Capitalism is only harmful when bad people abuse it (and other conservative myths)


"Capitalism made America great – free markets, innovation, hard work – the building blocks of the American Dream. But in the wrong hands some of those dreams can turn into nightmares."

‘When Mitt Romney Came to Town’

Promoted by Winning Our Future, a pro-Gingrich super PAC, ‘When Mitt Romney Came to Town‘ features a series of poignant interviews with workers who lost their jobs, houses and health insurance coverage when the businesses they worked for were restructured or went under.

This misleading video illustrates what’s wrong with American conservatism today — an unwillingness to talk honestly about how free markets drive technological change and generate wealth. The economist Joseph Schumpeter called it ‘creative destruction’. Economies grow as new technologies replace older ones and industries and jobs move to where work can be done most efficiently. As W. Michael Cox and Richard Alm write:

A society cannot reap the rewards of creative destruction without accepting that some individuals might be worse off, not just in the short term, but perhaps forever. At the same time, attempts to soften the harsher aspects of creative destruction by trying to preserve jobs or protect industries will lead to stagnation and decline, short-circuiting the march of progress.

Too many conservatives shy away from this reality. Videos like this encourage the idea that business failures and the unemployment are the result of unethical business practices rather than part of the normal functioning of a capitalist economy. And when joblessness and the misery it causes can’t be blamed on people like Romney, conservatives pretend that this is the result of some personal vice like laziness.

For these conservatives, there’s no need for a national, government supported health insurance system. No need for more investment in education and training, and no need for income support programs to for people who can’t find jobs. All that’s needed is personal responsibility and the promotion of virtue.

In reality people who’ve worked hard and done everything that was expected of them can find themselves on the trash heap. If the factory you work for produces something consumers are no longer willing to pay for, you’re probably going to lose your job. Managers can’t use shareholder’s money to run the business as a charity or a private welfare state if it doesn’t help the business turn a profit.

All of the misery this video blames on Mitt Romney is a normal part of how free markets work. But that doesn’t mean there’s nothing Americans can do about it. Instead of using tax payers’ money to prop up failing businesses, governments can let uncompetitive businesses fail. Instead of trying to generate jobs by picking winners, governments can leave the selection process to the market. Freeing markets will accelerate the process of creative destruction and create wealth. But that only solves half the problem.

To deal with the fallout of destruction, governments can protect individuals rather than corporations. In the US today, one of the reason’s workers and their families fear job loss is because they risk losing their health insurance. If you have a chronically ill child, this can be devastating. The lack of a national system of health insurance in the US isn’t just bad for workers. In some cases it’s been bad for corporations as well. One of the reasons America’s big car makers struggled with the global financial crisis was their enormous health insurance and pension obligations.

These obligations are often blamed on unions. But as Malcolm Gladwell explains, employer funded insurance wasn’t the unions’ first choice. According to Gladwell union leaders like Walter Reuther understood:

… that in the free-market system it makes little sense for the burdens of insurance to be borne by one company. If the risks of providing for health care and old-age pensions are shared by all of us, then companies can succeed or fail based on what they do and not on the number of their retirees.

If conservatives would confront the reality of markets honestly, then Americans could have a serious debate about how to protect individuals and families while allowing markets to operate as efficiently as possible. It’s a debate that might include issues like health insurance, education, social security and social assistance. And it would mean giving up the pretense that tax cuts and deregulation are the solution to everything.

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Mr Denmore
Mr Denmore
10 years ago

My theory is that Americans’ naive faith in capitalism and free markets is in keeping with their idealism about most things. It’s over-reach. Markets do a lot of things very well and in many cases deliver better results more efficiently than could ever be achieved via government.

What markets don’t do well is in protecting the stability of the whole system and delivering equity. As we’ve seen in the financial crisis, they tend to generate excessive leverage and excessive risk taking. And worst of all, losses are socialised and profits privatised.

The argument is over striking the right balance between encouraging free market forces and fostering public intervention to deliver stability, a measure of equity consistent with maintaining the social contract and a social safety net.

Markets are tools, they are not an end in themselves, which is the idea projected by the uber-capitalists and libertarians – who like the Marxists have fallen in love with their ideology a little too much.

There’s a nice piece on this published this weekend at Project Syndicate and written by Professor Michael Spence of New York’s Stern School.

http://www.project-syndicate.org/commentary/spence31/English

Tel
Tel
10 years ago

Mr Denmore, care to link to some libertarians who support socialised losses and privatised profits?

Mr Denmore
Mr Denmore
10 years ago

Tel, usually the ones whose business have failed. Libertarians on the way up, socialists on the way down (though they would never admit to the latter)

JC
JC
10 years ago

“Too many conservatives shy away from this reality.”

Really Don? Have you read any of the criticisms by other conservatives from the WSJ on down.

So far there hasn’t been a great deal of agreement in conservative land supporting Gingrich’s attempt in trying to poison the well.

Perhaps you can provide some evidence that Gingrich’s comments are widely supported in conservative circles.

“Videos like this encourage the idea that business failures and the unemployment are the result of unethical business practices rather than part of the normal functioning of a capitalist economy. And when joblessness and the misery it causes can’t be blamed on people like Romney, conservatives pretend that this is the result of some personal vice like laziness.”

Really? You think it would encourage indeps and conservatives to believe this tripe? Don’t thinks so, which is why I think Gingrich’s polls have been collapsing since.

“For these conservatives, there’s no need for a national, government supported health insurance system. No need for more investment in education and training, and no need for income support programs to for people who can’t find jobs. All that’s needed is personal responsibility and the promotion of virtue.”

I’m not that’s true. Each and every single Conservative candidate has a policy with regards to health insurance. You obviously consider a private model, not tied to a person’s job, as not being a decent health insurance policy stance though, but it is i think and it also aligns with free market principles. As for job training, the US has no centralized education policy, which even the Economist considered a few years ago in one of their specials, was perhaps the best non-policy policy of all.

Not all US higher ed etc. is about Harvard or Yale, Don. There are countless local collages and training schools. Suggesting there is a lack of this form of ed is truly ignorant about the US. In fact, if i recall, that Economist article talked about how Americans seem to be by far the most active in adult ed. of any nation they researched.

“In reality people who’ve worked hard and done everything that was expected of them can find themselves on the trash heap.”

Trash heap? Really dramatic, no? I don’t really thinks that’s the case.

“If the factory you work for produces something consumers are no longer willing to pay for, you’re probably going to lose your job. Managers can’t use shareholder’s money to run the business as a charity or a private welfare state if it doesn’t help the business turn a profit.”

True. This is nothing new by the way. People like Gingrich ought to go back and read a speech Bill Clinton gave before the 92 election, which in some ways some pundits believe won it for him. He talked to a group of workers telling them he could not guarantee jobs but he would promise them help with retraining and tax credits for moving expenses etc. This is nothing new in other words.

” All of the misery this video blames on Mitt Romney is a normal part of how free markets work. But that doesn’t mean there’s nothing Americans can do about it. Instead of using tax payers’ money to prop up failing businesses, governments can let uncompetitive businesses fail. Instead of trying to generate jobs by picking winners, governments can leave the selection process to the market. Freeing markets will accelerate the process of creative destruction and create wealth.”

Possibly one of the most perfect paras ever written.

“To deal with the fallout of destruction, governments can protect individuals rather than corporations. In the US today, one of the reason’s workers and their families fear job loss is because they risk losing their health insurance.”

This is somewhat true, but not completely. Americans have several choices when they lose their jobs. If they can afford it, they can access COBRA which means they can continue to pay the health insurance premium they carried with their jobs for 18 months after. If they can’t afford it, they then go on medicare or medicaid, which is the US government plan for people below certain income levels.

“If you have a chronically ill child, this can be devastating. The lack of a national system of health insurance in the US isn’t just bad for workers. In some cases it’s been bad for corporations as well. One of the reasons America’s big car makers struggled with the global financial crisis was their enormous health insurance and pension obligations.”

Then blame the current system, Don. This is the system where both Bush’s and various previous and GOP candidates have tried to change to a private system not tied to a job and in the past they have been crucified by the Dems. All present candidates have a policy to privatize the system in some form or another. However I presume you’re really pushing for a socialized system, right?

“These obligations are often blamed on unions. But as Malcolm Gladwell explains, employer funded insurance wasn’t the unions’ first choice. According to Gladwell union leaders like Walter Reuther understood:

… that in the free-market system it makes little sense for the burdens of insurance to be borne by one company. If the risks of providing for health care and old-age pensions are shared by all of us, then companies can succeed or fail based on what they do and not on the number of their retirees.”

Oh really? Our system is partially privatized and the privatized version seems to work quite well. I also suggest you take a look at Singapore’s private system which is excellent and cheap.

The reason the US system doesn’t work in its current format is that no-one gives a shit about cost containment and there are heavy duty mandates from state governments.

I have a great link on another computer to an economist’s paper and will link to it in a few days when I get back home.

I don’t understand why you think a market system works for pretty much everything but it stops at the hospital of doctor’s door. I think the Soviet model doesn’t work. We can pretend it does, but even in Australia it’s a horrible model.

“If conservatives would confront the reality of markets honestly, then Americans could have a serious debate about how to protect individuals and families while allowing markets to operate as efficiently as possible.”

Yes they are serious. The Ryan plan is a good one and the various candidates have policies that deal directly with what you’re saying, so i suggest you go to their websites and see what they say.

” It’s a debate that might include issues like health insurance, education, social security and social assistance.”

Yep, they all pretty much deal with these issues if you took the time and read their policy statements. You may not like their solutions as they aren’t soviet models, but they are pretty good if you believe in the market system.

Other than Paul, there is no candidate talking about reducing tax benefits or loans for job retraining, so I can’t imagine what you’re suggesting here.

“And it would mean giving up the pretense that tax cuts and deregulation are the solution to everything.’

Perhaps not tax cuts just yet if you don’t want to, but why not have a serious discussion about the 600 odd new regulations imposed by this current administration.

JC
JC
10 years ago

And Don

I have a kid currently studying /living in the US. The portion of the health insurance premium I paid for the year is around 1600 bucks. That offers a system similar to ours, which is the kid has to see a GP type before going to a specialist and open entry to any ER in the NYC area. Pharma is also covered. I don’t call it an expensive premium.

Tel
Tel
10 years ago

Mr Denmore: ummm, I don’t know how to say this politely, but I sort of think you are making this up. How about an example?

Tel
Tel
10 years ago

Oh really? Our system is partially privatized and the privatized version seems to work quite well. I also suggest you take a look at Singapore’s private system which is excellent and cheap.

The reason the US system doesn’t work in its current format is that no-one gives a shit about cost containment and there are heavy duty mandates from state governments.

Our system has some very strange things in it, although I agree that it does mostly work (where “mostly” is subjective). For example, if you walk into a typical radiology practice, and ask to see their rate card, you will note that the Medicare rate is the baseline and the Worker’s Comp rate is between 2x and 3x more expensive than the Medicare baseline. Generally the explanation is that Worker’s Comp imposes a lot of paperwork on the practice which justifies the higher costs, but although I find paperwork a PITA myself, I rather suspect that really companies are being used to cross-subsidise the public health system. Insurance companies are a soft target when it comes to inflated bills, especially then those insurance companies can kick the costs onto someone who has no choice but to pay.

This of course generates a hidden cost for Australian competitiveness and ultimately destroys jobs, but in a way that is very difficult to trace back to any cause (and who cares anyhow while we have mining and agriculture to fall back on).

Mel
Mel
10 years ago

Tel:

“Mr Denmore, care to link to some libertarians who support socialised losses and privatised profits?”

Matt Ridley. http://www.monbiot.com/2007/10/23/libertarians-are-the-true-social-parasites/

JC
JC
10 years ago

“Tel, usually the ones whose business have failed. Libertarians on the way up, socialists on the way down (though they would never admit to the latter)”

Mr Denmore, you realize that your argument is logically weak. If a person no longer believes in a set of ideological positions that made him or her libertarian then they are no longer libertarian.

Mr Denmore
Mr Denmore
10 years ago

JC, my experience is if a person no
longer believes in a set of
ideological positions, it is
usually because reality intervened.

Patrick
Patrick
10 years ago

Mel, I’m not sure why you linked to that dross on this thread? Can you elaborate?

Don, according to this when’s Economist Romney devotes ‘several pages of his book, No Apology’, to creative destruction.

I suspect that you have ruined an otherwise sensible point by misguidedly trying to conflate your straw man with Romney.

john
john
10 years ago

http://www.gallup.com/poll/145286/four-americans-believe-strict-creationism.aspx

About 40% of Americans believe that the world was created in about 10 thousand years ago. Need I say more?

john
john
10 years ago

52% of republicans believe in a literal ‘creation’.

Interestingly 22% of postgraduates also believe in a literal ‘creation’.

JC
JC
10 years ago

Denmore

You seem to want to believe the worst of your ideological opponents…. that they somehow don’t really believe what they say they believe.

You’d be on much sounder footing if you were able to demonstrate the weaknesses in their ideological positions rather than thinking they’re always lying. Yes, Denmore there actually are some people that really do believe in the soundness of libertarian principles and will go to the grave believing this.

The best example would be Milt Friedman. Can you recall any debates he ever lost as I don’t?

Pedro
Pedro
10 years ago

John, if you believe in the book or mormon or Jesus or Allah or whatever then you are already capable of believing anything, so creationism is perhaps not such a biggie. But what does that tell you about this debate anyway?

I think people too quickly conflate conservatives withpeople who believe in the virtues of classical liberalism, which these days is a pretty radical position. A true conservative is a church going, relatively prudish, social democrat and therefore likely to swallow any old mercantilist hogwash.

Mr Denmore
Mr Denmore
10 years ago

JC, I believe you believe what you say. I just don’t agree with you. I’m not an expert on ‘Milt’ Friedman’s debates, though no doubt you have them all on DVD and watch them regularly at home while eating popcorn.

JC
JC
10 years ago

No, don’t have them on DVD or anything like that Denmore.

Tell us, you still believe we will achieve more democracy by killing pro-right media? Lol.

And by the way, your first comment is primary school equivalent nonsensical crap I’d expect at Green party meetings…. I presume you have best of Bob Brown and Christine Milne on HDDvd, yea?

john
john
10 years ago

pedro
Many Americans believe that the world was made 45000 years ago because that is what they have been taught to believe . ( BTW evolution is not a problem for mainstream Christians and Jews at all.)
The American propaganda machine for creationism is extremely well practiced at bullshit, smoke and mirrors, full of self righteous indignity and it essentially serves exactly the same sectional group referred to above as “American conservationism”

JC
JC
10 years ago

John:

You seem obsessed with the evolution thingi and your anti-Americanism sounds a little Australian “Bumpkinish”. Please note that it’s been around for the past 40 odd years and never seemed to have got out of flaired jeans and kaftan tops.

I’m really curious though. If a person believes in a 6000 year old earth, how does that really impact you directly in any way?

And can you please explain how you feel about the current president spending 20 years kneeling in Rev Wright’s church listening to sermons that Jews are pigs and that the White man introduced AIDS to American blacks. This same “Rev”. officiated at the president’s wedding and at one time suggested he was like an uncle to him. How’s that grab you eggsactly?

john
john
10 years ago

Anti American ? Most of the ones I know are realy good people ,60% do not believe “in a 6000 year old earth,” however they have neither compulsory voting nor preferential voting.

In creationism(anti-science/anti-gays and anti-Jews) they have a very professional and ruthless lobby group that is not the least troubled by reality.
And because of ‘Creationist’ dominance of the biggest single purchaser of school text books , the Texas education system, they have enormous influence over the content of ALL American textbooks .

As for
“And can you please explain how you feel about the current president spending 20 years kneeling in Rev Wright’s church listening to sermons that Jews are pigs and that the White man introduced AIDS to American blacks. This same “Rev”. officiated at the president’s wedding and at one time suggested he was like an uncle to him. How’s that grab you eggsactly?”

Give us a break.

JC
JC
10 years ago

“Give us a break.”

Ummm Why? Are you in denialist trance about where Obama spent Sunday mornings?

“Anti American ? Most of the ones I know are realy good people ,60% do not believe “in a 6000 year old earth,” however they have neither compulsory voting nor preferential voting.”

Frankly I’m at a loss in trying to understand what you’re saying here John. What has the US voting system have to do with creationism and why does it scare you?, as you seem really obsessed by it.

Personally I’m more concerned with throwing $10 billion into Bob’s bank to finance generalized looting by rent seekers. Or in the US case calling the $800 billion a wild success.

“In creationism(anti-science/anti-gays and anti-Jews) they have a very professional and ruthless lobby group that is not the least troubled by reality.
And because of ‘Creationist’ dominance of the biggest single purchaser of school text books , the Texas education system, they have enormous influence over the content of ALL American textbooks .”

It’s Frightening. It sounds like that NSW science text book discussing aboriginal science. Anyways, I’m not sure you’re right about your claim. I thought the Texas Supreme court struck down teaching creationism as science several years ago, no?

JC
JC
10 years ago

oops calling the $800 million stimulus…

Pedro
Pedro
10 years ago

John, the post was about conservatives being notso hotso on economic theory. You suggested that could be explained cause they were dumb creationists. Lots of Australian atheists are just has hopeless on economic theory and whinge just as much about the creative destruction that actually happens. Our latest car subsidies weren’t suggested by the Texas text book approval board.

I’m with you in thinking that the religious believe stupid things, but how is that relevant to the post?

Mel
Mel
10 years ago

Is Milton Friedman the man who gave us the failed theory known as monetarism? Find a new hero, champ.

Mr Denmore
Mr Denmore
10 years ago

Milton was the one who didn’t want to license doctors because the market would take care of it. “Sorry about taking your kidney by mistake, Mr Jones. Better luck next time.”

JC
JC
10 years ago

It’s failed, Mel?

Are you able to explain how without using a link?

But here I’ll help.

Monetarism has many facets and the part you must have read about briefly somewhere is about quantitative targeting to some tranche of the money supply.

I suggest you explain your reservations to Ben Bernanke who has followed Friedman’s lessons on QE a couple of times since the GFC with some success and confounding the naysayers who suggested it would lead straight an inflationary spiral.

In any event , monetarism seems to be making a comeback with the Economist suggesting the Fed ought to target Nominal GDP, which is straight out of Milt’s playbook.

Sorry “champ” you’re wrong.

Patrick
Patrick
10 years ago

Wrong thread, Mr Denmore, but don’t you think that if Doctors were completely unregulated various certification methods would have arisen? I.e. affiliation with specific hospitals, guilds, insurers or what have you?

How dumb do lefties think that people are?

john
john
10 years ago

Pedro I was just pointing to a general problem that is particularly easy to see in some parts of America ; A fixation on ‘theory” (in this case religious theory) over reality. As you say, It is not unique to American conservatives. Becoming stuck on theoretical representations of reality to the point that you violently reject nonconforming reality , is all to common.

JC I am not Obama or the Rev Wright , personally Wright sounds like a very bad man but What has it got do with me? its like me implying that because ‘you’ are an Australian.Yes they cannot teach ‘creationism’, that’s why they came up with ‘creation science’. I do not know where the legal fight over that one is at. But they can and do wield influence what is Not in the texts.

john
john
10 years ago

Sorry wrong thread.

JC
JC
10 years ago

John

Believing in creationism, especially the young earth theory is silly. However I’m not at all certain why you consider it damaging to anyone- even the people that believe in it.

It wasn’t so long ago when all presidents were creationists of some sort or another and the country got on fine. A large number of Americans are religious and simply have faith that God created heaven and earth. It’s been around for a long time, this religion stuff and I personally am unfazed by it. I just don’t understand the knee jerk fascination by some Australians that seem obsessed by this. Why care?

I also think you are mixing up your nouns. Other than young earthers, I would think creationism is based on faith rather than theory, no?

In any event were moving away from the point of the thread. My point was that if you truly believe in free markets, you shouldn’t assume that guiding principle stops at the doctor’s door or the hospital. It even doesn’t end with retraining or unemployment benefits.

Mel
Mel
10 years ago

JC @29:

“I suggest you explain your reservations to Ben Bernanke who has followed Friedman’s lessons on QE a couple of times since the GFC with some success and confounding the naysayers who suggested it would lead straight an inflationary spiral.”

The clowns at the Wall Street Journal have been warning of an inflation outbreak and some right wing economists in Australia, such as Sinclair Davidson, have aped these concerns. More capable economists, like the Keynesian Paul Krugman, correctly pointed out the inflation concern represented a fundamental failure to grasp the basics of macroeconomics. The Keynesians were right, as we now know.

As to the Obama stimulus, most of the key Keynesian thinkers in the US said from the outset that the stimulus was not sufficient to pull the economy out of recession. Nonetheless, it ameliorated the recession for a while and obviously the cost of the stimulus was significantly offset by increased tax receipts and reduced transfer payments.

It remains to be seen what, if anything, will pull the US out of recession, but it certainly will not be anything like the snake oil conjured up on the pages of the Wall Street Journal.

JC
JC
10 years ago

Mel
Actually the one capable and very competent economist on the neo-libertarian right who has been pushing NGDP targeting is Scott Sumner. In point of fact Krugman has been ambivalent at best about monetary policy preferring to spruik more fiscal spending. Like most Keynesians Krugman has had deep reservations monetary policy would work at zero bound, which is nonsense seeing the Fed is able to increase its balance sheet size without limit and thereby nudging NDGP higher.

Having said that, I actually agree with you that the right has lost its bearings about monetary policy and some of these candidates have actually called for Bernanke’s firing. He’s a Republican appointed by a GOP prez for lords sake.

There is some okish thinking behind their policy stance though, as it seems to hark back to the Austrian school, which favors liquidation of mal-investments. That’s a decent theory in my mind, however the US economy isn’t in that space… that will allow such a policy without outright depression, as the economy is perhaps too rigid and far too leveraged. It would cause an almighty thud, I believe.

However lets get back to Friedman and your criticism of him. Bernanke is a Friedman disciple and is following Milt’s playbook almost to the letter. Perhaps not going far enough, but certainly in that direction.

The US does has quantitative monetary policy in operation at this point in time with zero bound and QE. Milt, through Bernanke possibly is saving the US economy from depression.

Well that’s what I think anyway. Having said that, I think the Right is perfectly correct with fiscal retrenchment with the debt level approaching 100%. I just wish they would get their monetary house in order though.

Cemeteries are full of people that thought they were in-expendable, but in Milt’s case I really wish he lived forever as no one has replaced him as the glue that held all the disparate parts of the Right together.

john
john
10 years ago

JC
Believing in the young earth these days requires a hell of a lot more cognitive dissonance than it did in 1870. There are a lot of people in America who are well primed to believe the Merde that Newt is selling , no matter what the reality is.

‘mixing up the Nouns’ is what creation ‘science’ is aimed at. It is claimed to be a scientific theory and that it thus deserves equal time.

As for “truly believe in free markets” what is the difference between that and a religious belief?

JC
JC
10 years ago

“Believing in the young earth these days requires a hell of a lot more cognitive dissonance than it did in 1870.”

You really think Presidents after 1870 weren’t creationists? Really?

People believe in silly things but most are able to function in life. Lots of people believe in horoscopes for instance. Byron Bay is filled with alternative medicine bullshit.

And some of us john, some of us really believe that Australia putting a high price on carbon emissions will induce China, India, the US and others to do so too. Hows that for dissonance?

“There are a lot of people in America who are well primed to believe the Merde that Newt is selling , no matter what the reality is.”

Newt isn’t my kinda candidate, but what’s he selling you have a problem with other than right wing policies? If it’s his recent criticism of Romney, I agree by the way. It’s crap and he’s poisoning the well.

“‘mixing up the Nouns’ is what creation ‘science’ is aimed at. It is claimed to be a scientific theory and that it thus deserves equal time.”

Well okay, that’s obviously bullshit, but why get so worked up about it?

“As for “truly believe in free markets” what is the difference between that and a religious belief?”

Okay, here’s an assignment for you, another one. Show me one economy that isn’t set up along liberal democratic lines that has done as well as the liberal democracies. One.

kelly liddle
10 years ago

JC
“All of the misery this video blames on Mitt Romney is a normal part of how free markets work.”

Of all the things you have to say is a pefect paragraph you chose this one. Although not stated the inferrence was about the tech company that fraud had occured by ratings agencies or banks lying about the viability of a company. This may or may not be true but if it is true then that is not normal free market unless you believe that telling lies is ok. Even Andrew Forrest got done for that in Australia.

“that will allow such a policy without outright depression” You also have no idea what you are talking about with this one. The word depression was used up until the end of the Great Depression for any downturn in the economy the word since then has not been used, using recession instead so all you could be saying is that we may return to an older word.

The health system in the US is not about the same as Aus it is rooted with about double the spending for a slightly lower outcome even spending more as a percentage of gdp on public health. http://data.worldbank.org/indicator/SH.XPD.PUBL.ZS http://data.worldbank.org/indicator/SH.XPD.PUBL.ZS

JC
JC
10 years ago

“All of the misery this video blames on Mitt Romney is a normal part of how free markets work. But that doesn’t mean there’s nothing Americans can do about it. Instead of using tax payers’ money to prop up failing businesses, governments can let uncompetitive businesses fail. Instead of trying to generate jobs by picking winners, governments can leave the selection process to the market. Freeing markets will accelerate the process of creative destruction and create wealth.”

Kelly,

You posted a sentence that was part of the para. You left out the other parts for some reason.

Regarding the rest of the comment, I have no idea what you’re talking about after reading it a few times. What are you trying to say here:

“Although not stated the inferrence was about the tech company that fraud had occured by ratings agencies or banks lying about the viability of a company. This may or may not be true but if it is true then that is not normal free market unless you believe that telling lies is ok. Even Andrew Forrest got done for that in Australia.”

Whatever about depression. I was inferring U6 in the high 20’s.
I know you support Paul. I just think his monetary policy ideas would cause a depression. They’re silly.

Yes, Kelly I know the US insurance system is rooted. I said that earlier. Obamcare doesn’t make it any better though.

kelly liddle
10 years ago

I didn’t have to put the rest of the paragraph because it said all. It was inferred that the good investment ratings given by the banks etc. and the prospectus were a known lie. If this was the case then it is not a part of the free market it is fraud (even if it can’t be proven in court).

Although not in the video it appears Bain recieved public moneys

“Mitt Romney says he saved Bain & Company, but he didn’t tell you that on the day he took over, he had his predecessor fire hundreds of employees, or that the way the company was rescued was with a federal bailout of $10 million,” notes the narrator in Sen. Kennedy’s unreleased ad as pictures of newspaper articles fill the screen. “He and others made $4 million in this deal which cost ordinary people $10 million.” http://www.thenewamerican.com/usnews/politics/10538-romneys-skeletons-his-bain-capital-received-millions-in-bailouts

So I think the arguements for and against are not so simple as Romney is a capitalist. The capitalist system in the US and Australia to a lessor extent is corrupted and Bain for example may have taken advantage of the corruption. By corruption I mean it is crony capitalism not free market capitalism. Maybe the arguement should be is it ok to behave in a corrupt manner if that is how the system works and it is legal? I do think that if you have been corrupt even if it is legal it will be a major dissadvantage in an election campaign and if the above passage is true about the bailout of Bain that will not go down well. The fact that Goldman Saches likes to give such a large amount of money to both Obama and Romney would suggest they think that these people will not do anything to change the status quo.

rog
rog
10 years ago

Prime example of dissonance is JC

And some of us john, some of us really believe that Australia putting a high price on carbon emissions will induce China, India, the US and others to do so too. Hows that for dissonance?

The reality is that Australia believes it should put a price on carbon as it is a responsible action in light of the evidence.

What India or China or wherever believes is irrelevant – the point is that we should be able to construct national policy without having to seek approval from outliers. Otherwise we would be condemned to seek to approval from the lowest common denominator, which is where JC hails from.

Heavens forbid.

Sally
Sally
10 years ago

JC talks a lot of gibberish. And always at great length. The atrocious grammar is the most irritating thing of all.

“Cemeteries are full of people that thought they were in-expendable…”

Too funny. “Who”, dear, not “that”, though an understandable mistake coming from alienated you.

And the prefix “in” before “expendable” is beyond gauche.

What an embarrassment to the anti-libertarian Right. Are any of these dudes able to write a grammatical sentence with no typos?

Vulgarity is a most unattractive trait.

JC
JC
10 years ago

Kelly

Bain didn’t receive a federal bailout. It’s dishonest nonsense that newt came out with. When Romney took over the firm was on it’s legs and he negotiated down interest what was owning to a new england bank then held by the FDIC.

What is being described is regular stuff that goes on in near bankruptcy situations. The likely result in a liquidaton could have been that the FDIC lost the lot.

This was discussed before at the cat and I think you also participateed in those discussions , so why raise it here again.

I honestly don’t know what the rest of the stuff is about. Are you saying he ran an IPO that was fraudulent? What exactly? Explain it please.

Look Kelly, I’ve told you other times what I think of Paul. Sorry, but that honest Abe routine doesn’t wash with me. Paul has voted against numerous spending bills while inserting his own earmarks for pork. It’s freakng dishonest.

I like most of his economic policies. His monetary policy and foreign policy suck big time as far as I’m concerned. You know that anyways. It’s Romney by default for me. I thought at one time newt had eluded lunacy, but he’s back to his old ways.

JC
JC
10 years ago

Sally/ Phil

You’re now resorting to checking iPad typos? Well thats good right? At least you’ve found a useful vocation in life instead of writing love peoms to the Fort Hood murderer, or pretending you’re me or members of my family at Bird’s house of many horrors.

Honestly , I’m really pleased for you. It’s heartfelt.

kelly liddle
10 years ago

JC
FDIC is not free market capitalism. The fact it maybe normal for a government owned institution to cut deals just shows how bad the system is. Government institutions should never have discretionary power to hand out money even if it is through changing a loan contract. The loan could have been sold in the open market by auction and let a capitalist vulture deal with Bain. If it is done in the free market ok fair enough but by a government owned institution it is not. Should be this simple pay up and if you can’t then you should be put into recievership and liquidated if that is what is required as Bain would do to others or sell the loan. Seems like a double standard. It is a requirement at least under Australian law that you do not operate a company while insolvent. That would be free market.

JC
JC
10 years ago

Kelly:

At around the time the deal was done, the FDIC was the proud owner of around 250 odd S&L’s and several mid level regional banks.

It’s a different discussion if there ought to be any government involvement in the banking system at all. I think there should be free banking, but that’s not what we’re talking about.
Your issue is if the FDIC/Romney deal was above board.

Lacking any information suggesting otherwise, you’d have to assume it was. Anything else would have come out by now.

Your suggestion the loan should have been sold in the open market needs to be considered. There was no on-sale possibility for these sorts of bad loans at the time, as the FDIC was up to its neck in assets having gone bad. You seem to think the FDIC simply okay-ed everything without looking into it and examining alternatives and immediately assume it was a bad deal for the FDIC. Why? What information do you have that you’re not sharing.

Quite honestly this $4 million or $10 million was a drop in the ocean at the time for the FDIC and it proved to be a drop in the ocean for Romney too, as the firm ended up making over $1.5 billion for his investors over the time he was with Bain.

As for Romney’s action in the deal.. what exactly did he do wrong. He realized the firm was unable to continue the way it was going, sort relief and negotiated out of some of the debt/interest. What did he actually do wrong? These aren’t irregular negotiations for a firm on the ropes, Kelly.

I think you’re making a mountain out of a molehill.

Tel
Tel
10 years ago

George Monbiot claims about Matt Ridley:

Before he resigned on Friday, the bank had borrowed £16 billion from the government and had refused to rule out asking for more.

Well more correctly, the money was not borrowed from the government, it was borrowed from the Bank of England which is owned by the government, but independently operates in the role of a reserve bank and lender of last resort (a role that is common to many nations, and which goes back many hundreds of years before the BofE was nationalised).

I’m not expecting Monbiot or his readers to understand the subtlety but they should at least recognise that many other reserve banks do the same thing on a routine basis (e.g. RBA has been steadily buying up Mortgage debt from Australian banks in the form of RMBS to encourage liquidity during the past few years). You won’t find Monbiot wringing hands over that.

George Monbiot also claims:

Ridley and the other bosses blamed everyone but themselves for this disaster.

Well Matt Ridley himself gave quite a different story:

http://www.thisislondon.co.uk/standard/article-23871939-my-remorse-by-former-rock-chairman.do

“I enormously regret what happened at Northern Rock,” he told The Journal newspaper.

“It’s an incredibly painful memory for me and it’s something that I will live with for the rest of my life.

“I have nothing but remorse for my role in what happened. I’ve apologised and explained as much as I can what happened before the Treasury Select Committee.”

Indeed, Monbiot didn’t even see fit to mention that Ridley was a non-executive chairman, but regardless of that he did accept his share of the blame, and he resigned, and to the best of my knowledge did not walk away with a big bonus or anything. Then the rant really starts:

It was allowed to do so because it was insufficiently regulated by the Bank of England and the Financial Services Authority. When his libertarian business model failed, Dr Ridley had to go begging to the detested state.

Well actually, if Monbiot had been paying attention, he would note that Ridley got dragged out for questioning by the Treasury. They ended up taking the whole bank by force (and essentially writing off the shareholders equity) and selling it again (which I believe is Virgin Money now), so there was no shortage of regulatory power. If the BofE was insufficiently regulating the industry then it was the BofE who loaned out additional liquidity to cover up the problem, but anyhow all banks (including the BofE) are answerable to Parliament if that happens to be required.

Besides all that, there is absolutely no such thing as a “libertarian business model” because the whole idea of being a libertarian is that people come up with a broad diversity of models… some of which succeed and some of which fail. Libertarians have always argued that bank failures are fundamentally unavoidable because a bank makes a profit from borrowing short term, and lending long therm — an intrinsically unstable thing to do. However, if banks are allowed to fail (and in the Northern Rock case, the slack was absorbed by shareholder losses, which is completely normal and yet another thing Monbiot either can’t understand or just conveniently fails to mention) then the system as a whole keeps going. If banks are propped up and prevented from failing then it moves to systemic collapse (which is looking like being on the cards in the next few years).

Now when interviewed, Matt Ridley says, “We were all taken by surprise by that. There was almost nobody who saw it coming. Those who did were not in the right place to warn everyone else.”

So did Monbiot’s brilliant insight allow him to see it coming first? Of course not! Did Monbiot’s wonderful government regulators see it coming? Oh no, they saw nothing. What’s more, Northern Rock was just the start of the trouble… so surely both Monbiot and all those regulators would have taken heed of this warning and started ringing out the bells before the crisis of 2008 that was just around the corner? Hmmm, no they failed on the second time round too.

Basically one guy’s guess is as good as the other then. Truthiness… if in doubt blame some libertarians for being a bit different.

Anyhow, it ain’t over yet. If Monbiot had a single bone of consistency he would be very concerned about rising government debt all over Europe right now (and blaming the libertarians absolutely will not help this time round). We are going to see government defaults, it’s only a question of when and how big.

trackback

[…] is in response to JC one of my sparing partners at Club Troppo and also a news item/blog written defending Bain […]

kelly liddle
10 years ago

JC
What did he actually do wrong?(Romney)

In answer to your question possibly nothing. You might think I am annoying especially if you believe Romney is a good guy, but he will have to answer the question on what happened and also if he is a capitalist how can he reconcile making money from the system he now wishes to stop (that is assuming he is a free market capitalist in which the FDIC would not exist). Hey and by the way I have not mentioned Ron Paul on this thread yet. I have put some comments regarding this subject on my blog.

JC
JC
10 years ago

Kelly,

Romney is not a libertarian. He is (I think this week) a closet social liberal Nor Easterner who is really freaking smart and may show some initiative in cutting back spending and possibly enacting some of the Ryan plan if pushed.

He was for the bank bailout by the way.

And what does he have to answer for? Doing the deal with the FDIC. That’s easy.

“If he is a capitalist how can he reconcile making money from the system he now wishes to stop (that is assuming he is a free market capitalist in which the FDIC would not exist).”

Kelly, do you understand that he didn’t actually make money out of the thing, that it in fact was a form of debt forgiveness, as a result of the firm he just took over being on skid row and about to tip over?

I don’t see why you keep harping on this as though it will end his candidacy. Dude, it happened in 1994 or so. Get over it.

kelly liddle
10 years ago

JC
You might be right but I think it is a serious threat to his candidacy and if he gets to be the repbulican nominee even more of a threat versus Obama. Debt forgiveness is the same as recieving cash.

JC
JC
10 years ago

I missed Denmore’s critique of Milton Friedman

“Milton was the one who didn’t want to license doctors because the market would take care of it. “Sorry about taking your kidney by mistake, Mr Jones. Better luck next time.””

Yea Denmore blindly relying on credentialism is what I’m sure Milt was getting at.

Good to know you rely on the simple faith of a government licensing board to inform you of your doctor’s capability.

I presume you don’t support suing doctors, because you know, the government says they are all great.

Oh hang on, a credentialed and fully licensed doctor killed about 13 people in Queensland. How could that possibly be seeing he was licensed by the government? Ummm

And tell us, do how do measure a doctor’s abilities. Is it by his or her license or how you feel about him or her? Are you an expert in knowing prognosis and the treatment plan is the best medical science can offer?

And how about the negative impacts of cartelization when numerous things could just as easily be treated by a nurse practitioner or a pharmacist with the potential of cutting costs.

Denmore, you seem to have an emotional aversion to libertarianism and not one that’s intellectually based. The short sentences and little jabs won’t work.

rog
rog
10 years ago

JC’s argument is akin to “why should car drivers have a govt license if there are road accidents”.

Libertarianism means anybody should be allowed to drive and “the market will sort them out”.