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July 09, 2010


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2010 aka 1984






In my adult life, I have never been so frustrated as I am when I run across FOX NEWS robots. Worrying about the free market will soon be the least of our worries. We are rapidly losing our free society. It is slipping right through our fingers. The "Powers that be", who ever that is, learned a very important lesson from old George Orwell, IGNORANCE IS STRENGTH.

If FOX NEWS told them so, I have no doubt that our ignorant masses would stop going on ocean cruises for fear of falling off the edge of our flat earth.

Outside of this blog, does anyone know if there is any intelligent life out there??

These FNR's (Fox News Robots) really do believe to the core of their souls that ZERO taxes is the cure for everything. Yet, they are the first to call 911 when they stub their toe on Camelback Mountain. Who do they think pays for the helicopter which comes to their rescue???

I agree with most of this, but the "closed-loop" is even more tautological than Mr. Talton suggests.

Any genuine "free-market" zealot would surely disagree with the assertion that "the George W. Bush revels were "the free market" at its zenith".

The problem of course is that it's difficult to say when this country EVER had a "free-market" by such standards.

It wasn't such at the time of the founding fathers, because of the tariffs and other government mechanisms which protected domestic production and allowed it to survive, grow, and even flourish in the face of stiff competition from established imperial economies in Europe; not to mention the fact that slave-labor is incompatible with a free-market (remember, England outlawed slavery in 1772).

The real problem with the "free-market" thesis is that it's pig-ignorant of history, political-economy, realpolitik, or any concept of the fact that markets function in a framework of laws and that such frameworks are the antithesis of their thesis.

I'm running out of online time, so perhaps we can continue this tomorrow. If anyone wishes to suggest a time when the United States was a "free market" it might make for an interesting follow-up discussion.

@ AZRebel:

There are further signs of intelligent life on other blogs such as Eschaton/Atrios (Duncan Black), Talking Points Memo, Balloon Juice, Grasping Reality With Both Hands (Brad DeLong), A Tiny Revolution and, from a paleoconservative perspective, Eunomia.

"...the formation of monopolies and cartels...", that is, what people fail to see, the inevitability of a truly free market and it's those people most hurt by such a system that cry for it's survival and expansion: the uneducated.

At the root of our civilization, our culture of technology, and our markets, lays one undeniable reality: our unquenchable hunger for energy.

For (tragi)comic relief from Arizona’s economic doldrums, one only need to travel to downtown Phoenix, attend an Arizona Corporation Commission meeting, and listen to the pablum of “free market” “philosophy” being spewed by lesser commissioners with respect to the large, “natural” monopolies of Arizona’s electric utilities.

Such unconsidered and unconstrained proselytizing has had the unfortunate result of leaving the utilities effectively unregulated. Of course, the predominant Arizona psychosis -- as best reflected by the Goldwater Institute -- colludes with this fraud.

The best evidence of the Commission’s failure is the hidden, regressive tax created by the arcana of Arizona’s unique electric utility rate schedules. These rate schedules help to maintain a “market” that is captive to an energy system of unparalleled corporate socialism: all the guaranteed profits are returned to “investors”, while all the risks -- long-term and toxic -- are pushed into the public sector. (Does this remind you of any recent events in the financial sector?)

Today’s “free market” faith -- or rather the spiritual vacuum that underlies such selfish faith -- will deliver a very heavy burden to our children. One need only look to the Gulf Cataclysm to see where such faith leads. The inner word of the chant, “Drill, baby, drill”, is most telling: this celebration of our culture’s infantilism is a tragic echo of our infantile delusion of a “free market”.

Happy Bastille Day.

Obama did a reasonably good job defining Republicans in an electioneering soundbite last Thursday:

* * *

Obama listed Republican policies that he said led to economic disaster: lower taxes for millionaires and billionaires, fewer rules and regulations for the biggest corporations, and decisions that "cut working people loose.

...His jabs grew sharper as his remarks closed, saying Republicans care more about political points than "what it means for the next generation" and side with corporate titans over regular Americans.

"They don't think in terms of representing ordinary folks. That's not their orientation," Obama said. "So, that's the choice we face in this election. We got the Bartons and the Boehners and the Blunts. They've got that 'no' philosophy, that 'you're on your own' philosophy, that status quo philosophy."

* * *

But he demonstrated considerably less vision, and vigour, in defining Democrats:

"As for Democrats, he said their policies are straightforward, too: cut taxes on the middle class, make sure big corporations are "playing by the same rules" as small businesses and invest in making sure people get the "skills for the future." "


Wow. This is not the plan of a socialist. This is not the plan of a social democrat. This is not even the plan of a liberal. This is the rhetoric of a cowardly, mealy-mouthed, centrist who understands as well as Republicans do who butters the bread of the two major parties and their members in Congress.

Incidentally, in public policy discussions of marginal tax rates, and what constitutes a "fair share", it's clear that most individuals have a poor grasp of concretes.

Consider this: $2.5 million dollars may not seem like "a lot" of money by some standards. But it could pay the salary of someone earning $50,000 a year for 50 years. (Shocking? Yes, it is, but get the calculator out.)

Now, imagine someone earning $2.5 million, not as a one-time payment (say, a lottery win) but each and every year. That individual's income for a SINGLE year could pay for the entire lifetime of a comfortable, middle-class family from the age of marriage to retirement. What's a fair marginal tax rate on such income?

(Caveat: yes, inflation will reduce the spending power of $50,000 considerably over 50 years, but the basic point remains.)

Closed loop II: The faith in an unrestricted market is understandable because it's a very elegant belief system and it has a lot of truth in it. "If we could only get government out of the way..." So the current frustrated anger finds its valve in a reactionary fantasy of progress, a tickling of the anarchistic vein. A liberating show of strength is supposed to clear a straight path to a better future. But there won't be a better future, only a different one. Problems will keep stewing as they have for decades -- they have progressed to a point that IMO even Obama, Glasnost & Perestroika won't be able to turn things around. Which will give the angry freedom fighters even more reason to demand a return to 'enterpreneurial values'. That return or better rollback will be forced by circumstances not legislated. "Letting go" may be the only viable course of action. If the systems of our society come under pressure and the dominoes start falling we will have more freedom (and free time) than even Ron Paul might wish for. We will be living in the world of Darwin & Hobbes. The reaction will be vastly different depending where they're coming from.

The hardcore back-to-the-land libertarians who sit in their bunkers in the Rockies at least put their money where their mouth is. They may even have a point in the long term.
Then there is the light version (including "garage business libertarians", most tea partiers, "Government should only do the military and the roads." etc.) They may have a harder time adjusting to reality. Freedom works! But not always in a benign way. When the return to 'free enterprise' implies a good deal of mayhem, the faithful will either turn even more insistent or they will likely be crying and wishing for the spoils of 'socialism'. You know, "roads" and such.

Ezra Klein of the Washington Post has written a short but sweet item exposing phony "deficit hawks", illustrated with Arizona's own Sen. Kyl:

* * *

Jon Kyl gives away the game on deficits

"[Y]ou should never raise taxes in order to cut taxes," Jon Kyl said on Fox News Sunday. "Surely Congress has the authority, and it would be right to -- if we decide we want to cut taxes to spur the economy, not to have to raise taxes in order to offset those costs. You do need to offset the cost of increased spending, and that's what Republicans object to. But you should never have to offset cost of a deliberate decision to reduce tax rates on Americans."

What's remarkable about Kyl's position here is that it appears to be philosophical. "You should never have to offset cost of a deliberate decision to reduce tax rates on Americans," he said. Never! This is much crazier than anything you hear from Democrats. Imagine if some Democrat -- and a member of the Senate Democratic leadership, no less -- said that as a matter of principle, spending should never be offset. He'd be laughed out of the room.

Back in the real world, tax cuts and spending increases have the exact same affect on the budget deficit. This sort of comment is how you tell people who care about the deficit apart from people who are interested in exploiting fears of the deficit to shrink the size of government. It's also the sort of comment that makes clear that the deficit commission's work is doomed, even if they do go with three-quarters spending increases. Democrats won't accept an unbalanced product and Republicans won't accept a balanced product.


Laissez-faire advocates fail to understand that unlimited concentration of power is every bit as oppressive in economies as in governments; and that economic concentration of power leads almost inexorably to concentration of political power, as oligarchs intent on getting their way in the economic sphere see the political sphere as a potential threat.

This is ironic, because one of their arguments (not without some validity, and not limited to libertarians) is that politics is inevitably corrupted by concentrated economic interests and that therefore regulators end up in the pockets of those whom they are supposed to supervise. What's left is a watchman with a pair of gimpy legs (the Republican and Democratic parties).

The real solution to this problem of co-optation would include a completely public system of campaign finance. Prospective candidates would be required to demonstrate their viability by collecting a qualifying percentage of signatures from registered voters. This would weed out some of the wackos and reduce the number of candidates to be funded, but could still be accomplished by grassroots efforts. No private funds would be permitted to be used in any political campaign -- period.

That wouldn't address the loophole of "independent" private groups using their wealth to saturate the mass media with "information" ads; nor would it address the problem of politicians favoring business interests in exchange for the prospect of a cushy private sector "consulting" job after leaving office; nor the problem of congressional staff (who do the practical work of researching and crafting legislation) being co-opted by big business behind the scenes and influencing the politicians they work for; but at least public elections would be a start, and could be supplemented by other controls. If it takes a constitutional amendment to accomplish this in the face of recent Supreme Court rulings, it would be worth it.

The conservative "solution" to the problem of the watchman with gimpy legs -- who after all is still better than no watchman at all -- is to fire the watchman and let the "honor of thieves" (i.e., the free-market) sort everything out.

The idea that free competition allows greater consumer choice and provides a more effective and natural set of rewards and punishments to economic players is, up to a point, true. The problem is that political mechanisms are not the only way to game the system: the economy itself provides ample means for the most powerful economic players to effectively stifle competition, if allowed to.

What happens, then, under a true laissez-faire system, is that economic power is concentrated among a small number of big firms, who then use that power to stifle competition in ways that have nothing to do with the relative merits of competitors and their products/services.

A system in which a few big banks control the availability and terms of commercial credit -- being able to offer better loan terms than anyone else to those they favor (favor being determined by interlocking corporate directorates), or conversely, no credit to those they don't favor, leaving the latter to seek credit (vainly or at disadvantageous terms) from smaller banks -- is one in which he who owns the gold makes the rules.

Supermarket and other store display shelves have room for a limited number of products -- far less than either actually or potentially available. Commercial arrangements between manufacturers and the stores which stock and prominently display their products -- or don't -- can stifle meritorious competition from small-fry.

Similar problems from economic concentration can plague distribution chains, supply chains, advertising, and other aspects of commerce, in the absence of external regulation. I say this with confidence because such problems already exist, to a degree, under our current (fairly weak) regulatory system.

Libertarians claim that, in the face of such bottlenecks, competition would produce new players more responsive to merit. But the goal of economic activity, from the standpoint of businessmen as opposed to philosophers, is to make as much money as possible, not to maximize competition. Getting around oligarchic control of finance and credit, of marketing, distribution, and supply bottlenecks controlled by oligarchs, would require the creation of new, parallel commercial infrastructure systems serving these needs for competitors, and the start-up costs of such networks would be prohibitive -- and from whom would financing be obtained? Another prohibitive expense would be the cost of prolonged price-wars with established, concentrated economic powers eager to destroy upstart competitors.

In short, free competition sows the seeds for the destruction of free competition. Ask anyone who ever worked in a "company town" (until they stepped out of line) how that worked out. The inevitable result of unrestricted economic competition is quasi-feudalism, from which the only escape is revolution.

Ironically, the only way to maintain any significant degree of competition is to regulate it. In order for that to work, it has to be effective (i.e., vigorous) and fair. That means recognizing, once and for all, the legitimate role of regulation, instead of opposing it in the abstract on the basis of doctrinaire political principles; it also means giving regulatory bodies the power to effectively regulate, and funding them with budgets which allow them to fulfill their mandate.

Conservatives point to the byzantine mass of the Code of Federal Regulations as evidence of the burden, and the lack of transparency (since it must be administered by a cadre of specialized attorneys) inherent in regulation.

But to a surprising degree, a large portion of this bulk consists of exceptions introduced by politicians on behalf of special interests. The tax code, for example, has a short-form for those taking the standard deduction, and another process of virtually unlimited length and complexity for those itemizing deductions (e.g., corporations). Other sections of regulatory code contain the equivalent of "earmarks" for specific industries and groups, or even (in effect) specific companies.

To the extent that this is true, "regulatory simplification" would consist merely of doing away with the exceptions and thus leveling the playing field -- and this is consistent with the goal of fairness in regulation.

The remaining complexity of regulation can be attributed in large part to the fact that there are numerous industries; that fair regulation means specifying clearly and predictably what is and is not allowed; and that each industry has its own special details and problems. In these cases, the length and complexity of the regulatory code as a whole is of no practical concern to anyone, and of abstract concern only to simple-minded and doctrinaire political philosophers. Each industry is concerned with those regulations governing its activities (many of them dealing with special circumstances which seldom come into play), and none other.

Conservatives have a bad habit of using anecdotes involving the inevitable (but occasional) regulatory excess as arguments against regulation per se, instead of arguments against THOSE regulations.

Often, misrepresentations, exaggeration, and prevarication (the misleading omission of critical facts) informs the anecdotes, since they are conceived by right-wing think-tanks (funded by wealthy corporations and individuals) as agit-prop to advance their doctrinaire political agendas, rather than as sincere and well-meant attempts at reform. These are then spread via reactionary talk-radio and websites, where they take on a life of their own, often with additional embroidering in the form of fictional "corroborating" stories told by callers. Somewhere along the way, whether in response to "reports" sent directly by think-tanks, or as a way to use the popular outrage of their core constituents, or both, they become talking-points for conservative writers, politicians, and activists.

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