Rolling Back the Progressive Era

This is another excellent article by Michael Hudson, who has written many insightful and educational articles recently.  I've learned a great deal from Michael and highly recommend reading his material - whether you agree or disagree with him. - Ilene at Phil's Stock World

Rolling Back the Progressive Era

Courtesy of Michael Hudson

How Bankers are using the Debt Crisis to welcome in the Financial Road to Serfdom

Financial strategists do not intend to let today’s debt crisis go to waste. Foreclosure time has arrived. That means revolution – or more accurately, a counter-revolution to roll back the 20th century’s gains made by social democracy: pensions and social security, public health care and other infrastructure providing essential services at subsidized prices or for free. The basic model follows the former Soviet Union’s post-1991 neoliberal reforms: privatization of public enterprises, a high flat tax on labor but only nominal taxes on real estate and finance, and deregulation of the economy’s prices, working conditions and credit terms.

What is to be reversed is the “modern” agenda. The aim a century ago was to mobilize the Industrial Revolution’s soaring productivity and technology to raise living standards and use progressive taxation, public regulation, central banking and financial reform to distribute wealth fairly and make societies more equal. Today’s financial aim is the opposite: to concentrate wealth at the top of the economic pyramid and lower labor’s returns. High finance loves low wages.

The political lever to achieve this program is financial. The European Union (EU) constitution prevents central banks from financing government deficits, leaving this role to commercial banks, paying interest to them for creating credit that central banks monetize for governments in Britain and the United States. Governments are to go into debt to bail out banks for loans gone bad – as do more and more loans as finance impoverishes the economy, stifling its ability to pay. Yet as long as we live in democracies, voters must agree to pay. Governments are sovereign and debt is ultimately a creature of the law and courts.

But first, voters need to understand what is happening. From the bankers’ perspective, the economic surplus is what they themselves end up with. Rising consumption standards and even public investment in infrastructure are seen as deadweight. Bankers and bondholders aim to increase the surplus not so much by tangible capital investment increasing the overall surplus, but by more predatory means, headed by rolling back labor’s gains and stiffening working conditions while gaining public subsidy. Banks “create wealth” by providing more credit (that is, debt leverage) to bid up asset prices for real estate and enterprises already in place – assets that either are being foreclosed on or sold off under debt pressure by private owners or governments. One commentator recently characterized the latter strategy of privatization as “tantamount to selling the family silver only to have to rent it back in order to eat dinner.”[1]

Fought in the name of free markets, this counter-revolution rejects the classical ideal of markets free of unearned income paid to special interests. The financial objective is to squeeze out a surplus by maximizing the margin of prices over costs. Opposing government enterprise and infrastructure as the road to serfdom, high finance is seeking to turn public infrastructure into rent-extracting tollbooths to extract economic rent (the “free lunch economy”), while replacing labor unions with non-union labor so as to work it more intensively.

This road to neoserfdom is an asset grab. But to achieve it, the financial sector needs a political grab to replace democracy with financial technocrats. Their job is to pretend that there is no revolution at all, merely an increase in “efficiency,” “creating wealth” by debt-leveraging the economy to the point where the entire surplus is paid out as interest to the financial managers who are emerging as Western civilization’s new central planners.

Frederick Hayek’s Road to Serfdom portrayed a dystopia of public officials seeking to regulate the economy. In attacking government so one-sidedly, his ideological extremism sought to replace the checks and balances of mixed economies with a private sector “free” of regulation and consumer protection. His vision was of a post-modern economy “free” of the classical reforms to bring market prices into line with cost value. Instead of purifying industrial capitalism from the special rent extraction privileges bequeathed from the feudal epoch, Hayek’s ideology opened the way for unchecked financial power to make a travesty of “free markets.”

The European Union’s financial planners claim that Greece and other debtor countries have a problem that is easy to cure by imposing austerity. Pension savings, Social Security and medical insurance are to be downsized so as to “free” more debt service to be paid to creditors. Insisting that Greece only has a “liquidity problem,” European Central Bank (ECB) extremists deem an economy “solvent” as long as it has assets to privatize. ECB executive board member Lorenzo Bini Smaghi explained the plan in a Financial Times interview:

FT: Otmar Issing, your former colleague, says Greece is insolvent and it “will not be physically possible” for it to repay its debts. Is he right?
LBS: He is wrong because Greece is solvent if it applies the programme. They have assets that they can sell and reduce their debt and they have the instruments to change their tax and expenditure systems to reduce the debt. This is the assessment of the IMF, it is the assessment of the European Commission.

Poor developing countries have no assets, their income is low, and so they become insolvent easily. If you look at the balance sheet of Greece, it is not insolvent.

The key problem is political will on the part of the government and parliament. Privatisation proceeds of €50bn, which is being talked about – some mention more – would reduce the peak debt to GDP ratio from 160 per cent to about 140 per cent or 135 per cent and this could be reduced further.[2]

A week later Mr. Bini Smaghi insisted that the public sector “had marketable assets worth 300 billion euros and was not bankrupt. ‘Greece should be considered solvent and should be asked to service its debts,’ … signaling that the bank remained firmly opposed to any plan to allow Greece to stretch out its debt payments or oblige investors to accept less than full repayment, a so-called haircut.”[3]Speaking from Berlin, he said that Greece “was not insolvent.” It could pay off its bonds owed to German bankers ($22.7 billion), French bankers ($15 billion) and the ECB (reported to be on the hook for $190 billion) by selling off public land and ports, water and sewer rights, ownership of the telephone system and other basic infrastructure. In addition to getting paid in full and receiving high interest rates reflecting “market” expectations of non-payment, the banks would enjoy a new credit market financing privatization buy-outs.

Warning that failure to pay would create windfall gains for speculators who had bet that Greece would default, Mr. Bini Smaghi refused to acknowledge the corollary: to pay the full amount would create windfalls for those who bet that Greece would be forced to pay. He also claimed that: “Restructuring of Greek debt would … discourage Greece from modernizing its economy.” But the less debt service an economy pays, the more revenue it has to invest productively. And to “solve” the problem by throwing public assets on the market would create windfalls for distress buyers. As the Wall Street Journal put matters bluntly: “Greece is for sale – cheap – and Germany is buying. German companies are hunting for bargains in Greece as the debt-stricken government moves to sell state-owned assets to stabilize the country’s finances.”[4]

Rather than raising living standards while creating a more egalitarian and fair society, the ECB’s creditor-oriented “reforms” would roll the time clock back to oligarchy. Not the post-feudal oligarchy of landlords owning land conquered militarily, but a financial oligarchy accumulating banking claims and bonds growing inexorably and exponentially, leaving little over for the rest of the economy to invest or consume.

The distinction between illiquidity and insolvency

If a homeowner loses his job and cannot pay his mortgage, he must sell the house or see the bank foreclose. Is he insolvent, or merely “illiquid”? If he merely has a liquidity problem, a loan will help him earn the funds to pay down the debt. But if he falls into the negative equity that now plagues a quarter of U.S. real estate, taking on more loans will only deepen his net deficit. Ending this process by losing his home does not mean that he is merely illiquid. He is in distress, and is suffering from insolvency. But to the ECB this is merely a liquidity problem.

The public balance sheet includes land and infrastructure as if they are surplus assets that can be forfeited without fundamentally changing the owner’s status or social relations. In reality it is part of the means of survival in today’s world, at least survival as part of the middle class.

For starters, renegotiating his loan won’t help an insolvency situation such as the jobless homeowner above. Lending him the money to pay the bank interest (along with late fees and other financial penalties) or stretching out the loan merely will add to the debt balance, giving the foreclosing bank yet a larger claim on whatever property the debtor may have available to grab.

But the homeowner is in danger of being homeless, living on the street. At issue is whether solvency should be defined in the traditional common-sense way, in terms of the ability of income to carry one’s current obligations, or a purely balance-sheet approach taken by creditors seeking to extract payment by stripping assets. This is Greece’s position. Is it merely a liquidity problem if the government is told to sell off $50 billion in prime tourist sites, ports, water systems and other public assets in order to pay foreign creditors?

At issue is language regarding the legal rights of creditors vis-à-vis debtors. The United States has long had a body of law regarding this issue. A few years ago, for instance, the real estate speculator Sam Zell bought the Chicago Tribune in a debt-leveraged buyout. The newspaper soon went broke, wiping out the employees’ stock ownership plan (ESOP). They sued under the fraudulent conveyance law, which says that if a creditor makes a loan without knowing how the debtor can pay in the normal course of business, the loan is assumed to have been made with the intent of foreclosing on property, and is deemed fraudulent.

This law dates from colonial times, when British speculators eyed rich New York farmland. Their ploy was to extend loans to farmers, and then call in the loans when the farmer’s ability to pay was low, before the crop was harvested. This was indeed a liquidity problem – which financial opportunists turned into an asset grab. Some lenders, to be sure, created a genuine insolvency problem by making loans beyond the ability of the farmers to pay, and then would foreclose on their land. The colonies nullified such loans. Fraudulent conveyance laws have been kept on the books since the United States won its independence from Britain.

Creditors today are using debt leverage to force Greece to sell off its public domain – having extended credit beyond its ability to pay. So the question now being raised is whether the nation should be deemed “solvent” if the only way to carry its public debt (that is, roll it over by replacing bad old loans with newer and more inexorable obligations) is to forfeit its land and basic infrastructure. This would fundamentally alter the relationship between public and private sectors, replacing its mixed economy with a centrally planned one – planned by financial predators with little care that the economy is polarizing between rich and poor, creditors and debtors.

The financial road to serfdom

Financial lobbyists are turning the English language – and economic terminology throughout the world – into a battlefield. Creditors are to be permitted to take the assets of insolvent debtors – from homeowners and companies to entire nations – as if this were a normal working of “the market” and foreclosure was simply a way to restore “liquidity.” As for “solvency,” the ECB would strip Greece clean of its public sector’s assets. Bank officials have spoken of throwing potentially 150 billion euros of property onto the market.

Most people would think of this as a solvency problem, at least if one defines solvency as meaning the ability to maintain the kind of society one has, with existing public/private checks and balances and living standards. It is incompatible with scaling down pensions, Social Security and medical insurance to save bondholders and bankers from taking a loss. The latter policy is nothing less than a political revolution.

The asset stripping that Europe’s bankers are demanding of Greece looks like a dress rehearsal to prevent the “I won’t pay” movement from spreading to “Indignant Citizens” movements against financial austerity in Spain, Portugal and Italy. Bankers are trying to block governments from writing down debts, stretching out loans and reducing interest rates.

When a nation is directed to replace its mixed economy by transferring ownership of public infrastructure and enterprises to a financial class (mainly foreign), this is not merely “restoring solvency” by using long-term assets to pay short-term debts to maintain its balance-sheet net worth. It is a radical transformation to a centrally planned economy, shifting control out of the hands of elected representatives to those of financial managers whose time frame is short-term and extractive, not long-term and protective of social equity and basic needs.

Creditors are demanding a political transformation to replace democratic lawmakers with technocrats appointed by foreign bankers. When the economic surplus is pledged to bankers rather than invested at home, we are not merely dealing with “insolvency” but with an aggressive attack. Finance becomes a continuation of war, by economic means that are to be politicized. Acting on behalf of the commercial banks (from which most of its directors are drawn, and to which they intend to “descend from heaven” to take their rewards after serving their financial class), the European Central Bank insists on a political revolution to replace democratic government by a technocratic elite – not of industrial engineers, but of “financial engineers,” a polite name for asset stripping financial warriors. If Greece does not comply, they threaten to wreak domestic financial havoc by “pulling the plug” on Greek banks. This “carrot and stick” approach threatens that if Greece does not sign on, the ECB and IMF will withhold loans needed to keep its banking system solvent. The “carrot” was provided on May 31 they agreed to provide $86 billion in euros if Greece “puts off for the time being a restructuring, hard or soft,” of its public debt.[5]

It is a travesty to present this revolution simply as a financial exercise in solving the “liquidity problem” as if it were compatible with Europe’s past four centuries of political and classical economic reforms. This is why the Syntagma Square protest in front of Parliament has been growing each week, peaking at over 70,000 last Sunday, June 5.

Some protestors drew a parallel with the Wisconsin politicians who left the state to prevent a quorum from voting on the anti-labor program that Governor Walker tried to ram through. The next day, on June 6, thirty backbenchers of Prime Minister George Papandreou’s ruling Panhellenic Socialist party (Pasok) were joined by some of his own cabinet ministers threatening “to resign their parliamentary seats rather than vote through measures to cut thousands of public sector jobs, increase taxes again and dispose of €50bn of state assets, according to party insiders. ‘The biggest issue for the party is stringent cuts in the public sector … these go to the heart of Pasok’s model of social protection by providing jobs in state entities for its supporters,’ said a senior Socialist official.”[6]

Seeing the popular reluctance to commit financial suicide, Conservative Opposition leader Antonis Samaras also opposed paying the European bankers, “demanding a renegotiation of the package agreed last week with the ‘troika’ of the EU, IMF and the European Central Bank.” It was obvious that no party could gain popular support for the ECB’s demand that Greece relinquish popular rule and “appoint experienced technocrats to half a dozen essential ministries to implement the EU-IMF programme.”[7]

ECB President Trichet depicts himself as following Erasmus in bringing Europe beyond its “strict concept of nationhood.” This is to be done by replacing elected officials with a bureaucracy of cosmopolitan banker-friendly planners. The debt problem calls for new “monetary policy measures – we call them ‘non standard’ decisions, strictly separated from the ‘standard’ decisions, and aimed at restoring a better transmission of our monetary policy in these abnormal market conditions.” The task at hand is to make these conditions a new normalcy – and re-defining solvency to reflect a nation’s ability to pay debts by selling the public domain.

The ECB and EU claim that Greece is “solvent” as long as it has assets to sell off. But if populations in today’s mixed economies think of solvency as existing under existing public/private proportions, they will resist the financial sector’s attempt to proceed with buyouts and foreclosures until it possesses all the assets in the world, all the hitherto public and corporate assets and those of individuals and partnerships.

To minimize opposition to this dynamic the financial sector’s pet economists understate the debt burden, pretending that it can be paid without disrupting economic life and, in the Greek case for example, by using “mark to model” junk accounting and derivative swaps to simply conceal its magnitude. Dominique Strauss-Kahn at the IMF claims that the post-2008 debt crisis is merely a short-term “liquidity problem” and one of lack of “confidence,” not insolvency reflecting an underlying inability to pay. Banks promise that everything will be all right when the economy “returns to normal” – as if it can “borrow its way out of debt,” Bernanke-style.

This is what today’s financial warfare is about. At issue is the financial sector’s relationship to the “real” economy. From the latter’s perspective the proper role of credit – that is, debt – is to fund productive capital investment and spending, because it is out of the economic surplus that debts are paid. This requires a financial regulatory system and tax system to maximize growth. But that is precisely the fiscal policy that today’s financial sector is fighting against. It demands preferential tax-deductability for interest to encourage debt financing rather than equity. It has disabled truth-in-lending laws and regulations to keeping interest rates and fees in line with costs of production. And it blocks governments from having central banks to freely finance their own operations and provide economies with money. And to cap matters it now demands that democratic society yield to centralized authoritarian financial rule.

Finance and democracy: from mutual reinforcement to antagonism

The relationship between banking and democracy has taken many twists over the centuries. Earlier this year, democratic opposition to the ECB and IMF attempt to impose austerity and privatization selloffs succeeded when Iceland’s President Grímsson insisted on a national referendum on the Icesave debt payment that Althing leaders had negotiated with Britain and the Netherlands (if one can characterize abject capitulation as a real negotiation). To their credit, a heavy 3-to-2 majority of Icelanders voted “No,” saving their economy from being driven into the debt peonage.

Democratic action historically has been needed to enforce debt collection. Until four centuries ago royal treasuries typically were kept in the royal bedroom, and loans to rulers were in the character of personal debts. Bankers repeatedly found themselves burned, especially by Habsburg and Bourbon despots on the thrones of Spain, Austria and France. Loans to such rulers were liable to expire upon their death, unless their successors remained dependent on these same financiers rather than turning to their rivals. The numerous bankruptcies of Spain’s autocratic Habsburg ruler Charles V exhausted his credit, preventing the nation from raising funds to defeat the rebellious Low Countries to the north.

The problem facing bankers was how to make loans permanent national obligations. Solving this problem gave an advantage to parliamentary democracies. It was a major factor enabling the Low Countries to win their independence from Habsburg Spain in the 16th century. The Dutch Republic committed the entire nation to pay its public debts, binding the people themselves, through their elected representatives who earmarked taxes to their creditors. Bankers saw parliamentary democracy as a precondition for making sound loans to governments. This security for bankers could be achieved only from electorates having at least a nominal voice in government. And raising war loans was a key element in military rivalry in an epoch when the maxim for survival was “Money is the sinews of war.”

As long as governments remained despotic, they found that their ability to incur more debt was limited. At this time “the legal position of the King qua borrower was obscure, and it was still doubtful whether his creditors had any remedy against him in case of default.”[8]Earlier Dutch-English financing had not satisfied creditors on this count. When Charles I borrowed 650,000 guilders from the Dutch States-General in 1625, the two countries’ military alliance against Spain helped defer the implicit constitutional struggle over who ultimately was liable for British debts.

The key financial achievement of parliamentary government was thus to establish nations as political bodies whose debts were not merely the personal obligations of rulers, but truly public and binding regardless of who occupied the throne. This is why the first two democratic nations – the Netherlands and Britain after its 1688 dynastic linkage between Holland and Britain in the person of William I, and the emergence of Parliamentary authority over public financing – developed the most active capital markets and became Europe’s leading military powers. “A funded debt could not be formed so long as the King and Parliament were fighting for the mastery,” concludes the financial historian Richard Ehrenberg. “It was only after the [1688] revolution that the English State became what the Dutch Republic had long been – a real corporation of individuals firmly associated together, a permanent organism.”[9]

In sum, nations emerged in their modern form by adopting the financial characteristics of democratic city states. The financial imperatives of 17th-century warfare helped make these democracies victorious, for the new national financial systems facilitated military spending on a vastly extended scale. Conversely, the more despotic Spain, Austria and France became, the greater the difficulty they found in financing their military adventures. Austria was left “without credit, and consequently without much debt” by the end of the 18th century, the least credit-worthy and worst armed country in Europe, as Sir James Steuart noted in 1767.[10] It became fully dependent on British subsidies and loan guarantees by the time of the Napoleonic Wars.

The modern epoch of war financing therefore went hand in hand with the spread of parliamentary democracy. The situation was similar to that enjoyed by plebeian tribunes in Rome in the early centuries of its Republic. They were able to veto all military funding until the patricians made political concessions. The lesson was not lost on 18th-century Protestant parliaments. For war debts and other national obligations to become binding, the people’s elected representatives had to pledge taxes. This could be achieved only by giving the electorate a voice in government.

It thus was the desire to be repaid that turned the preference of creditors away from autocracies toward democracies. In the end it was only from democracies that they were able to collect. This of course did not necessarily reflect liberal political convictions on the part of creditors. They simply wanted to be paid.

Europe’s sovereign commercial cities developed the best credit ratings, and hence were best able to employ mercenaries. Access to credit was “their most powerful weapon in the struggle for their freedom,” notes Ehrenberg, in an age whose “growth in the use of firearms had forced them to surround themselves with stronger fortifications.”[11] The problem was that “Anyone who gave credit to a prince knew that the repayment of the debt depended only on his debtor’s capacity and will to pay. The case was very different for the cities, who had power as overlords, but were also corporations, associations of individuals held in common bond. According to the generally accepted law each individual burgher was liable for the debts of the city both with his person and his property.”

But the tables are now turning, from Icelandic voters to the large crowds gathering in Syntagma Square and elsewhere throughout Greece to oppose the terms on which Prime Minister Papandreou has been negotiating an EU bailout loan for the government – to bail out German and French banks. Now that nations are not raising money for war but to subsidize reckless predatory bankers, Jean-Claude Trichet of the ECB recently suggested taking financial policy out of the hands of democracy:

But if a country is still not delivering, I think all would agree that the second stage has to be different. Would it go too far if we envisaged, at this second stage, giving euro area authorities a much deeper and authoritative say in the formation of the country’s economic policies if these go harmfully astray? A direct influence, well over and above the reinforced surveillance that is presently envisaged? …

At issue is sovereignty itself. In this respect, the war being waged against Greece by the European Central Bank (ECB) may best be seen as a dress rehearsal not only for the rest of Europe, but for what financial lobbyists would like to bring about globally.

Footnotes

[1] Yves Smith, “Wisconsin’s Walker Joins Government Asset Giveaway Club Naked Capitalism, February 22, 2011.

[2] Ralph Atkins, “Transcript: Lorenzo Bini Smaghi,” Financial Times, May 30, 2011.

[3] Jack Ewing, “In Asset Sale, Greece to Give Up 10% Stake in Telecom Company,” The New York Times, June 7, 2011.

[4] Christopher Lawton and Laura Stevens, “Deutsche Telekom, Others Look to Grab State-Owned Assets at Fire-Sale Prices,” Wall Street Journal, June 7, 2011.

[5] Landon Thomas Jr., “New Rescue Package for Greece Takes Shape,” The New York Times, June 1, 2011.

[6] Kerin Hope, “Rift widens on Greek reform plan,” Financial Times, June 7, 2011.

[7] Ibid. See also Kerin Hope, “Thousands protest against Greek austerity,” Financial Times, June 6, 2011: “‘Thieves, thieves … Where did our money go?’ the protesters shouted, blowing whistles and waving Greek flags as riot police thickened ranks around the parliament building on Syntagma square in the centre of the capital. … Banners draped nearby read ‘Take back the new measures’ and ‘Greece is not for sale’ – a reference to the government’s plans to include state property and real estate for tourist development in the privatisation scheme.”

[8] Charles Wilson, England’s Apprenticeship: 1603-1763 (London: 1965), p. 89.

[9] Richard Ehrenberg, Capital and Finance in the Age of the Renaissance (1928), p. 354.

[10] James Steuart, Principles of Political Economy (1767), p. 353.

[11] Ehrenberg, op. cit., pp. 44f., 33. 

Photo credit: AP (Demonstrators gather during a peaceful rally outside the Greek Parliament in Athens, on Sunday, June 5, 2011. Thousands of protesters have gathered for a 12th consecutive day to protest at fiscal austerity measures and demand that Greece stop paying its debtors. They have also denounced politicians of all stripes as incompetent and corrupt. (AP Photo/Dimitri Messinis)) 

Comments

[spekulatn]

+1 Moe Howard.

[Bob]

Nice story.  So the banksters are really Champions of Freedom who are humanity's last hope?  Or is what the author describes coming down on Greece further "socialism."

No need to name names, but how many of the 100 wealthiest people/elites have and/or are supporting socialism?  Just to get it out of the way, I'll concede Soros, since I can already hear it coming.

[Moe Howard]

Bob, I guess reading comprehension and thinking beyond headlines are not your strong areas.

Do yourself a favor and try a simple search to see who financed Trotsky's trip to Russia from New York, who ordered his ship released when the Canadians held it, check who was behind Lenin's return from Germany. Who kept the U.S.S.R. as a functional government all those years? Ever heard of Armand Hammer?

If looking at root causes are too much for you, go to Chicago's West Side and take a look around. That is the result of the progressive "War on Poverty". This is the end result of what you wish for the rest of us.

Rather than me list how many of the 100 wealthiest people / elites support socialism, why don't you list how many don't? It would be a much, much shorter list. Just the foundations alone: Annenberg, Ford, Carnegie, you name it, almost all advocate a socialist agenda. In case you are really thick, you do understand that Senators McCain and Graham are Progressives that support socialism, right? Because if you don't understand at least that fact there may be no hope for you.

[AnAnonymous]

Rather than me list how many of the 100 wealthiest people / elites support socialism, why don't you list how many don't? It would be a much, much shorter list.

Very circular. Through a personal gain approach, it follows that rich people support anything that can make them richer.

As capitalism has no other definition for US citizens that capitalism good in opposition to socialism/communism bad, this seriously limits the possibility to check whether or not rich people have supported capitalism.

If one comes up with an era rich people self proclaimed to support capitalism, as this observation is bad to US citizens who propagate their thesis that rich people support socialism, then it will no longer be capitalism but socialism.

Even though these guys told they supported capitalism, they would only have told it to hide the fact that the system they supported was socialism, not capitalism and so on.

In this analytical framework, typical to the US citizen mind, it is by design impossible to show that rich people support capitalism.

[nmewn]

Simply put, progressives are thinly veiled socialists.

Bankers are socialists (of a type, actually they're fascist/crony capitalists) they take no real risk to their own capital, as any loss is borne by the state.

"No need to name names, but how many of the 100 wealthiest people/elites have and/or are supporting socialism?"

Seeing as how 250k is now the "official number" for the wealthy & elite, how about 95% of the old MSM talking heads? Or 99% of Hollywood "stars"?

A progressive (a socialist) will make any number of entreaties for fairness under the guise of the public good, generally, every one of these schemes lead to misery for all (over time) as the sense of individual entitlement at the expense of other unseen individuals grows among the population/public. 

Socialism is a type of fascism and is, in fact, crony capitalism as it relies on the state to sustain itself.

This is not to say there are not fascists/crony capitalists on the right side of the political spectrum, there certainly are.

The quickest way to stop this nonsense is to drop the income tax altogether and have a flat tax where everyone pays the same amount. The mere proposal is enough to flush the left/right-socialist/capitailist dogma into the light of day like a covey of quail.

But we can't have that, can we? ;-)

[disabledvet]

does this look like the picture of a "thinly veiled Socialist"?  How about the sound?

http://www.youtube.com/watch?v=hv-VNTtUYZo&feature=player_detailpage

[Bob]

Well, since you asked, not to me.  And, apparently, not to you.  But there's a distinct class of people who see him as Stalin's mini-me.  They see socialists everywhere.  I recently heard that all the world's richest people are socialists who are fiendishly springing the trap of socialism upon us all.  I shit you not.  You know how it is . . . a fucking nut house. 

When you talk with them about another subject, you find that you share deep common ground, though.  Take me and nmewn above, for example (we've done the common ground over time.) 

The real shame is the poisonous language which serves to absolutely alienate us on nothing more substantial than animal hostility.   Regardless of how elegantly we please ourselves in laying out our own precious visions of that perfect world. 

For example, Ron Paul and Ralph Nader agree about the military and its proper role.  That's 43% of our federal budget.  And although I can't recall having heard him say it, I am sure that Ralph would be cool with ending the Fed. 

What is wrong with this picture?  Sounds to me like the ideas agree.  WTF is wrong with us?

[AnAnonymous]

They see socialists everywhere.  I recently heard that all the world's richest people are socialists who are fiendishly springing the trap of socialism upon us all.  I shit you not.  You know how it is . . . a fucking nut house. 

I've just read a book on starvation and its effects. Apparently, making a threat exterior to oneself is a sort of protection.

Bankers not being capitalist, that is a great trait of the US mind and the way it evolves.

Even in the past, US people had no troubles in painting bankers as the spear head of capitalism.

In the same vein, Wall Street are now labelled communist and bailing them out a communist endeavour.

US citizens have deep troubles depicting themselves as they are.

[JW n FL]

http://www.youtube.com/watch?v=E58u3_8oHsY

John F. Kennedy Secret Society Speech (Part 1/2)

[JW n FL]

http://www.youtube.com/watch?v=CWiIYW_fBfY&feature=related

Eisenhower Farewell Address (Full)

[Bob]

It's been awhile, nmewn!  It looks like this "thinly veiled socialist" has flushed you out.  How ya been? :>)

[nmewn]

LOL!...not bad Bob. Good to see you around.

Its just degrees of charity (I believe) that separate us.

[Bob]

Oh, c'mon, I'm not that bad!

[nmewn]

;-)

I don't believe I ever said you were, personally. Its the idea that's bad in my view.

The idea that once its acceptable to use the force of the state to take liberty & property away from others who have done absolutely nothing wrong, is what is bad. From each according to his ability, to each according to his needs implies a malevolent mediator of some sort.

We all now know what this mediator is.

And we all now know (from past historical experience) it is the worst way of doing it. Putting someone else in charge of what you should be doing yourself only gives the "someone else" an incentive to see that the issue never gets resolved.

It leads to statism, to cronyism.

I'm a grown adult, I don't need some cancerous growth within the system to tell me how to live my life and I believe you don't either.

[John_Coltrane]

Buffett, Gates, Madoff, etc. big Obama and Clinton fans and huge donators to the dem party.  Ophra, Barbara Streisand (note the strong connection between lack of actual personal competence/ability and support of progressive causes).  If you can't look out for yourself, you like others to do so.  Freedom is risky-not for the faint at heart. 

[Bob]

So is freedom what the "investors" are seeking to impose upon the Greeks?  Or is "freedom" just a word that makes further thought unnecessary?

BTW, I'll give you Streisand--always thought she sucked. 

[Ricky Bobby]

I reject being ruled by the banksters but that does not mean I embrace the fucking party apparatchiks.

[Dr Zaius]

+1

[Bob]

+2

[g]

.

[Optimusprime]

Very interesting but avoids difficult issues--such as the role of Jewish financiers in all this.  One needs to read Sombart, for starters, but in addition, simply connect the Spanish expulsion of Jews (many went to the Low Countries), Cromwell's allowing the Jews to return openly to England in consideration of a lot of money (Jews had been expelled from England by Edward I), the fateful decision by Charles II to permit the Jews to remain, even though they had contributed to his father's defeat and death, etc.  Then consider  the role of Jewish financial means and know-how in the formation of the Dutch and British East India Companies and their respective national banks.  And so on. 

We can no longer afford the luxury of ignoring or avoiding these issues, because the results and developments therefrom are still with us.  The Rothschilds, yes, but it did not begin with the Rothschilds per se.  It has a looong history.

[Dburn]

What a fucking asshole.

[disabledvet]

have you followed the actual war news or not?  We just had a casualty just down the road from me.  I felt as usual like "someone was sending me PERSONALLY" a message.  Tell me I should believe otherwise.

[LasVegasDave]

Optimus

Please take your head out of your ass.  I think a "Jew banker"  has hidden a bag of gelt in what was your brain.

[g]

The author misunderstood Hayek's "The Road to Surfdom." We have not had a free market in this country for a long time. Instead we have had central bank control, government central planning of the economy and the social arena, failure to enforce rule of law (government/judicial loop hole's for the powerful) and contract enforcement, and a revolving door between big business and government. To state that Hayek's ideology, as stated in the context of the article, that "... Hayek’s ideology opened the way for unchecked financial power to make a travesty of 'free markets.' ", is quite false. The actual contributing factors have to do with the corruptibility of governing officials, this happends no matter what paradigm you choose, whether its is left or right leaning, free or planned. The government can not police itself when it comes to political contributions, lobbies, and other powerful interests. The people must hold their representatives accountable. In large part the people abdicated their role in the aforementioned duty, for a plethora of reasons.

We would have been better off with a true free market (recent history and past history should clearly teach us that central planning always fails more miserably than the free market, it is the corruptibility of those who govern that destroy the free market, making it beneficial only to the powerful). Greatly simplified, equitable enforcement of rule of law and contracts, reasonable regulations, most importantly far less corruption, and accountability as demanded by the citizens, would have give us the economy, country, and society we really need.

More drivel that lacks critical thinking and historical perspective, from Ilene and her crew. Fact is that socialism/progressivism fast tracks a society to the failed regimes we have seen time and again. There is no semblence of balance that is so essential to any institution.

[Agent 440]

You have to give it to ilene, the progressives are nothing if not consistent: another article by theives complaining about the quality of the stuff they've stolen and how hard it was to steal.

[SamuelMaverick]

Wow, perfectly said Agent440.  +1

[Reptil]

No G, you're wrong. A free market, paradoxally needs a regulatory body, to prevent cartels. To not see that is the huge mistake made in the USA, which led to an inverted totalitarian state, and invariably ends in a militairy dictatorship.

This is really the BLIND SPOT of you phony "free market" types.

ps: did not junk. arguments speak for themselves.

[g]

I appreciate dialogue, junking, especially without offering a rebuttal is quite weak. The best of ideas were often  discovered through meaninful dialogue of opposing ideas.

[Dr Zaius]

g, take your junks as compliments.

[g]

Thx! My economic awakening came in 2007, when I was considering managing my own retirement. It did not take long to discover that a huge crash was just around the corner. Many interesting personalitites saw this coming. Almost all of these individuals believe that free markets are better than centrally planned economies.

I decided not invest my money because it was obvious that the economic system is really just a rigged casino, that caters to the government and the powerful. I must admit that I am not an economist, but perhaps those who are not economists are better qualified to have an opinion on how the economy should work, given that they are less biased by a system that promotes the status quo. My understand of the economy is young by many standards, but I do not think it really takes all that long to discover the truth and to learn which system better serves the people.

I will take the junks as compliments!

[AnAnonymous]

More drivel that lacks critical thinking and historical perspective, from Ilene and her crew.

Yes, it is drivel. But yours is not?

We would have been better off with a true free market (recent history and past history should clearly teach us that central planning always fails more miserably than the free market, it is the corruptibility of those who govern that destroy the free market, making it beneficial only to the powerful). Greatly simplified, equitable enforcement of rule of law and contracts, reasonable regulations, most importantly far less corruption, and accountability as demanded by the citizens, would have give us the economy, country, and society we really need.

That is drivel.

[Eternal Student]

It's really hilarious to see the people touting the beauty of "Free Markets". Here we are, in the middle of the biggest clusterf*ck of all time due to the derivatives mess. Which was completely unregulated. Heck, the contracts were written just to obfuscate the issue so that the Government couldn't figure out what was going on.

And yet, in the middle of this economic disaster caused by the free market, people are clamoring to repeat it all over again.

[g]

I think we made our case aboce very clearly, no need to reiterate it for you. None of us advocated a complete lack of regulation. The regulators did not do their job, they are clearly corrupt. This is not a free market issue, the fault lies in the fact that the markets are not free. The corrupt central planners pushed derivatives, there was ample warnings from many segments that derivatives were dangerous. Watch 'Inside Job' to learn the basics and then come back and post a response.

[Dr Zaius]

People who believe in free markets also believe in transparency. Derivatives are anything, but transparent. The fact that buyers of derivatives have to trust BS advice from ratings agencies is a testament to that fact.

[Reptil]

Transparency means you have to have rule of law. To enforce rule of law, you need a legislative government that also has been empowered, and is controlled by the people. If you let this be controlled by a part of society only you will, logically, have a big problem.

[AnAnonymous]

Can your rule of law compete with the US kind of rule of law, that is a selective application of law?

[Eternal Student]

Sorry, but you seem very confused. First you state:
"We would have been better off with a true free market".

Then you contradict yourself with: "None of us advocated a complete lack of regulation.".

Please clear up your muddled thoughts before you respond.

[g]

Read the posts from the beginning, obviously you did not. No one is advocating a complete lack of regulation. We are clealry stating that we do not support central planning of the economy furthermore that we detest and vehemetly oppose the rampant corruption of the government and regulatory bodies. You very incorrectly state that it was the fault of the free market, once again I will state that we do not have free markets and have not for many decades. Once again watch Inside Job for a basic education on why this is so. This was clearly the fault of corrupt government and years of misguided central planning.

[Eternal Student]

Ok, so by your definition of a  "true free market" you mean a well regulated market. Which is not what many (if not most) call a true free market. Thanks for clearing that up. Which of course implies that an unregulated market is, ummm, what? A superduper true free market?

Honestly, before you accuse others of drivel and uncritical thinking, you need to take a look at yourself. It also might help to learn more than just by watching one film (even though it is excellent).

[g]

Circular conversation, may you find the path to enlightenment, lol. Sorry could not help it, have to crqsh its late here. Seriously read Hayek and Watch Inside Job, I have some other suggestions, then come back and post.

[Eternal Student]

When you unclear your muddled thoughts, and learn a bit more, I'd be happy to take you more seriously. But honestly, you really don't seem to understand what you're talking about. Though I'm positive you think you do. :)

[g]

One more post I can not resist. The govrnment has no business setting prices, choosing econmic winners and losers, subsidizing certain sectors of the economy, etc. The only regulation of the economy that is permissable is the enforcement of contracts, enforcing rule of law, prosecution of fraud. What else is there? Rhetorical.

[Eternal Student]

This is just more flawed reasoning. "Free markets" such as you've qualified, always lead to monopolies. Which maintain an unfree market, by use of their powers to restrict the competition.

So, as you've defined it, you are really advocating for unfree markets. And that is just one of the built in flaws to the Libertarian thesis, and one of the reasons why that silly tripe never, ever works. Though they keep trying. And causing enormous screw ups, and damage, every time. The current economic fiasco is just one of these. With them still advocating for "free markets".

Also, you are basically stating that the repeal of Glass-Steagall was a good thing. That thought doesn't seem to have occured to you.

Try and get out of it as you may, but the bulk of history and economic reality is against you.

[AnAnonymous]

The only regulation of the economy that is permissable is the enforcement of contracts, enforcing rule of law, prosecution of fraud.

Which means chosing the winners and losers, subsidizing certain sectors of the economy. Circular.

Competition is a measure based activity. To measure something, one needs a rule in its  original meaning: an instrument to measure, to straighten.

The one who sets the rule makes the winner.

Some basic stuff that so far no one has managed to escape.

[g]

I do believe that we need government, but we must always err on the side of freedom. History only has examples of how the freedom of the people has been usurped by those in power. Furthermore, it seems to me that the quickest way to power is to seize control of the economy. Human nature is not inherently "good", this is why socialism does not work. Hayek, recognized this fact, that is in large part why he believed and advocated tthe free market, because it better matches the nature of humans. In short, Hayek, realized that humans can not create anything perfect, thus the reason why economic planning is always a disaser. Err on the side of freedom. The free market is based on competition which functions better considering human nature.

What gets me is that we have not had free markets for the better part of a century. Lets consider that the Fed was created in 1913. Since that time control of the economy has only increased, the economy has further suffered the ravages of central planners each proceeding year. You can not make the case that our current economic woes are the fault of the free market considering the preceeding facts. Just the opposite, we see increased volatity, decreased efficiency, increased corruption, less transperancy, and greater wealth inequality each year hence. Due to the interference of the fed, the government, and the powerful.

So given the fact that we have not had a free market economy in our lifetimes, how about trying it out, because central planning has failed miserably.

To quote the forward in "Road to Serfdom"

The second part of the strategy is to make better, unassailable
arguments for personal liberty. Any part of the socialist agenda
can be shown as immoral under the assumption that people own
themselves. The idea of self ownership makes certain forms of
behaviour unambiguously immoral. Murder, rape and theft are
immoral simply because they violate a person’s property rights to
himself. Government programmes such as subsidies to farmers,
bailouts for businesses, and welfare or medical care for the
indigent are also immoral for the same reason. Government has
no resources of its very own. The only way government can give

one person money is to fi rst take it from another person. Doing
so represents the forcible using of one person, through the tax
code, to serve the purposes of another. That is a form of immorality
akin to slavery. After all, a working defi nition of slavery is
precisely that: the forcible use of one person to serve the purposes
of another.
Well-intentioned socialists, if they are honest people as Hayek
contends, should be able to appreciate that reaching into one’s
own pockets to assist one’s fellow man is laudable and praiseworthy.
Reaching into another’s pocket to do so is theft and by
any standard of morality should be condemned.
Collectivists can neither ignore nor dismiss irrefutable
evidence that free markets produce unprecedented wealth.
Instead, they indict the free market system on moral grounds,
charging that it is a system that rewards greed and selfi shness and
creates an unequal distribution of income. Free markets must be
defended on moral grounds. We must convince our fellow man
there cannot be personal liberty in the absence of free markets,
respect for private property rights and rule of law. Even if free
markets were not superior wealth producers, the morality of the
market would make them the superior alternative.

[AnAnonymous]

Lets open the dam of propaganda. Your long comment addresses none of the points I recalled.

How competition is better suited to human nature, which I dont know, is somehow a puzzle. People must know what human nature is to tell that x or y is better suited to human nature.

The dominant point still being that you provided no argumentation over the points I recalled.

The US citizens nature is eternal.

[g]

Ok I will take a stab at this then.

Humans are motivated by person gain, in our society this is measured by monetary wealth. The incentive to perform is elicited by the  goal of wealth accumulation. If you punish the productive then you negate the incentive to excel. The free market rewards creativity, ingenuity, and hard work. Socialism/central planning does the opposite, as your wealth created through hard work is redistributed to those with less motivation, hence socialism/central planning does not reward a good work ethic, efficiency, or productivity.

As people compete in the market place, efficiency increase as productive competitors strive to capture customers. This reduces prices and increases the quality of products and services. One of the great strengths of the free markets is that production, capital, price arbitrage are aligned to consumer time preferences. Whereas in central planning this does not and can not happen, thus the reason that central planning is so wasteful of resources. Only the free market effectively set prices.

[AnAnonymous]

Humans are motivated by personal gain among things or are they exclusively motivated by personal gain? Or is not the convenient answer to picture everything as personal gain?

Excelling at production: people excelling at production are people excelling at consumption since the human activity called production is first and all consumption.

The US colonization of the Indian land was a centralled planned endeavour etc...

No answer on the remark made on competition.

But the best: where can people find examples of free markets economy? Because on the paper, Godzilla economy performs much better than free market economy.

[disabledvet]

actually "we never had socialized losses until we actually had them."  up until '73 we had a draft so in that sense "the losses were never socialized."  cue to 2008:  that's the real deal, now what?  "never let a crisis go to waste"?  toward what purpose?  towards whose end?  it strains creduility to say "for the voter!"  of course there is necessity:  70 percent of the economy is the American consumer so "there you go witht the bailout thing."  which again raises the question:  "what's up with the war(s) thing then?"  at this point it's basically philosophical to me now.  the money is going out the door either way--am "i" ultimately in line with the (ACTUAL SPENDING) priorities or not?  how can anyone with a straight face in the United States...or Europe...or Japan...HONESTLY say "no"?  "It is done" is it not?