David Stockman has a book coming out, detailing the story of crony capitalism that has led to the financial calamity that manifest in 2008. Coincident with the book release, he has written an opinion piece for the New York Times, “State-Wrecked: The Corruption of Capitalism in America.”
Eighty percent of the commentary is directed at the sad history of economics and crony capitalism in America. On this, few are as well qualified as Stockman to write. He has lived in the halls of both government and business, including the private equity world. He captures and skewers many – even taking to task the Republicans, whom he views as more hypocritical than the democrats on economic matters.
For this commentary and diagnosis, I have few quibbles (saying anything positive about World War II ending the depression is one of my quibbles). However, it is in his treatment plan that Stockman falls short – as short as any politician, mainstream economist, or media mouthpiece.
He starts off well enough:
These policies have brought America to an end-stage metastasis. The way out would be so radical it can’t happen. It would necessitate a sweeping divorce of the state and the market economy. It would require a renunciation of crony capitalism and its first cousin: Keynesian economics in all its forms. The state would need to get out of the business of imperial hubris, economic uplift and social insurance and shift its focus to managing and financing an effective, affordable, means-tested safety net.
A “sweeping divorce” – this has real potential. Of course, I disagree with the state-provided safety net part, but if he puts the rest into meaningful recommendations I can live with it.
…amendments to give the president and members of Congress a single six-year term, with no re-election;
This is step one? This is the start of a “sweeping divorce”? The office of the president is the only federal elected office with term limits, and yet, yoked with this collar, the executive branch has grown into the most powerful branch of government.
…providing 100 percent public financing for candidates;
Another spending program? Really?
Who would decide the rules for which candidates get financed? How would a candidate qualify? Why eliminate the democracy of voting with dollars? Why not, instead, eliminate that which the politicians can buy with their vote?
…strictly limiting the duration of campaigns (say, to eight weeks);
This sounds more like the wife going to mom’s for a tea because hubby didn’t like the nail polish. Where is the divorce?
…and prohibiting, for life, lobbying by anyone who has been on a legislative or executive payroll.
Why get in the business of controlling people’s employment options? Why all this tinkering around the edges? Eliminate the benefit of lobbying, and you will eliminate lobbying.
It would also require overturning Citizens United…
Now people cannot voluntary organize?
…and mandating that Congress pass a balanced budget, or face an automatic sequester of spending.
Stop, please stop. My head is about to explode.
It would also require purging the corrosive financialization that has turned the economy into a giant casino since the 1970s. This would mean putting the great Wall Street banks out in the cold to compete as at-risk free enterprises, without access to cheap Fed loans or deposit insurance. Banks would be able to take deposits and make commercial loans, but be banned from trading, underwriting and money management in all its forms.
My head has exploded. Give me a minute to put it back together….
OK, I’m back.
Sure, I am all for banning government deposit guarantees (it isn’t insurance). But now we should pass new regulation that will be better than the old regulation? Apparently we just need the right legislators and regulators, and everything will be fine.
Why ban the banks from doing whatever they want? Why not just allow the market to provide the discipline?
It would require, finally, benching the Fed’s central planners, and restoring the central bank’s original mission: to provide liquidity in times of crisis but never to buy government debt or try to micromanage the economy.
This is sometimes raised – if only the Fed would stick to its original mission – the legislation of 1913. It usually comes from the politically naïve. It shouldn’t come from someone who has seen the inside of the beast, as Stockman has. The camel’s nose under the tent and Stockman can’t see it.
Trying to get the Fed to stick to its original charter of 1913 was tried once…in 1913. And this in an era when people actually had some respect for gold. It didn’t last. It helped to fund the most catastrophic war known to man. It ushered in the boom of the 1920s, and prolonged the bust of the 1930s. There is nothing praiseworthy about establishing a monopoly agency with control over the single most important commodity for an advanced division-of-labor society.
Getting the Fed out of the financial markets is the only way to put free markets and genuine wealth creation back into capitalism.
Let me restate this: Getting the [organization that has the power to manipulate money and credit] out of the [money and credit manipulation business] is the only way to put free markets and genuine wealth creation back into capitalism.
The only way to get the Fed out of financial markets is to get rid of the Fed.
Ron Paul courageously has made it fashionable to at least discuss the Fed’s existence. Even Forbes (online, not the man) has run articles on this, here and here. Forbes even cites Alan Greenspan, for goodness sakes:
In the same January 2011 interview, Greenspan apparently wondered out loud if we even require a central bank! When Alan Greenspan starts to talk about “End the Fed,” things are changing.
Why all of the policy recommendations, requiring further involvement of central planners in deciding what is best for the market? Why are Stockman’s centrally-planned solutions any better than Nancy Pelosi’s or Paul Ryan’s? Says who? Prove it.
Stockman came so close, and then fell off of the same cliff that many other pseudo-free-market types fall from – never question the monopoly on money and credit. Never question the existence of a central bank.
How can some who writes this…
These policies have brought America to an end-stage metastasis. The way out would be so radical it can’t happen. It would necessitate a sweeping divorce of the state and the market economy. It would require a renunciation of crony capitalism and its first cousin: Keynesian economics in all its forms. The state would need to get out of the business of imperial hubris, economic uplift and social insurance…
…go on to offer a half-dozen or more ways to get the state further involved in the market economy?
Why not a “sweeping divorce,” as Stockman promised?
The answer is terribly simple: free markets mean free markets. End the government backing. End the monopoly.
End the Fed.