Abandoning Old Economic Dogma
Jeff Alworth
Right-wing economic dogma has had powerful sway not only over economic policy in the US over the past two decades, but even over reality. That dogma holds that freer markets are always better while governments are always inefficient and incompetent; tax cuts are always the most effective way to boost economies; and privatizing government functions is the best and cheapest way to serve "customers." Much as the right was able to demonize the word "liberal," they have had nearly perfect success in communicating this ideology as fact, rather than the specious and self-serving dogma reality has lately proven it to be. One of the big fights in the next election will pit economic facts against this unchallenged GOP rhetoric; whom voters find persuasive will decide some races.
While markets are wonderfully efficient organisms in some cases, there are several obvious areas where they amount to nothing more than corporate welfare. Recently, student-loan companies have attracted a lot of attention for their payola schemes. It isn't unique to student loans, either; health care, vast military contracts, farm subsidies are other examples. The New Yorker's James Surowiecki describes the practice:
In part, it’s ideology, and the dominance of what you might call the privatization mystique—the idea that anything the government can do, the private sector can do better. Often, this makes sense: the free market is more likely to come up with efficient ways of creating and distributing products and services than the government is. But the student-loan market isn’t a free market in any meaningful sense of the term, because the government effectively determines prices, insures against losses, and subsidizes volume. In this environment, most of the competition among private companies is really just squabbling over how to split up the spoils. Economists call this behavior — when a company seeks to manipulate economic conditions rather than actually create value — “rent-seeking.” It’s common in areas where the fetish for privatization has taken hold, such as the outsourcing of homeland security to private contractors and the boom in private Medicare insurers. (The private insurers are less efficient than Medicare and receive billions in subsidies from the government.)
It doesn't sense on any level but as a payola scheme. Given the dramatic changes that Tom DeLay brokered between the GOP and K Street, it makes a lot of sense on that level.
The "fetish" of free markets also places value on only a single factor: a financial bottom line. But society is built on more than a single value. People will willingly sacrifice money for a number of other objectives--lowered risk (medical, old age), livability, community, healthy environments, and so on. Free markets are horrible mechanisms to accomplish these things--though of course Grover Norquist has been making that argument for 15 years.
A couple of articles reminded me of this recently. On Saturday, the Oregonian reported that while the housing bubble continues to burst nationwide, in Portland things are just fine. Why? Because Portland, unlike most cities in the nation, has invested in values beyond the financial bottom line:
Kathy Hall, a principal broker at The Hasson Co. in Lake Oswego, says the region continues to attract newcomers who like the region's livability -- clean air, hiking and biking -- and relative affordability.
"That's why our market has held its value," Hall says.
Every time the city--the "People's Republic of Portland" to right-wingers--wants to invest in bike lanes or street cars, conservatives scream that we're wasting our money. But these investments harvest not just direct benefits of livability, but financial benefits, too.
And in today's edition, the Oregonian reported that Portland enjoys a "green subsidy" of $2.6 billion because we drive less. That money--3% of our annual economy--would otherwise go to gas and car companies in Detroit and Houston. The values multiply--fewer cars on the roads mean those on the road spend less time in traffic; fewer cars means less carbon emissions. That benefit comes from careful, long-term planning by the city. None of these would emerge from right-wing thinking, which says serve the market by building more cars.
In the national debate, it's verboten even for Democratic leaders to mention national health care. This is a vestige of the right-wing dogma, which--all evidence to the contrary--still holds that public programs are a disaster. But we have seen, from real disasters on our bridges, in New Orleans, in Iraq, in our crumbling schools, and on and on, that the real disaster is in fetishizing markets.
I hope Democrats from Hillary and Barack to those at the local level start to reject the bizarro-world rhetoric of free-markets, tax cuts, and privatization. It's time to add other values to the formula and begin to demand that facts guide us, not empty rhetoric.
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Aug 20, '07
When government takes responsibility away from the people and institutionalizes it, they create a monopoly. Monopolies are harmful to the interests of the people, because a monopoly is less responsive to the consumer's needs. Why? Because the monopolist doesn't have to compete.
If you hate Blue Cross/Blue Shield, you can (usually) buy health insurance from another insurer. If you hate the Oregon Health Plan, you're stuck with it.
A few examples of government monopolies that are unresponsive to public concerns include:
FEMA Public housing DMV (a trip to K-mart seem pleasant by comparison) CSD (now State Office of Service to Children and Families) Wapato Correctional Facility (still closed!) Portland Development Commission
5:35 p.m.
Aug 20, '07
Recently, Ridenbaugh Press talked about this issue in Money, public or private. The false premises of “privatization” are easy to sort through.
Let’s take a plan to invest $1B in fixing bridges and roads in Oregon or building a prison, etc, (bridges & roads whose maintenance was neglected under Republican legislatures because “we didn’t have enough money” (ie. they preferred low taxes to safe bridges)).
First, they talk about it like we’d have to raise taxes $1B now to build the bridges. But we don’t. We issue “bonds” -- we borrow, as we go. And we pay back over, say 30 years, with interest. This is exactly what a private group will do. Except the government offers tax-exempt bonds which can be more attractive to investors. In other words, it is just like buying a house (with no down payment!) -- we don’t plunk down out of savings for the house, we borrow and pay it back over time. That means we can pay for in manageable chunks over time, either replacing payments from expiring bonds or new taxes or expense reductions elsewhere in the budget -- or some combination.
Now, during construction, if we want to be sure that the structure is sound and built according to specs, we have to run tests and validate the books -- whether the state builds it, contractors build it or (we need a good noun for this, how about “privateer” ;-) privateer builds it.
And once it is operating, to be sure maintenance is done, or prisoners are treated according to the law, or whatever, we still need engineers reviewing for safety, we still need oversight for other conformance to the law and to make sure we are getting our money’s worth. None of that goes away just because a privateer is running it.
And then, as you point out, private companies have profit to show which government doesn't. But in addition, privateers have sales and marketing costs to convince the government to pick them over some other company. Medicare's overhead is 3%; private insurance is 30% -- sure you can switch insurers (if you have insurance, if your company offers more than one, if the new one will take you, ...), but they still are more expensive.
Yes, there are inefficiencies in government, but based on Intel’s 10% force reduction last year, I’d say there are a few in industry too. In fact, my observation has been that any group of greater than zero people is inefficient.
An interesting books in this area is Jared Berstein’s All Together Now, Common Sense for a Fair Economy.
Aug 20, '07
When government takes responsibility away from the people and institutionalizes it, they create a monopoly. Monopolies are harmful to the interests of the people, because a monopoly is less responsive to the consumer's needs. Why? Because the monopolist doesn't have to compete.
As long as voters and activists like us are paying attention, the government does in fact have to "compete" in a way that is much more beneficial to citizens than a financially driven private competition would be. When private companies compete they do so on the basis of lowering their overhead--and hopefully prices to the consumer--as much as possible to increase profits. They do so by making changes in their product (be it a bridge, a prison, an insurance plan, or what have you) that make it less expensive, but often times also of a lower quality.
Elected officials who might be overseeng these projects under a public system have to compete differently. While they have an obligation to spend their alotted funds wisely and thus are inclined to be frugal when it is prudent to do so, their primary responsibilty is toward serving their constituents. Generally speaking, their constituents are better served by spending a few extra dollars on a bridge that isn't going to collapse or a health care system that will actually provide the care they need. Otherwise they will just end up spending more money in the long run because the intial provent did not provide the services necessary.
Every time an election is held, candidates compete on these grounds the same way companies would compete to win a contract if these projects were privatized. The insentive of a corporation to provide a cheaper service is making money, the insentive of an elected is to continue to hold office.
A government "monopoly" does in fact have to compete because they require our support to retain said monopoly. As long as we are paying attention to what they are doing, the government does have to be accountable for providing the best quality for a reasonable price.
6:40 p.m.
Aug 20, '07
Re: "When government takes responsibility away from the people and institutionalizes it, they create a monopoly. Monopolies are harmful to the interests of the people..."
They are monopolies either way. If we privatize a bridge or road or prison or FEMA, we can't go changing who we work with willy-nilly. The bridge is still there. The prison was built for us, FEMA can't have different companies managing them every other year. We're stuck with whoever for tens of years or longer.
That's why we need oversight, etc. The argument falls flat.
We have found the government and are us, even if we try to outsource it (to paraphrase Pogo).
Aug 20, '07
Jeff writes: "Right-wing economic dogma has had powerful sway not only over economic policy in the US over the past two decades, but even over reality. That dogma holds that freer markets are always better while governments are always inefficient and incompetent;"
Jeff I don't want to be picky, but I guess I must and while I do agree with some of what you write I also disagree with other points and this is what bugs me so often about many post. Since you equate right wingers and free markets if I believe in a free press, or freedom of religion does that make me a right winger? The reason I ask is that "free markets" that is those free from the heavy hand of government are often the most open and avaiable for public participation whereas those that are heavy regulated are closed to much of the public. For example the transportation marketplace is closed to private business owners and has been for years. We are prohibited from owning a transportation business in most American cities and as a result many people do without access to jobs, healthcare and education.
Housing is another item that is heavily regulated by the government and as a result we end up spending more for housing and with that we mail those mortgage payments to out of state mortgage companies. That's a lot of money leaving Oregon.
Freedom and free markets was at one time a "liberal cause". Why not today?
MW
Aug 20, '07
Great post Jeff! And speaking of "rent-seeking" it looks like Jackson County Commissioners want to privatize their public library system to a Maryland company. Check it out:
http://www.mailtribune.com/apps/pbcs.dll/article?AID=/20070816/NEWS/708160322/-1/SPECIAL06
What a great way to reopen the libraries in Jackson County. Exploit the workers to cut costs. This sucks. The Library was a union shop (SEIU). Library workers had good wages and benefits. Now the County wants to cut $2 million from the library budget by hiring this company that will pay low wages and offer no benefits to speak of and walk away with a profit. I hope library users in Jackson County tell the County they would rather their libraries remain closed than have them reopen on the backs of the workers.
Aug 20, '07
The decision to go public or private should be determined by the market itself. If a strong case for profit in the private sector can be made, no government involvement should be necessary, because firms will compete for the business. A perfect example is this proposed public assistance for a hotel near the Oregon Convention Center. If the demand was clearly there, no government subsidy would be needed. All the big hotel chains would be bidding privately for the land to build.
Neuhauser got it right. In the private sector, a profit motive exists which does not exist in the public sector. That profit motive is based on a required "internal rate of return" which the investors seek in order to pool their capital there instead of with other competing investment opportunities. If a strong argument for getting that return can't be made, the private firm won't invest. This was certainly the case with Bell Telephone and the Interstate highway system. Telecom reached a point where the consumer actually has benefited from privatization. The highway system is different. No firm can profitably invest in building its own interstate highways, so when a state like Indiana gives a long term lease of its highways to a private entity, it's basically a looting of public assets. The current US military endeavor to "protect American interests" is the same thing. No oil company can profitably maintain its own militia with a stregth to conquer nations, so we have the current scheme in which the taxpayer does it for them.
In the case of student loans, there are already many private student loans available. If the banks that make those loans could pay interest or defer interest the way the government does and still develop a profitable portfolio of intellectual capital, they would. So a gap exists between what the private sector is willing to move in aand provide and what the electorate must support in the interst of long-term policy for the government. That is why Bill Clinton created the subsidized Stafford loans. That is why I have paid far more in taxes on my increase in wages than what the government spent on me. That is why I'm writing this now. I am a net gain to the tax base as a result of a government program that provided me with funds for education that the private market would not.
Aug 20, '07
"the government does in fact have to "compete" in a way that is much more beneficial to citizens than a financially driven private competition would be."
Try to get bldg permits, street repair and better schools from a competing govt source.
Having someone whose only skill is getting elected, make economic decisions should scare everyone here. The "market" reflects everyone's needs, not just one politician.
Aug 20, '07
Jeff, It amazes me that your examples of free market failures are mostly government programs that meddled in the free market. You point to student loans like they are something the free market is engaged in when they were created through a government intervention in the financial markets. You also point to farm subsidies which is a prime example of what true free market supporters would eliminate. Show me where the free market has failed that the cause was not government intervention??? Remeber that the our current Health Care system sprang from the wage controls imposed by the feds in the 40's. Jay
Aug 20, '07
Jeff,
Most of the comments on this post support your contention about the dogma of free markets.
It should be obvious that there are activities where free enterprise does not function properly. I'd include most traditional government services among these.
We must be very careful whenever government contracts with business, because influence peddling can easily result in shoddy product at high cost. Look, for example, at PGE, which is granted a government enforced monopoly in its service area in return for accepting PUC regulation. Along with its parent, Enron, PGE has never stopped devising mechanisms to extract as much as possible from ratepayers.
At the federal level, look at Halliburton's sweetheart deals that rob the treasury. Government programs run with government employees may be inefficient at times, but the private sector is much better at wholesale thievery.
8:57 p.m.
Aug 20, '07
Hey, a whole bunch of new names in comments--I must be doing something right.
MW: Since you equate right wingers and free markets if I believe in a free press, or freedom of religion does that make me a right winger?
Free markets are agnostic about party. They are amoral and apolitical. This is their virtue, not their vice. But the dogma arose when the GOP made them the virtue--perhaps in reaction to the Great Society, perhaps to the fall of the Soviets. In any case, they are one mechanism among many functioning in societies. I think free markets should absolutely exist in certain sectors. But where society sees values that they must assure (retirement, health care, bridges), it's the wrong mechanism.
Jay: You point to student loans like they are something the free market is engaged in when they were created through a government intervention in the financial markets.
Well, no. Like a number of sectors I cited--defense, infrastructure, education, health care--the market isn't a great solution. Student loans are essentially extended by the government--it takes all the risk--but the student loan companies are allowed to skim off a profit without taking any risk. This isn't a free market in any sense; it's privatization for the sake of transfering federal dollars to the private sector (ie, corporate welfare).
Tom, I'd add that there is some truth to some of the arguments conservatives make: business is a freedom and in countries where it doesn't exist, there is less freedom. Opening markets opens governments. But it's not the only freedom. And like everything else, it must be balanced against other freedoms.
Aug 20, '07
"A couple of articles reminded me of this recently. On Saturday, the Oregonian reported that while the housing bubble continues to burst nationwide, in Portland things are just fine. Why? Because Portland, unlike most cities in the nation, has invested in values beyond the financial bottom line:..."
Just wait, it will happen.
Aug 20, '07
A very agreeable article, even if a little long on problem and short on solution (so typical of my species). Short and sweet is, end corporate welfare. However, nature abhors a vacuum. So, replace discretionary spending by politicians (since insiders always win most of the pie - it's what gov't was invented to do) with discretionary spending by citizens. A la Alaska's oil dividend, pay citizens a dividend from society's surplus. Then we can make our own choices about "public services" and won't need bail-outs for stock markets, etc. Security from the bottom up. While it's much easier to critique the greed of those we put above us, it's much more necessary to advance and win a positive vision.
Aug 20, '07
I love the term "free market" and what I'd really love would be for those so fond of the term to point to one moment in history from the time of Adam Smith where it actually existed. No kidding, one moment.
11:48 p.m.
Aug 20, '07
Chuck's exactly right. Most of what corporate folks call a "free market" is really a market propped up by government subsidies and regulations.
I'm reminded, for example, of how Weyerhauser supported many of the environmental regulations in the late 90s -- not because they had some new-found respect for the environment, but rather because they were the only company big enough to be able to comply. The additional markets allowed them to move in and buy up all the small timber-lots. Not exactly a "free market" at all!
Aug 21, '07
Chuck Butcher is probably closer to the truth than many would wish to admit, but should we work towards a free market, or go with the push me-pull me system we now have.
Are expectant mothers any better off since they seldom have access to midwives thank to laws that outlawed them in most states? Are low income peole better off thanks to laws that outlawed choices in trnasportation?
And lets keep in mind that occupational licensing was part of the post Civil War Balck Codes and was intended to keep the freed slaves out of the marketplace and did a good job. So has much changed today?
MW
Aug 21, '07
Sorry, the arguments in favor of Jeff's ill informed post actually reinforce the free market "right wing dogma".
witness the ODOT debacle at the North Medford Interchange and the Jackson county libraries. In the former the government agency botched the job and has ruled themselves responsible for the botched job. The government (us) has to pay for the errors. In the latter, yes, a more efficient and profit based model has been proposed based in part on a rational wage and benefit structure, but also by a massive thinning of the bloated county management structure.
8:36 a.m.
Aug 21, '07
In defending the "Free Market" you need look no further than the Gummint intervention in the world stock markets during the month of August.
This is the latest skimming operation getting a hand up. When the Subprime mortgage market started relieving the new home buyers of their equity and forclosing on bad debts, the sages muttered righteously about personal responsibility and letting the chips fall where they may, but when Bear Sterns and the Hedge guys and the Derivative guys started getting visibly wobbly, central banks and governments around the globe started pouring hundreds of billions into their respective shell games.....er......stock markets.
This ain't some far fetched theory. It's what's been happening over the past three weeks.
Aug 21, '07
Just as the Reagan/Thatcher era was a welcome relief from the problems associated with socialism and government intervention in the economy, this article shows the way to a welcome relief from the excesses of the "free market" era, which has ended with massive government corruption of the right-wing sort.
But I think the best way to look at an issue is first, can the private sector do it better than government? Government intervention should occur only when the answer is "no," or "maybe yes, but at an unacceptable social cost."
And don't let the reaction to right-wing excesses blind the left to the benefits of free trade and globalization - a process that has produced many more winners than losers in the U.S., and a process that has brought hundreds of millions of Asians and now Latin Americans out of poverty and misery.
The Economist has an excellent article on the rise of the middle class in Latin America at http://www.economist.com/displaystory.cfm?story_id=9645142
So when are the Democratic candidates for President going to stop trashing NAFTA, an agreement that has clearly benefited both the U.S. and Mexico, and start supporting agreements with Peru and Panama that will help end poverty and misery in those countries too?
Aug 21, '07
UP Overlord:
an agreement that has clearly benefited both the U.S. and Mexico
How, precisely, has the "free trade" NAFTA benefitted workers in the US or in Mexico? And how, precisely, has NAFTA helped the US or Mexico protect their citizens from environmental pollution?
I think the evidence may be against you on that.
Aug 21, '07
Jeff, free markets are from some bizarro world??? Are you hitting the crack pipe a little too much these days? It is basically impossible to run a large economy in a central planning mode. If anyone was stupid enough to try to move the American economy away from a free market to a centrally planned one you would see millions of people starve to death. That is what happened in Russia and China when they tried to centrally plan their economy. Free markets where buyers and sellers can engage in price setting is about the only way the world will even function at this scale. You, like most "progressives" should probably just stay away from the subject of economics since you suck at it so badly.
Aug 21, '07
Good article, Jeff. And, as you say in the Comments section, it's cool to see so many responses from irregulars.
Here's my take (sorry that it's so long):
CREATE SOCIALISM (economic democracy) for “COMMODITIES” (insurance, banking, steel, oil, power)
A “commodity” in this sense means a service or product that is in a non-competitive business environment. That is, there are no “market forces” in a short-run context. (There is always competition at some level and over a longer time-frame. Steel supplants cast iron and wood; titanium, aluminum, and graphite-composites supplant steel. Japanese heavy industries out-compete U.S. producers; now here come the Chinese, among others.)
In our country the only competition between banks, between insurance companies, between oil companies, and between electrical utilities is for bragging rights concerning profits and management salaries. They all provide products that are essentially undifferentiated. And there may be four different names on the four gas stations at a crossroads, but the producers (Big Oil) are interlocked by marriage, by class interest, by mutual investments, by non-oil-company Boards of Directors’ positions, by lobbying organizations, by industry organization (primarily, the American Petroleum Institute), and by mutual production arrangements.
Effectively, these monopolies (oligopolies, if you prefer) create socialism for the super-rich. They are thoroughly interwoven with the national government via politicians who repel almost every attempt to create or enforce some type of social accountability or responsibility on them. Federal bureaucracies also serve their interests in various ways. The Federal Reserve administers monetary policy and a base interest rate that assures the big banks a cost-plus-profit relationship with the money supply. The Department of Energy employs geologists who supply, organize, and analyze much of the data that Big Oil uses to determine their production strategies. Insurance companies are “regulated” by an agency that actually compiles and organizes the statistics, or actuarial data, that determine insurance rates.
The point here is that we have a socialistic control system for the benefit of large corporations in this country already: government regulatory agencies, few separated centers for strategy and marketing decisions, and non-market-controlled price fixing. The situation even includes one of the main drawbacks to socialism – difficulty in creating alternative systems or competitive organizations. It has been many a year since most of us recognized that solar-based electrical and heat generation was a better approach to supplying many energy needs than fossil-fuel-based generation. Ask yourself – what role has the U.S. government played in development of solar-based energy production? And why?
So – we have a critique. Interestingly, we also have the skeleton of a system for converting chosen industries to a truly socialistic arrangement: bureaucracies that are dedicated to the welfare of the industries involved. In the context of the specific industries mentioned above, this would involve nationalization of the productive facilities of two sectors: petroleum (production/refining/transportation) and basic steel production. (I include steel, because it is not currently viable in this country, but should be. Steel is still a backbone component of all industry and infrastructure. To rely on distant producers is economically foolish, plus ecologically irresponsible due to: 1) the energy to transport steel to the U.S., and 2) the relatively lax environmental controls of many foreign steel producers.])
Insurance and banking would be national agencies, too, but these could be set up from scratch without necessarily displacing or expropriating private companies. These types of socialized businesses should compete with private companies. If the private companies actually can provide a better service, they should get the associated reward.
An essential part of my approach would be the “mixed economy” model. Entrepreneurial capitalism is vitally important to economic development and technological progress. Any field that is new and competitive should be subject to true market forces – an important feature of economic democracy. The problem with major segments of our current economy is as noted above: they are not competitive. They are mature, stagnant, domineering (and often corrupt) businesses that merely take a percentage of each transaction and give it to the super-rich for no true and necessary reason. Their “patent” expired, and their investment was paid off, long ago.
As to the standard counterarguments, one of the classic reproaches to socialism is the complaint that labor becomes inefficient, if not essentially anti-social. “The trains won’t run on time”, however, does not seem very meaningful in the current context of the private airplane companies’ records for on-time performance. Simply put, it does not have to be that way. For a modern and a better example, the Japanese train systems, including the Shinkansen, are government-subsidized monopolies. As essentially socialistic entities, they belie our common assumptions about such enterprises that: 1) employees don’t care about service or schedules or customer relations, and 2) management is complacent. I have only witnessed professional – I might almost say “gracious” – employee behavior. Moreover, the only serious accident in many years – in the whole system – occurred last year on a branch line that had been sold off in one of then-Prime Minister Koizumi’s privatization experiments.
Another aspect that needs to be considered is that the Japanese system is regionalized to a major extent. Control of infrastructure and schedules and train interaction is exercised by decentralized centers, just like Air Traffic Control in the U.S. There is no doubt in my mind that almost all such ventures should be distributed in such a way as to maximize local control. Likewise, power generation should be highly regionalized to reduce transmission losses and transportation costs. Energy and fuel should be hindered from travelling long-distance, except in case of a mutually-agreed emergency. With the advent of solar-based energy systems, “fuel” is nearly ubiquitous.
Given the point that a certain level of limited socialism has social relevance, is the nationalized, bureaucratized version the only model? In fact there are other forms of business organization that are socialistic in a broad sense, such as co-operatives. The form in this case – and others to be discussed in Position Paper # 8 – should fit the situation and the clientele. Like insurance they should compete in a non-exclusive market against corporations and sole proprietorships; like energy production and distribution they will naturally be local/regional.
When an enterprise has a national scope, though, we should be implementing a national(ized) approach – i.e., socialism as it is usually defined. I would add, however, a caveat that has not been treated often in socialist theory: the customer has to be part of the organizational and operational process. In the past the welfare of “the people” has been a very generalized and invidious consideration. Bureaucrats and politicians have been their stand-ins in most practice. The consumer is the missing component in most socialist schemes.
When the basic policy is promulgated, I recommend that we start implementation with an easy target - insurance. The insurance “industry” is a cash cow for the super-rich. They own the companies; we put money into their coffers; they make loans to themselves (their corporations) for low rates of interest; they pay out a percentage of the money that we entrust to them against our claims; they pocket the remainder in the form of dividends. And the cycle goes on and on. Now and then some disaster defeats the actuarial basis of their rate structure. Then the federal government comes in with our tax money to mitigate their loss. It should not be a stretch to convince a large majority of the country to eliminate the “middle man”. We have the popular and relatively successful Social Security program to use as a template – with modifications due to the differences between the standard forms (health, life, home, and accident) of insurance versus the system for retirement benefits.
My guess is that socialization of petroleum-related industries would be popular, too. But that’s a subject for another, focussed discussion. Meantime, given the current economic situation for the U.S. middle class; given our understanding of corporate misleadership; given our declining industrial base – we should be able to make the case with a majority of our fellow citizens that we are on the downward side of an economic cycle that only started upward with our emergence from World War II as the one country with an intact and dynamic industrial base. The current situation is not some minor cyclical correction. We are sliding down the drain, and the only solutions will involve public planning and participation in domestic economic enterprise.
Aug 21, '07
Kari: Chuck's exactly right. Most of what corporate folks call a "free market" is really a market propped up by government subsidies and regulations.
***I'm reminded of a discussion weeks ago about so-called "tort reform". Shouldn't free-marketers (in the interests of consistency) be arguing for unfettered access to courts and damages? In fact, it is when a person's right to be made whole because of negligence or malpractice is limited that taxpayers have to clean up after the wrong-doers. Time after time punitive damages awarded by juries to institutions like tobacco companies are reduced on appeal. What would be the price of smokes these days if RJ Reynolds was really adrift in the free market sea? Who is paying for the damages from Superfund sites?
Free marketers really want a market where they are free to make money and free of any responsibility for damage or injury.
Randy 2
11:24 a.m.
Aug 21, '07
A couple notes on the classic misdirection arguments from above:
witness the ODOT debacle at the North Medford Interchange and the Jackson county libraries.... The government (us) has to pay for the errors.
The issue isn't whether governments make mistakes--like any human institution, of course they do. For every government botch job, you can cite an Enron. The real issue, and the point of my post, is that privatizing some government management--notably in health care, defense, education, etc.--is inefficient and expensive; worse, when a government farms these out to businesses, they lose the control over other benefits like livability, risk management and so on.
Jeff, free markets are from some bizarro world??? Are you hitting the crack pipe a little too much these days? It is basically impossible to run a large economy in a central planning mode.
You indict me for something I never said--and in doing so prove the point. Markets are effective tools for some things. But reactionaries on the right wish to cast things as either Soviet-style central control or perfectly free markets. It's a naive characterization as the former has been proven a disaster and the latter has never happened (fortunately). By offering overheated rhetoric and invective, you apparently wish to avoid actually discussing the topic you say liberals "suck at so badly." Why do you think that is?
Aug 21, '07
Jeff Alworth:
While markets are wonderfully efficient organisms in some cases, there are several obvious areas where they amount to nothing more than corporate welfare.
Bob T:
But when it does, it's not free enterprise but an example of the "mixed-economy" hybrid that owes its existence to those who dislike the free market and/or who don't understand it to begin with.
There is a large group of people who oppose the mixed economy hybrid, in terms of the choosing of winners and losers and of artificially restricting entry based on anything but safety concerns, but they are ignored by both the Republican and the Democratic Party across the board.
Do you support the existing taxi cartel privilege laws in Portland? I find it interesting that progressives don't want to tamper what we have and allow a millionaire like Sho Dozono own a cab company (w/o needing to know what a cab is) while a retired gentleman is banned from starting his own cab service to serve, say, just the Kenton-St. Johns area.
Progressive types always trot out those horror stories ("The drivers will be rapists") to justify their continued support for privileged legislation for millionaires like Sho Dozono.
Bob Tiernan
Aug 21, '07
Jeff wrote:
"Tom, I'd add that there is some truth to some of the arguments conservatives make: business is a freedom and in countries where it doesn't exist, there is less freedom. Opening markets opens governments. But it's not the only freedom. And like everything else, it must be balanced against other freedoms."
Yes, business is a freedom, one I exercise and enjoy, but the relationship between business and other freedoms is not so simple. The modus operandi of US foreign policy in developing nations has been to support governments that favor business [our businesses, in particular] by curtailing the rights and freedoms of the populace. Large, powerful businesses very often seek help from government at cost to the citizenry. At it's extreme, this is fascism, a system clearly unfriendly to freedom.
As several writers have pointed out, the free market is theoretical. It always has been. On one hand, complete market freedom doesn't work in many spheres. On the other hand, wealthy interests always curry political favor to distort the market to suit them.
In the absence of government power, business interests form their own armies [think death squads] and end up dividing the land into fiefdoms. When the government is easily buyable [as in the US], big business gets most of what it wants, including curtailment of competition by the little guys, subsidized services, protection from liability, and low taxes.
The free market is good theory, but lousy religion.
Aug 21, '07
Most of what corporate folks call a "free market" is really a market propped up by government subsidies and regulations.
I hope Democrats. . . start to reject the bizarro-world rhetoric of free-markets, tax cuts, and privatization.
I think the problem here is the use of extremes in making an otherwise excellent point. Free markets are incredible tools around which to organize society. None of us would be where we are without them. They aren't "bizarro" and most of them are not propped up by government. There are also certain commodities where they don't work, and probably never can. Think health care: a truly free market would allow anyone to be a doctor (low cost of entry). Prices would be incredibly low, but the human carnage would be intolerable. So we license physicians to maintain quality, which skews the market.
Jeff, your overall point is excellent, which is that Republicans have adopted markets as a religion and are thus blinded by faith. Democrats can capitalize on that not by attacking free markets, but instead by praising markets for the incredible benefits they bring and talking about reasonable regulation to mitigate the less desirable effects (like unlicensed surgeons). And we criticize the Republicans for creating rent-seeking opportunities, which they excel at.
Aug 21, '07
Miles writes: "Think health care: a truly free market would allow anyone to be a doctor (low cost of entry). Prices would be incredibly low, but the human carnage would be intolerable. So we license physicians to maintain quality, which skews the market."
I could not disagree more. We license physicians because the physicians wanted it to protect their incomes from competition. Specifically they wanted midwives out of the birthing business. In the end they were successful, but infant mortality increased for a number of years afterwards.
Today we are given the excuse of consumer protection, but to truly protect the consumer physicians would be charged with fraud when they performed unnecessary surgery, or even homicide when their patients died from medical errors, of which many do die today.
Having a "free market" is one thing. Insuring justice is another. Sometimes the two will overlap.
MW
Aug 21, '07
Jeff, how kind of you to pick on a single and specific example. ODOT's exesses, boo-boos, cost overuns and inefficiencies are the stuff of legend.
So lets try another. How do you explain the relative successes economically of DHL, FedEx and UPS while the US Postal Service is beset by rampant issues, inefficiencies and huge fare hikes? All basically perform a similar function, yet 3 are expanding and growing while the fourth is seriously considering service cut-backs.
Caveat, you can't cite unions as the difference since UPS is heavily represented by The Teamsters.
Aug 21, '07
Just wanted to inject my two cents -
RON PAUL FOR PRESIDENT!!!
10:29 p.m.
Aug 21, '07
DHL, FedEx, and UPS can all cherrypick what they want to carry and from and to where they will deliver it. The USPS has to carry bulk mail and franked mail, charges a fraction of what UPS and the others charge for the equivalent of first class mail service (in part because it must rely on a political process for rate changes), and must serve every corner of America. There are still places where FedEx just doesn't go.
Aug 22, '07
Comparing USPS to the private shippers is like comparing public schools to private ones. Public entities provide service to everyone and need special needs dictated by law. It's great service, but not the way to maximize the bottom line. This is a central point. There are times when the profit motive prevents the kind of service desired. Ayn Rand and her minions never learned this.
Aug 22, '07
Tom Civiletti:
The free market is good theory, but lousy religion.
Bob T:
Tom, you're hopeless. More later.
Bob Tiernan
Aug 22, '07
Jeff Alworth:
But reactionaries on the right wish to cast things as either Soviet-style central control or perfectly free markets.
Bob T:
Well, I suppose many do that. In fact, I know they do. At the same time, progressives (most, I guess) are guilty of the same thing becuase they'll point to corporate welfare (Bush's baseball stadium deal, or taxi cab monoplies/cartels) and call them examples of a free market in action.
Both sides are wrong.
There are, of course, people who advocate free enterprise and preach against that kind of corporate welfare and regulated mixed economy, but they are called kooks by the progressives. Can you find common ground with such people? Or would that entail actually supporting free enterprise - no, you're more interested in mislabeling corporate welfare as free enterprise so that you can attack it for being something that it's not, while supporting corporate welfare anyway (mixed economy junk) like taxi cartels etc.
Keep in mind that Jim Crow laws were anti-free enterprise since a free market society was providing freed slaves with for more upward mobility opportunities than the good ol' boys of Dixie could stand. Odd, too, that the support for the separate but equal doctrine (based on first class seating in railroad cars), rubberstamped in Plessy v. Ferguson in 1896, included the same attacks on "corporate America" for not caring about "regional concerns", or caring only about green, instead of black & white. What irony. You guys sound just like the good ol' boys of the post-bellum South.
Yeah, it's tough being a free-enterpriser. Attacked by both corporate welfare loving conservatives and progressives -- for the same thing.
Bob Tiernan
Bob Tiernan
3:42 p.m.
Aug 22, '07
Tom Civiletti makes the key point regarding corporate behavior in the absence of governmental oversight.
What happens, in virtually every case, is that cartels form and collude regarding pricing and availability of products. These cartels are not friends, they are often deadly enemies who form short term alliances to knock out business threats who might be tempted to undercut the big guys in pricing or production of surplus goods.
The nation currently closest to the libertarian ideal is Russia, followed closely by various narcotraficant nations like Afghanistan.
It ALWAYS goes right to brute force, and there are no historical examples of the successful libertarian Nirvana; just as there are no examples of the Marxist Nirvana.
Aug 22, '07
"...there are no examples of marxist Nirvana."
Monkey Business and Duck Soup were pretty close, though.
4:59 p.m.
Aug 22, '07
ROFLMAO... touché
Reminds me of this classic t-shirt.
Aug 22, '07
"...there are no examples of marxist Nirvana."
Tom Civiletti: Monkey Business and Duck Soup were pretty close, though.
Bob T: Well, well. You're not hopeless after all. And good to see that you prefer the Paramounts to even the best of the MGMs.
Bob Tiernan
Aug 22, '07
Pat Ryan:
The nation currently closest to the libertarian ideal is Russia, followed closely by various narcotraficant nations like Afghanistan.
Bob T:
Well, hardly. You're so ignorant regarding your opinion of what libertarianism means that I won't waste my time on this. Bye.
<h2>Bob Tiernan</h2>