You're warming to this subject, aren't you Spotty?
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[Thursday, December 11th] On Wednesday, Spot posted Keep bailing!, a post about the contrast between the financial services bailout and the (possible) automotive sector bailout. He suggested that the difference in treatment of the two was related to the current dominance of Finance Capitalism over Industrial Capitalism in the United States. Many people - including our friend techno in an essay that Spot linked to before, but you can read it here - say Finance Capitalism has become dominant because of the rise of the Chicago school of economists: Milton Friedman and his circumjovialists.
Spot, what are circumjovialists?
Look it up, grasshopper. It's a word you'll enjoy being able to use.
Anyway, we all know Uncle Milty; he's called in some circles the Maven of Mayhem. Uncle Milty's views of "creative destruction" have led acolytes like David Strom to suggest that maybe all the turmoil in the financial markets wasn't so bad after all! Because, apparently, moderation and prudence can stifle economic growth! But apparently not the only thing that can stifle economic growth, as we're finding out.
Although he doesn't have a link at the moment, Spot remembers King Banaian bemoaning the day when Morgan Stanley and Goldman Sachs, the last big independent investment banks left standing, turned themselves into commercial bank holding companies - in order to, as the linked NYT article says, avail themselves of the Federal Reserve's lending facilities, and in exchange for tighter regulation. The professor shook his head sadly, and said that financial innovation would have to come from somewhere else.
Thanks, Professor, but we've had all the financial innovation we can afford for a very long time! Probably more than we can afford, as a matter of fact.
[Friday, Decemer 12th] So, where was Spot? Oh, yes! The Senate turned down the idea of even the chintzy little bailout. (Spot toyed with using the perfectly serviceable word niggardly, but concluded that some right winger would accuse him of being a racist.)
When we look at both of these situations, we have to place at least some of the blame, probably a lot of it, on the right wingers' holy spirit, the Invisible Hand. In fact, Spot wrote some new words for the hymn tune by the Welshman John Roberts a couple of years ago:
Immortal, Invisible Hand only wise,
Be careful, however, it’ll poke out your eyes.
Its origin Scottish, a myth from the moors,
It mostly appeals to the pikers and the boors.
Unthinking, uncaring, and cold as a fish,
Nor gen’rous, nor sharing, a total knish.
Its logic, all simple, its surface appeal,
Will make some scrubs think that it’s the real deal.
All laud they would render; O dear sweaty Hand,
E'en as You turn earth into a No Man’s Land.
The Hand gives a dope slap as it bids us goodbye,
Then gives us the Finger, and a poke in the eye.
Spotty, are you clairvoyant?
Might be, grasshopper. You'll have to make up your own mind.
In any event, in the past couple of months, we have witnessed epic market failures. Uncle Alan admits as much regarding the financial sector. Spot submits that the problem with the domestic automobile industry has a lot more to do with the products offered by the automakers (Hummers? What were they thinking?) than the cost of labor. And the auto workers built the cars they were told to build, didn't they?
Blaming the UAW for the industry's problem is a red herring. When you read about "legacy costs" that the industry has, and it allocates a sum to every car being currently produced, it's not the auto worker's fault. It's the fault of a management that failed to properly accrue and fund the cost of future retiree benefits back when they were incurred. Why did management do that? Well, to to make the profit and loss statement look better, which in turn allowed bigger management paychecks. Those guys retired with their bundle years ago, leaving the problem to their posterity.
Why were we so asleep at the switch? Because the market fundamentalists not only told us the "market" would take care of it, we would make things worse if we were foolish enough to interfere with the Invisible Hand.