bed with business.  As a result, we’re becoming increasingly numb as a people to the idea that a $1T here and a $1T there is no big deal, just as we’re getting used to the idea of the government has any business directing how private companies should spend their money.  The bailout is an anti-capitalist virus that attacks our public finances and our commitment to corporate independence.  We must let these companies fail or we’ll destroy free market capitalism.  That is the real systemic risk.

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One sad thing about the CPAC Conference is that while the various speakers’ criticism of Obama’s “soak the rich” policies are true and persuasive, conservative leaders are missing out on an important recent development that renders much of the old strategy focused on growth, low taxes, and a rousing defense of capitalism less relevant than ever.

Once upon a time, conservatives were middle class, upwardly mobile people that worked hard, saved, made a few bucks, had kids, moved out to the suburbs, voted Republican, and contrasted their own happy and auspicious lives with those of the shiftless, undeserving poor, the “parasites” of the Democratic Party.  Working class people too hopped on board, though sometimes uneasily,  because they were disgusted with the excesses of the 1960s, jealous over their guns and their churches, and resentful of the simmering racial cold war harming their prospects on factory floors.

Today, however, the first group in that coalition–the group that cares a lot more about money and taxes and economic parasites than it does about flag-burning or abortion–is in economic shambles.  Their 401Ks are cut in half.  Their homes are upside down and increasingly being foreclosed upon.  Their self-confidence which depended upon the sharp contrast of their own lives with those of the idle poor has been undermined by the prospect of years and years of toil simply to get even.  Further, their sense that the rules are basically fair and that businesses (and people like them affiliated with businesses) succeed because they deserve to has created a kind of upper-middle-class populist reaction to the various Wall Street bailouts:  if their own small businesses must fail, and if their own portfolios get whacked, why does a subset of the economy, a subset that is not particularly notable for building or inventing anything other than impenetrably complex financial instruments, getting tax money and bailouts while the ordinary upper middle class gets the tab.  This tale of two groups of rich people is given further salience by the contrast of their own relatively straightforward success through thrift, focus, effort, hard work, and sobriety with the gambling-style activity and loose living of Wall Street in recent years.  I’m reminded of the largely middle class reaction against aristocratic decadence in France circa 1789.  Recall that it was a bourgeois revolution, not primarily a proletarian one.

Bill Clinton quite intelligently saw that the future of the Democratic Party and its big government ideology required expanding entitlements to the middle class, so that future elections became referenda on health care, scholarship funds, and the like.  Even so, his centerpiece health care proposal failed.  The middle class constituency I describe above mostly had health care because they were employed, and Republicans took over in 2000 after eight fat years of moderate rule.  What Clinton could not do by force of rhetoric, the economic crisis may allow.  Suddenly the old rules have left the middle class deeply in debt, immobile, and flirting with despair over the massive and seemingly unfair degradation of their wealth.  Further, the big giveaways to Wall Street, banks, and the most irresponsible homeowners have created among many a cynical “get while the getting’s good” view of things. After all, why be a sucker?  And, more important, why shouldn’t the rules be changed to help the good people just like them?

Rick Santelli’s impassioned Chicago Tea Party rant was surely enjoyable, but it would probably fall on deaf ears in places like Ft. Myers and Phoenix where people that did play by the rules and still see themselves as sensible and responsible are deeply underwater.  Suddenly, they’re poor too and more inclined than ever to take the handouts that they formerly thought would only slow them and their kind down.  It’s one thing to be against big government when you are a net loser under such a regime; it’s quite another to ask people to be against big government on principle.  For a long time, enough Americans saw the limited government policies of the founders echoed in the pro-capitalism direction of the Republican Party as a winning formula in accord with justice.  When that formula has left so many high and dry, the inexorable sprint towards big government solutions is harder to resist than ever, as too is a serious reevaluation of the values on which it was all based.

To accomplish anything of value, conservatism must change its rhetoric, focusing more on the cultural issues that still divide us from the Democrats and the likelihood that this productive class (even with a housing bail out) will become the permanent water-carrier for the big government future, exchanging, in effect, its future and that of its children for a few trinkets and Fool’s Gold.

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Bush was never a real believer in Free Markets. He instead believed in preserving the power and privilege of people like him. He sold it as a new kind of middle way, so-called “compassionate conservatism.”

Bush did not work hard to get where he was, instead inheriting his name, his network, and most of his money from his family. My experience with these “fortunate sons” is that they have a certain blindness about their own and others’ economic fortunes. Not having attained their success through their own efforts, they either feel guilty about it and indulge in various guilt-driven flirtations with leftism, or, alternately, don’t care about the structures that allowed their enterprising ancestors to attain wealth, aiming instead to preserve what they have at the expense of the economy as a whole.  Consider Bush’s perception that a woman who needed three jobs to support herself and her family was “uniquely American” rather than a tragic consequence of a low wage, screwed up economy.

Bush has been willing to sell out American workers and manufacturers out for many years to China and Mexico in the name of a cockeyed notion of fairness.  Now, worried about his legacy, he’s willing to kick the auto manufacturing can down the road by giving away TARP money to the Big 3 automakers.  There is no rhyme or reason to it, and his selective involvement in the economy is an invitation to chaos and politically chosen winners and losers.  Instead of setting the rules of the road, under Bush, the government has chosen very distinct winners and losers in the economy.

Consider Bush’s numerous deviations from free market principles and basic fair play:

  • The giveaway to MBNA and other credit card companies in the ex post facto bankruptcy reforms of 2005;
  • The giveaway to the pharmaceutical industry in the form of the prescription drug Medicare benefit of 2006;
  • The rescue of Bear Sterns earlier this year coupled with the rejection of a Lehman Brothers bailout;
  • The $190B farm subsidy bill of 2002;
  • The cheap-money, high deficit imposition of various costs on future generations in order to create the present day illusion of prosperity.

Bush has repeatedly put a particular social class–corporate America, its multinational managerial elite, and the wealthy in general–above the good of the country as a whole.  Unlike Reagan and the long traditions of the Republican party, Bush has shown indifference to American workers and businesses most threatened by globalization. Obviously the Big 3 have problems largely of their own making, caused not least by the short-sighted greediness of their unions.  But they did not create the last decade’s unbalanced trade with China, our overly leveraged and under-regulated financial sector,  the slow money-suck of constant inflation, nor the immigration-driven wage gap with the rest of the “blue collar” economy.  They should not be bailed out now, not least because they have a tool in bankruptcy to reform themselves.  But the trade and monetary conditions of the last 10-20 years should never have come to pass.  Now terrible decisions are being made under crisis conditions by an ideologically unmoored failure.

Unfortunately, Obama and the Democrats promise more of the same whether in the form of spending on make-work infrastructure programs, appointing an “auto czar,” or “investing” in new technologies.  Their policies, an exagerrated version of Bush’s with even less regard for the national interest, will perpetuate the legacy of cronyism and failure with slightly different winners and losers, i.e., giveaways to minorities, the unproductive, and politically correct Third World supplicants.  Whenever the government gets involved in these matters and insulates participants in the market from the usual requirements of profit, loss, and competition, then political considerations come into play, just as they do in a smaller way in the realm of government contracts, such as the practice of affirmative action set asides and other forms of patronage.

Bush did not embrace free markets tempered by some consideration of the necessity of a strong, vibrant, and diversified national economy.  Unfortunately, his term went down in the recent history books as “extreme conservatism” rather than the nonideological jumble that it was, the reflection of a man with a peculiar past and a worldview formed by lifelong associations with preservation-minded elites in the world’s most corrupt nations.

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