Steve Weissman / t r u t h o u t | Perspective – 2008-11-06 22:03:24
(November 6, 2008) —Poor John Galt. Only last year, The New York Times referred to Ayn Rand’s “Atlas Shrugged” as “one of the most influential business books ever written,” and portrayed Galt, the novel’s iconic hero, as a role model for corporate CEOs in their dogged pursuit of self-interest. No wonder, then, the gnashing of teeth in executive suites when Ayn Rand’s most famous devotee, former Federal Reserve Chairman Alan Greenspan, admitted that enlightened greed had failed.
“I made a mistake,” he told the House Oversight and Government Reform committee, “in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms.”
For Congressional Democrats, Greenspan’s mea culpa pointed the way toward greatly strengthened regulation of our financial markets, which the Fed chair had long opposed. President-elect Barack Obama similarly seems intent on imposing a new regulatory framework, along with higher tax rates on income and capital gains for families making over $250,000.
But please don’t gloat yet, as some progressive pundits have done. Most of those at the top of America’s corporate tree do not want to be regulated more tightly or taxed at a higher rate, and they are not about to wave the white flag of surrender. For them, the battle is just heating up.
Forbes magazine, which delights in calling itself “The Capitalist Tool,” led the counterattack with a cover photo of editor-in-chief Steve Forbes and his call to arms, “How Capitalism Will Save Us.” Twice a Republican presidential hopeful and now an economic adviser to John McCain, Forbes had made his millions the old-fashioned way, inheriting his father and grandfather’s publishing empire. And, to borrow from the late Ann Richards, he raised his battle flag with the utter certainty of one born with a silver foot in his mouth.
The current crisis, Forbes declared, “was not the failure of free markets but the outcome of bad government actions.”
Among his long list of regulatory and monetary errors, Forbes specifically damned the Fed for creating excessive liquidity, keeping interest rates artificially low, and allowing the value of the dollar to fall in line with the Bush administration’s desire to promote American exports.
He also faulted Fannie Mae and Freddie Mac for promoting affordable housing in ways we now call “predatory lending,” federal prosecutors for too aggressively pursuing fraud investigations of failed corporate risk-takers, and an arcane accounting regulation that requires financial institutions to write down the value of holdings to reflect falling market prices.
I would love to discuss at length each of these and their relevance, but his argument is mostly sleight of hand. The brunt of his message is what he glossed over and left out. In his zeal to absolve the free market of any fault, he completely dismissed the responsibility of individuals and institutions in the housing and financial industries. Their “greed and recklessness,” he said, were nothing more than a response to government actions.
Even more stunning, Forbes simply ignored what most observers see as the prime cause of the mess we’re in, and that is the massive deregulation of our financial institutions. Forbes was – and is – a leading champion of deregulation, and given what followed his success in selling it, who can blame him for wanting to talk about almost anything else?
In fact, his silence on the subject has nothing to do with shame. Like the Bourbon kings who learned nothing and forgot nothing, Forbes continues to fight against reasonable regulation of his mythic free markets, placing his faith in some invisible self-regulating mechanism that seems to have gone AWOL.
He also continues to take it on faith that lowering tax rates on capital gains will increase investment and create more jobs, even though historical studies suggest that the tax rates do not significantly deter or encourage investment. And, of course, he continues to champion his proposal for a highly regressive flat tax, which would redistribute the tax burden even more onto those who can least afford it.
Nor does Forbes stand alone in his defense of unregulated markets and lower taxes on the wealthy. These remain the religious dogma of trickle-down economics, from John McCain to the US Chamber of Commerce and diehards on Wall Street. True believers, they will continue to push their economic faith no matter who becomes president. If Obama’s victory means anything, fewer of us will be fooled this time around.
A veteran of the Berkeley Free Speech Movement and the New Left monthly Ramparts, Steve Weissman lived for many years in London, working as a magazine writer and television producer. He now lives and works in France.
Thu, 11/06/2008 – 23:50 — Tom Camfield (not verified)
“Enlightened greed?” That’s sort of like “enlightened population control.” Everyone thinks restraint is o.k. for everyone else, and convinces himself that his little bit of excess won’t make any difference. Also a lot like the ostentatious newcomers who arrive one household at a time to trash with their glitter and hedonism a formerly pleasant and quiet little town or neighborhood. Or like Bush’s idea to let industry self-regulate, out of some imagined conscience, its emission of environmental pollutants. Widespread obesity also illustrates the reality of human nature when it comes to a matter of control . . . and how about smokers where “enlightenment” is concerned?
Thu, 11/06/2008 – 19:09 — G.D. (not verified)
Economic impacts of ecological collapse – that’s what 20th century economists missed – that’s the part of reality that was Greenspan failed to detect. That might be what Ayn Rand also missed, what with her self-bootstrapped model of humanist Godhead, like Athena bursting forth from Zeus’s forehead – very sexy. Ayn Rand would agree that “Economists have done away with the notion of technological or ecological limits to growth.” It’s not so. Agriculture relies on stable climate and minimum amounts of water and fertilizer – without that, you can’t grow food. Cities rely on the constant delivery of food from farms – if that breaks down, you have famine. Mass death from starvation during the 20th century was usually associated with warfare – but soon, it might be associated with crop failures. Economists can get away with ignoring ecology for only so long. We have an industrial economy that relies on a perpetual growth model in combination with a non-sustainable use of raw natural resources (fossil fuels, etc.). A new model is needed, one that views a steady-state zero-growth economy as a healthy economy.
Thu, 11/06/2008 – 18:28 — Claire (not verified)
Regulation is absolutely needed in how financial products are structured but perhaps we need to move away from the threat of the tax stick and come up with a creative carrot. I propose we offer lower corporate rates for those companies that (1) Add jobs that pay full benefits at a predetermined rate (2) Provide all employees with health care benefits equal to the highest paid employees (all men and (3) offer stock options and pension benefits equivalent to highest paid employees (4) the highest paid employees total compensation does not exceed the lowest paid by a factor of more than 20x (5) low paid employees cannot be outsourced to raise the lowest paid bar
Thu, 11/06/2008 – 17:52 — dr wu–I’m just an ordinary guy. (not verified)
Day One on my odyssey to keep Obama from turning into a dud: Job #1 for Obama: Hire Dean Baker ( Or James Galbraith or Steve Weissman) as your economy person! Baker, one of the few economists who saw the Crisis coming, has a well conceived stimulus plan to revive the economy through health care reform ! Remember, Mr. Pres. –Wall Street is not necessarily the people’s (aka Main Street) best friend! Also, say no to the Clinton Wall Streeters who were at least half responsible for the Crisis. Say no to Rubin, Summers… Also say no to the University of Chicago Milton Friedmanites…Ayn Rand, John Galt too, Forbes, Greenspan, etc Might as well say no to the neo-cons who still yearn for American hegemony in the Middle East–Dennis Ross, et. al.
Thu, 11/06/2008 – 17:46 — Kevin Wires (not verified)
Their favorite author is Ayn Rand. They love to picture themselves as the John Gault or Hank Reardon character. It turns out in retrospect that most of these businessmen more closely resemble the Looters and the moochers. The principal that Gault and his followers lived by was the value of personal thought and work. I will sell my labor for what it is worth for no more or no less. We have groups of business executives that forcibly take the value of other mens labor. They extract incredible amounts of value from their companies sometimes when they are fired. And poor old Alan Greenspan. I am sure he saw himself as one of the noble companions of Gault or as Gault himself. Alan seems more of a match for Dr. Simon Pritchard. His policies while at the Fed could just be the book “The Metaphysical Contradictions of the Universe”. Rand is a good read and can be inspirational. She would be the first person to shun a looter like Forbes who has inherited his wealth and has not created his own wealth and worth. Funny thing about favorite books, you picture yourself as the hero, many times in reality you are the villian.
Thu, 11/06/2008 – 17:29 — anyfreeman (not verified)
Forbes is just another “fox in the henhouse, with mouth full of feathers” Greenspan’s candid admission that the ‘free market’ isn’t free, or its acolytes capable of self-regulation is at least honest. Forbes’ misses the point regarding regulation – the other global investors recognized the US based practitioners of deregulation have soiled themselves and stunk up the fundamentals. That’s why there’s a credit freeze. The US investment community has been selling peas under pods to the international markets, and the rubes are getting wise…
Thu, 11/06/2008 – 17:22 — Anonymous (not verified)
The “creditcard bubble” predicted to burst soon is the result at least partly of American employers not paying people enough for them to stay out of debt. Of course one could say that all the credit card debt went to extravagances, but increasingly it is for basic necessities.
The problem is…there was
Thu, 11/06/2008 – 17:20 — Anonymous (not verified)
The problem is…there was nothing “enlightened” about the greed.
Thu, 11/06/2008 – 17:13 — Anonymous (not verified)
Laugh them out of existence!! Love that cartoon. Keep up the good uncoverage work on them Mr Weissman.
Thu, 11/06/2008 – 17:00 — DorcasBlack (not verified)
The liberatarians, the free market capitalists, and the socialists all have overly narrow views of what is the best system. However, our tax code is much to complex, and higher rates encourage tax avoidance schemes rather than productive investment. The AMT needs to be killed, and we need a flatter set of rates and a simpler tax code, with exemptions for the lowest incomes. Many state income tax codes are operate that way, hitting a relatively low top rate fairly early, but exempting the poorest taxpayers entirely. If the new administration tries to jump in a raise taxes to “spread the wealth around,” or even let the current cuts expire abruptly, it will drive the economy even further downward. Changes must be made carefully and slowly.
Thu, 11/06/2008 – 16:38 — M Goldstein (not verified)
What is interesting is that the real problem may be in the notion of “enlightened self interest.” As a reformed free-market capitalist and a social psychologist it became clear to me that when individuals attempt to “corner the market” on wealth this is anything but enlightened, it destroys markets and is, in fact, ultimately self destructive. Why then would an INDIVIDUAL/ORGANIZATION do this? One explanation would be a perceived dispersion of responsibility, i.e. others (fools) will be enlightened, so why should I. What we have now is nothing like what Adam Smith envisioned. Unchecked greed and a failure to distribute wealth to the workers who, although their individual production may not be recognizable due to distribution of labor, contribute to the overall productivity of the society. The only way it works is to distribute wealth to the potential market and let it trickle up and down.
Thu, 11/06/2008 – 16:36 — Giovanna Lepore (not verified)
An Open Letter to Mainstream Media: Millions of us are cautiously optimistic that we can heal our nation under the administration of President-elect Obama in such areas of race relations, militarism, dependence on fossil fuel and the erosion of infrastructure and the steady export of US jobs. We, however, recognize that so much of this promise will be hollow if we do not do two things: end the war on Iraq while not escalating the one in Afghanistan and two, stop immediately and give wide coverage to the fact of continued looting of the US Treasury by the Bush Administration with this $700 billion+ “rescue plan” of the financial sector. As this is written, it might be a helpful service on your part to expose exactly where the public wealth–or should I say, the public debt?–is going, namely to various politically connected corporations and for all your readers to go to: www.bailoutmainstreet.com and sign the Call to Action:Time for a 21st Century Green
Alan Greenspan may have been
Thu, 11/06/2008 – 16:09 — C.J.Gelfand (not verified)
Alan Greenspan may have been a genius at manipulating finances, but he was absolutely backward when it came to understanding human nature. It took him until his old age to figure out that his mentor and idol, Ayn Rand, was a fraud. Rand preached ‘freedom’, but was a tyrant in her personal life, and her selfishness and violent temper tantrums ruined the lives of everyone close to her. Greenspan was not in her circle of closest intimates, and not affected by her rages. He was, therefore, able to hold on to his adolescent fantasies about her dangerous philosophy, which finally cost him his credibility. What a shame his epiphany didn’t come before he did so much damage.
Thu, 11/06/2008 – 16:09 — Anonymous (not verified)
You want to know who to blame? Blame the system with it’s current paradigm. Fictitious entities whose only goal are profit by any means necessary and only liability being fines creates a clinically psychotic”person” with all the rights and privileges and none of the physical liabilities. There’s the elephant in the middle of the room. Abolish corporations entirely, bring back direct accountability so that all owners and employees are liable, and then no longer can “Just doing my job” be an excuse. The root of the problem is the ability to deflect responsibility for decisions and actions to an idea instead of a person. People make decisions and take actions. Fictitious entities cannot without corporeal people acting on their behalf. When people are accountable for their own decisions and actions they behave differently. We have the potential to turn this whole thing around, and make it all better, but it takes changing how we think about PEOPLE doing business.
Thu, 11/06/2008 – 15:31 — frank1569 (not verified)
To paraphrase Dale Carnegie, nobody ever admits they’re wrong; a step further is that nobody ever admits they have a problem. Alcoholics deny they have a problem, drug addicts deny they have a problem, and, in this case, the insatiably greedy deny they have a problem. And that, bottom line, is the root of all economic problems – doing “whatever it takes” to hoard as much as possible no matter the costs and consequences. Is there a solution? Well, the best treatment for alcoholics, drug addicts, gamble-holics is AA or a variation thereof, and the “success” rate is barely 30% – it’s hard to imagine any greed-cure even matching that depressingly low number…
Thu, 11/06/2008 – 14:08 — Anonarcmous (not verified)
Greenspan, Forbes, McCain ,Palin etal NOW blame the economic weather-type’ tsunami’ for house/economic bubble failure, trying to define as NATURAL disaster–something completely out of their control or reach so as to disculpate themselves or their ideology from any wrong:they = innocent victims. Of course this is not so, this is because of their planning.& they will return to ask for a repeat so they can ‘get’erdone right’ this time. They will continue to sell this to all their wannabes, at the cost of everyone else. Of course, when the creditcard bubble pops in the future, they will say there was no way to know, and it is all the fault of the public buying the stuff and the houses…
© 2008 truthout
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