Huffington: Capitalism isn’t evil, but this isn’t capitalism

In her review of Michael Moore new movie, "Capitalism: A Love Story," Arianna Huffington had this to say about the current state of economic affairs:

In the film, Michael describes capitalism as evil. I disagree. I don't think capitalism is evil. I think what we have right now is not capitalism.

In capitalism as envisioned by its leading lights, including Adam Smith and Alfred Marshall, you need a moral foundation in order for free markets to work. And when a company fails, it fails. It doesn't get bailed out using trillions of dollars of taxpayer money. What we have right now is Corporatism. It's welfare for the rich. It's the government picking winners and losers. It's Wall Street having their taxpayer-funded cake and eating it too. It's socialized losses and privatized gains.

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Friedman: It’s time for a gas tax, but we don’t have the guts.

According to Thomas Friedman's recent op-ed in the NYT, given that oil prices are way down compared to last year, it's time for a gas tax, but we don't have the guts. We don't have the guts to make hard decisions like France and Denmark, which have both dramatically reduced their dependency on petroleum. Further, a gas tax would also generate much-needed revenue.

Such a tax would make our economy healthier by reducing the deficit, by stimulating the renewable energy industry, by strengthening the dollar through shrinking oil imports and by helping to shift the burden of health care away from business to government so our companies can compete better globally. Such a tax would make our population healthier by expanding health care and reducing emissions. Such a tax would make our national-security healthier by shrinking our dependence on oil from countries that have drawn a bull’s-eye on our backs and by increasing our leverage over petro-dictators, like those in Iran, Russia and Venezuela, through shrinking their oil incomes.

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Krugman: Banks are back to business as usual

In the NYT, Paul Krugman notes that the banks are increasingly engaging in the same risky short-term profiteering that let to the economic meltdown:

In the grim period that followed Lehman’s failure, it seemed inconceivable that bankers would, just a few months later, be going right back to the practices that brought the world’s financial system to the edge of collapse. At the very least, one might have thought, they would show some restraint for fear of creating a public backlash. But now that we’ve stepped back a few paces from the brink — thanks, let’s not forget, to immense, taxpayer-financed rescue packages — the financial sector is rapidly returning to business as usual. Krugman further notes that Obama hasn't yet shown the courage to directly confront the bankers, a move that, according to Krugman, could be politically popular.

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Ideology Be Damned!

This is the reason we need healthcare reform in this country. Crystal Lee Sutton has died at age 68 because her insurance company diddled and dawdled over whether or not it would pay for the medicine necessary to save her life. Don't know who Crystal Lee Sutton was? She was the real-life inspiration for Norma Rae, Sally Fields' excellent portrayal of a small-town union organizer who went to bat for workers' rights. This kind of thing should not happen. When profit---or overhead, however you wish to consider the problem---is placed ahead of life, those arguing against reform should hang their heads in shame. They cling to an ideology about free markets and consumer choice as though such things are part of the Ten Commandments (which most of them don't follow either) and always at the expense of lives. Dammit, people, we're talking about a system which should operate for people's benefit, not for its own. A system is simply a method of approach, a way of doing something, and if it can be changed once, it can be changed again if the reforms are found insufficient! It is no argument to reject reforms on the basis that the reforms might cause harm, since the present system is already causing harm. It is a foulness to our present system that many people find that in order to vouchsafe their own health or the health of their loved ones they must fight for the very thing they were told they had purchased in the first place. This is in no way different from lending predators who lied to people in course of borrowing money to buy a home. The average person has neither the time or expertise to understanding every clause and addendum in a complex contract and must rely on what he or she is told. Either you have insurance coverage or you do not. It should not come as a surprise after you are already sick and discover that there are codicils which protect the insurance company from having to pay out what in principle they obligated themselves to do if not by the letter of the policy then by the spirit of agreement with a customer. Yet thousands, millions of consumers daily learn to their dismay that they don't actually have what they thought they had bought. This is not a game. If the private sector is more concerned over profit margins than providing service, then they should lose the privilege of offering said service.

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Dark days and “Green Shoots”

“We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both.” --Supreme Court Justice Lous D. Brandeis
For all the discussion of "green shoots" and an economy on the mend, there's plenty of data and commentary to the contrary. What's interesting to me, is that recent developments only highlight the extent to which Main Street economics have become irrelevant to Wall Street. The administration is claiming that the crisis is largely over, and that it's time to breathe a sigh of relief. President Obama yesterday argued that "we can be confident that the storms of the past two years are beginning to break." Treasury Secretary Timothy Geithner discussed last week beginning to wind down some of the programs that were implemented in the heat of the crisis late last year. The value of the Dow Jones Industrial Average has risen from its July low of 8146, and is now trading around 9600. Everything seems well and good in the world of high-finance. But others see it differently. Nobel-prize winning economist Joseph Stiglitz argued this week that nothing has been done to address the underlying banking problems that created the mess in the first place, adding that "the problems are worse than they were in 2007 before the crisis." Simon Johnson, former chief economist of the IMF, echoes that sentiment, and points out that the real issues underlying the crisis have not been addressed at all. He lays out 4 areas of concern:
  1. The big banks need to be made to be dramatically smaller.
  2. Executives need to have a great deal of their personal wealth tied up in their banks to prevent a reckless focus on short-term results.
  3. An end to the revolving door between Wall Street and Washington, DC. "There is no way people should be able to go directly (or even overnight) from a failing bank to designing bailout packages to benefit such banks. In any other industry, in any other country, and at any other time in American history, this would have been seen as an unconscionable conflict of interest. "
  4. The financial elite is aware that they are able to exploit the Federal Reserve and use it as a "bailout machine".

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