Subscribe to Common Dreams News Updates
Most Popular This Week
Popular content
Today's Top News
Moral Bankruptcy: Why Are We Letting Wall Street Off So Easy?
It is said that a near-death experience forces one to reevaluate priorities and values. The global economy has just escaped a near-death experience. The crisis exposed the flaws in the prevailing economic model, but it also exposed flaws in our society. Much has been written about the foolishness of the risks that the financial sector undertook, the devastation that its institutions have brought to the economy, and the fiscal deficits that have resulted. Too little has been written about the underlying moral deficit that has been exposed-a deficit that is larger, and harder to correct.
One of the lessons of this crisis is that there is a need for collective action, that there is a role for government. But there are others. We allowed markets to blindly shape our economy, but in doing so, they also shaped our society. We should take this opportunity to ask: Are we sure that the way that they have been molding us is what we want?
We have created a society in which materialism overwhelms moral commitment, in which the rapid growth that we have achieved is not sustainable environmentally or socially, in which we do not act together to address our common needs. Market fundamentalism has eroded any sense of community and has led to rampant exploitation of unwary and unprotected individuals. There has been an erosion of trust-and not just in our financial institutions. It is not too late to close these fissures.
How the market has altered the way we think is best illustrated by attitudes toward pay. There used to be a social contract about the reasonable division of the gains that arise from acting together within the economy. Within corporations, the pay of the leader might be 10 or 20 times that of the average worker. But something happened 30 years ago, as the era of Thatcher/Reagan was ushered in. There ceased to be any sense of fairness; it was simply how much the executive could appropriate for himself. It became perfectly respectable to call it incentive pay, even when there was little relationship between pay and performance. In the finance sector, when performance is high, pay is high; but when performance is low, pay is still high. The bankers knew-or should have known-that while high leverage might generate high returns in good years, it also exposed the banks to large downside risks. But they also knew that under their contracts, this would not affect their bonuses.
Unjust Rewards
4,793 $1 million-plus bonuses paid by major Wall St. firms in 2008 7.7% Compensation increase at major firms from 2007 to 2009... 30% ...and at JPMorgan Chase $140B Projected 2009 compensation at major firms 
|
What happens when reward is decoupled from risk? One cannot always distinguish between incompetence and deception, but it seems unlikely that a business claiming to have a net worth of more than $100 billion could suddenly find itself in negative territory. More likely than not, it was engaged in deceptive accounting practices. Similarly, it is hard to believe that the mortgage originators and the investment bankers didn't know that the products they were creating, purchasing, and repackaging were toxic.
Bernie Madoff crossed the line between exaggeration and fraudulent behavior. But what about Angelo Mozilo, the former head of Countrywide Financial, the nation's largest originator of subprime mortgages? He has been charged by the SEC with securities fraud and insider trading: He privately described the mortgages he was originating as toxic, even saying that Countrywide was "flying blind," all while touting the strengths of his mortgage company, its prime quality mortgages using high underwriting standards. He eventually sold his Countrywide stock for nearly $140 million in profits. If he had kept the dirty secrets to himself, he might have been spared the charges; self-deception is no crime, nor is persuading others to share in that self-deception. The lesson for future financiers is simple: Don't share your innermost doubts.
The investment bankers would like us to believe that they were deceived by the people who sold them the mortgages. But if there was deception, they were part of it: They encouraged the mortgage originators to go into the risky subprime market, because it generated the high returns they sought. It is possible that a few bankers didn't know what they were doing, but they are guilty then of a different crime, that of misrepresentation, claiming that they knew about risk when clearly they did not.
Exaggerating the virtues of one's wares or claiming greater competency than the evidence warrants is something that one might have expected from many businesses. Far harder to forgive is the moral depravity-the financial sector's exploitation of poor and middle-class Americans. Our financial system discovered that there was money at the bottom of the pyramid and did everything possible to move it toward the top. We are still debating why the regulators didn't stop this. But shouldn't the question also have been: Didn't those engaging in these practices have any moral compunction?
Sometimes, the financial companies (and other corporations) say that it is not up to them to make the decisions about what is right and wrong. It is up to government. So long as the government hasn't banned the activity, a bank has every obligation to its shareholders to provide financial support for any activity from which it can obtain a good return. The predecessors to JPMorgan Chase helped finance slave purchases. Citibank had no qualms about staying in apartheid South Africa.
But consider, too, that the business community spends large amounts of money trying to create legislation that allows it to engage in nefarious practices. The financial sector worked hard to stop predatory lending laws, to gut state consumer protection laws, and to ensure that the federal government's ever laxer standards overrode state regulators. Their ideal scenario, it seems, is to have the kind of regulation that doesn't prevent them from doing anything, but allows them to say, in case of any problems, that they assumed everything was okay-because it was done within the law.
Securitization epitomized the process of how markets can weaken personal relationships and community. With securitization, trust has no role; the lender and the borrower have no personal relationship. Everything is anonymous, and with those whose lives are being destroyed represented as merely data, the only issues in restructuring are what is legal-what is the mortgage servicer allowed to do (see "Mortgage Shark Attack")-and what will maximize the expected return to the owners of the securities. Enmeshed in legal tangles, both lenders and borrowers suffer. Only the lawyers win.
This crisis has exposed fissures between Wall Street and Main Street, between America's rich and the rest of our society. Over the last two decades, incomes of most Americans have stagnated. We papered over the consequences by telling those at the bottom-and those in the middle-to continue to consume as if there had been an increase; they were encouraged to live beyond their means, by borrowing; and the bubble made it possible.
The country as a whole has been living beyond its means. There will have to be some adjustment. And someone will have to pick up the tab for the bank bailouts. With real median household income already down some 4 percent between 2000 and 2008, the brunt of the adjustment must come from those at the top who have garnered for themselves so much over the past three decades, and from the financial sector, which has imposed such high costs on the rest of society.
But the politics of this will not be easy. The financial sector is reluctant to own up to its failings. Part of moral behavior and individual responsibility is to accept blame when it is due. Yet bankers have repeatedly worked hard to shift blame to others, including to those they victimized. In today's financial markets, almost everyone claims innocence. They were all just doing their jobs. There was individualism, but no individual responsibility.
Some have argued that we had a problem in our financial plumbing. Our pipes got clogged, and we needed federal intervention to get the markets moving again. So we called in the same plumbers who installed the plumbing-having created the mess, presumably only they knew how to straighten it out. Never mind if they overcharged us for the installation, then overcharged us for the repair. We should quietly pay the bills, and pray that they did a better job this time than last.
But it is more than a matter of unclogging a drain. The failures in our financial system are emblematic of broader failures in our economic system and our society. That there will be changes as a result of the crisis is certain. The question is, will they be in the right direction? Over the past decade, we have altered not only our institutions-encouraging ever more bigness in finance-but the very rules of capitalism. We have announced that for favored institutions there is to be little or no market discipline. We have created an ersatz capitalism, socializing losses as we privatize gains, a system with unclear rules, but with a predictable outcome: future crises, undue risk-taking at the public expense, and greater inefficiency.
It has become a cliché to observe that the Chinese characters for crisis reflect "danger" and "opportunity." We have seen the danger. Will we seize the opportunity?
- Posted in
48 Comments so far
Show AllThe drain isn't clogged. It's working perfectly - sucking what's left of the middle class and the working poor dry. Our money is flowing into the reservoirs of the wealthy; the House and Senate, along with their owners, will do nothing to change the way the financial system works.
Too Big To Fail? BS : Bush Shadow (Obama*)! The Bernanksters' and Wall Street-walkers'
obscene bonuses need a permanent X-SIZE TAX; their depraved daily
profit-raping of US, too!! *Remember, come the elections; Neither
Are YOU!!
I suppose Mr Stiglitz as a Nobel laureate thinks he should show restraint in his writing...be polite...wouldn't want to come across as shrill or judgmental.
Where are the words...criminal?...greed?...selfishness?...shame?...corruption?...bribery?...
Words matter. If you describe the monstrous behavior of Wall Street criminals with polite euphemisms who are you serving?
These greedy pigs have managed to loot the Treasury while bringing the future of the country, and our children, into extreme jeopardy and guaranteeing millions of people suffering and early death.
Errors of judgement? Off with their heads!
Because 300 million USers are smashed-down slaves.
What will happen when 75 % of the population loose faith in the Government to act fairly?
55% of people don't vote. So maybe 75% won't vote. What difference does it make? They will still claim the prize regardless of the number of people who vote. Voters are just a small part of the game. They would be happy even if only 10 % voted and they would just say that Americans are lazy or don't vote because they're happy and have better things to do. In any other country 45% turn-out would be considered a serious sign of dysfunction or lack of legitimacy. In the U.S. it isn't considered significant. Do you believe that at present more than 25% of the population thinks the government acts fairly? Just asking.
How quaint to fret over the "morality" of a deeply amoral economic system. If any of the Eichmanns who engineered the ongoing debacle had ever worried over the morality of what they were doing, they'd have been 86ed onto the street in seconds by their superiors, who are far above such delicate concerns.
The New Economy is characterized by total amorality, and anyone with other notions simply isn't allowed into the inner sanctums of Wall Street. Stiglitz must know this, if I, and everyone else who can think, do.
The thieves are right now in the process of awarding themselves obscene bonuses--again--with the money hijacked from us taxpayers to bail their corrupt asses out, courtesy of Barack Obama. Who wonders if any of them are stopping to consider whether these bonuses for flagrantly illegal behavior are "moral"? They're just Doing Their Jobs.
On the other hand, we are not doing ours, which is to flush these bastards out into the street and force them to experience some real justice for a change. That's a job that's simply too demanding for us, apparently, since all we seem capable of is verbal expressions of outrage and disbelief as they continue robbing us all blind. This pathetic display of public impotence will probably go on until the Chinese take over our entire economy, since Americans have proven totally feckless in reclaiming any part of it from those who have plundered it and essentially destroyed it.
You are quite right. I believe the Chinese figured out a couple of decades ago that the USA is led by crooks that don't care about trashing the country for profits,
When the Chinese kept their currency exchange rate with the dollar constant, the elites here rejoiced and the transfer of manufacturing capacity from the USA to China turned from a trickle to a flood. Now that we are stripped bare, the next step is to do to us what we have always done to others; i.e. force us into fiscal discipline.
Things are not going to get better. The thing that infuriates me so much about all these pieces on the behavior of the elite is the continual and maddening habit of describing the elite as "reluctant" to change the status quo. Yeah, right. Reluctance is very, very different from tooth and nail fighting to the death with corruption, extortion, bribery and death threats involving legislators and regulators. These criminals play for keeps and they need to be openly labelled as the traitorous enemy of the USA. We are long past the namby, pamby, delicate bullshit of words like "reluctant".
What happens when reward is decoupled from risk? The same thing that happens when you remove the glass walls from a jewelry store and go home without leaving any guards on the jewelry.
And these bastards are standing before congress, covered in jewelry, claiming that grand larceny is a "mistake" and they won't do it again. Now please restock the jewelry store and do not put the glass wall or guards on the new jewelry. Trust us, we are capitalists...
Live frugally, sustainably and cheaply. Let the Chinese fuck our elites. The hogs will eat each other alive soon enough.
MR. BLANKFEIN: I got mine, Jack. You got yours?
REPUBLICRAT SENATOR: I object to your inference, sir.
MR. BLANKFEIN: Screw you! Eat it raw! What're you going to do to me?
(Laughter from the gallery as well as the other witnesses)
"Why are we letting wall street off so easy? Because we dream of one day becoming just as rich. But, it will be different because we are poor and wise and would never stoop to such tactics to amass and retain financial wealth. Dream on america, dream on.
We might be able to address the problem if we could just get Obama to resign and put a real Democrat in there. Until then, we will be able to do nothing whatsoever, because the White House will block every move toward reform, as they have done unrelentingly for the past year. (In case you hadn't noticed, Obama and company are essentially neocons.)
Honest Joe Biden is not a real Democrat or democrat.
The problem with this article is that it seems to have been written after the financial crisis was disinfected by trillions of gallons of hydrogen peroxide instead of trillions of dollars of money that everybody except the banksters will have to pony up.
Stiglitz writes; “There used to be a social contract about the reasonable division of the gains that arise from acting together within the economy. Within corporations, the pay of the leader might be 10 or 20 times that of the average worker. But something happened 30 years ago, as the era of Thatcher/Reagan was ushered in. There ceased to be any sense of fairness; it was simply how much the executive could appropriate for himself.”
That Ronald Reagan did everything a President could possibly do to destroy labor unions might also have had some impact on increasing the discrepancy between compensation to the workers and the parasites sucking the life blood out of the economy from the top.
Stiglitz continues; “What happens when reward is decoupled from risk? One cannot always distinguish between incompetence and deception, but it seems unlikely that a business claiming to have a net worth of more than $100 billion could suddenly find itself in negative territory. More likely than not, it was engaged in deceptive accounting practices.”
One of these accounting gimmicks was to credit the books with the revenue from a business transaction even though not so much as one freakin dime had changed hands on the transaction...So, when a bankster wrote a mortgage for a half a million dollars to a homeless person that didn’t have a pot to piss in or a window to throw it out of, the transaction showed up on the books as a hugely profitable mortgage that may as well have been a loan to Bill freaking Gates given the information available to an outsider looking at the books and trying to place a value on the mortgage backed security created from the bogus loans.
Joseph asks;” But shouldn't the question also have been: Didn't those engaging in these practices have any moral compunction?”
Take a night off and tune into an episode of “Survivor,” “The Apprentice,” or “Big Brother.” The shortage of those lacking “moral compunction” has been greatly exaggerated.
Stiglitz reaches this conclusion; “The country as a whole has been living beyond its means. There will have to be some adjustment. And someone will have to pick up the tab for the bank bailouts. With real median household income already down some 4 percent between 2000 and 2008, the brunt of the adjustment must come from those at the top who have garnered for themselves so much over the past three decades, and from the financial sector, which has imposed such high costs on the rest of society.
While this conclusion is exceedingly logical it assumes that the goals of improving society at large will be the guiding path to lead our entire society from the post financial crisis wilderness; That and 99 cents will get you a 16 ounce coffee at McDonalds.
It seems far more likely that the elite will instead chose a path where they maintain their lofty positions as an economic and political elite and screw the rest of the poor bastards that comprise the other 97% of Americans. The elite have worked exceedingly hard since Ronald Reagan to achieve the exact economic position that the U.S. is now in. Why the fuck would they suddenly decide that they were wrong and give away all of their gains just because America’s workers are approaching a pre-industrial age life style?
Ultimately expecting an economist to conclude that there is no difference, what so ever, between the ethical and moral system driving the economic elite of his nation, and the ethical and moral system driving pirates, is asking way too much from an economist.
The left has been paralyzed, put in a state of shock by the Bush administration and it's never recovered.
They will bend over farther and take it deeper than ever before, daring not to make so much as a tiny whimper inaudible even to a mouse while being screwed.
"Why Are We Letting Wall Street Off So Easy?"
Who's "we"?
What will we do when the next bubble bursts? Maybe we should let the individuals in power attempt another bailout. Then with rage at an incandescent point make "them" bear the brunt of our anger, and I don't mean refusing to reelect them to another term. I hope that Obama, Bernake, Rahm, Summers Frank and Geithner are in office when it happens. It's possible--the next big burst is probably less than three years off. I expect they already have their corporate jets standing by.
"I hope that Obama, Bernake, Rahm, Summers Frank and Geithner are in office when it happens."
If they're not, we always know where to look: Tel Aviv.
Hungry??? Eat the rich
Big JS fan, but with this he joins the ranks of the Laundry List 'experts' - you know, the ones who present us with yet another laundry list of problems we, the choir, are already expert on without even the mention of single, possible solution.
The science is in: Greed-a-holism is as real an 'illness' as Alcoholism or Drug Addiction or Compulsive Gambling. The myopic, successful pursuit of more money produces the same 'high' as a line of coke - and it wears off nearly as fast.
And just as drug laws cannot stem drug use, financial laws will not stem the Greed-a-holism epidemic - especially since the vast majority of us Americans now suffer from Greed-a-holism on some level...
Even the best drug/alcohol rehab programs have, at best, less than a 30% long-term success rate - the rest eventually die from their addiction.
That's us: we either admit we're a country of Greed-a-holics and seek treatment - both talk and pill - or we will die from our addiction...
Well said.
Shapiro from the SEC seals the AIG e-mails until 2018.
Bernake's fed declares record profits.
Blankfein and others say that "making mistakes" was bad business. No word about how many in their firms got (and are still getting) bonuses from those "mistakes". No word about how many (if any) were fired for those "mistakes". No word about criminal prosecutions. No word about monetary restitution.
Moral compunction? In the USA? You've got to be kidding!
The cliff is somewhere behind us...It's like skydiving without a parachute...We won't hear the splat sound.
With all due respect, Frank, I cannot disagree with you in principle. However, Professor Stiglitz has done a laudible job of outlining the root causes of the malady from which this country suffers, and to which you have spoken so eloquently. It takes great minds such as his to get us focused on what ails us. It is up to society and a respect for the values that will bring about real change to make it happen. Cheap and opportunistic use of the term "change" by the White House has rendered it moot. The values that will serve as the real foundation for meaningful change must, firstly, be understood and accepted before we can effect the lasting changes this country so urgently needs.
Kind regards.
"....Professor Stiglitz has done a laudible job of outlining the root causes of the malady from which this country suffers,.."
And he has done it this time with a visceral tone that we have never heard before!
Kudos to Professor Stiglitz!
"Why Are We Letting Wall Street Off So Easy?"
What do you mean by "we", paleface?
I'll never forget Reagan's words when he signed the bill in the 80's that allowed S&L's to use FDIC insured money to gamble on the stock market "I think we've hit the jackpot!" He couldn't have been more correct in setting the stage for the next 30 years for the rich bastards that have robbed us blind . . .
The Garn - St Germain Depository Institutions Act of 1982.
See what even the official account tells one:
http://www.fdic.gov/bank/historical/s&l/
Gary
Sioux Rose
ABROFSKY: So true! I remember seeing Stephen Pizzo (co-author of "Inside Job: The Looting of America's Savings and Loans") on The Phil Donahue Show. It made me go out and get/read the book. The lessons learned (on the side OF the criminally minded) were further advanced through the species of "business/con" executed by the executives at ENRON, coupled with the Arthur Anderson "style" accounting. All this and then the disastrous deregulation of Glass-Steagall and wow: recipe for a not-so-great Depression II. The engineers of this catastrophe should pay dearly; but right now they've used the loot stolen from the public to buy the politicians who make the laws that thus far allow them to get away scot-free. Gee. It almost sounds like a 21st century nursery rhyme, the New World Order's revised version of "The House That Jack Built." And then foreclosed upon...
Carter tried to tell you that there was a problem, a malaise. He knew. Reagan promised tax cuts and money and started the U.S. along the path to the present with attitude and deficits. You chose him. Well too bad for you. Carter was the closest a U.S. president has come to being decent in the last 50 years if not more. But you went for the smoke and mirrors instead of the truth. He,he,he. You deserve to get royally screwed. And you are and will get screwed even worse as time goes by. Take a good and careful look at what happens to a country the oligarchs work on (Haiti) because the U.S. itself is next.
>>Their ideal scenario, it seems, is to have the kind of regulation that doesn't prevent them from doing anything, but allows them to say, in case of any problems, that they assumed everything was okay-because it was done within the law.<<
It seems?! It IS already thus.
The gutting of the social contract has, as Stiglitz pointed out, began with Ronald 'can you say Alzheimer's' Reagan and his turncoat destruction of the traffic controllers' union and the New Conservatism that peddled tough measures against crime, strong national defense, a constitutional amendment to permit prayer in public schools, opposition to abortion and defeat of the Equal Rights Amendment for women while its economic polices, generally called Supply-side Economics (or in a burst of truth=saying GWH Bush called it "voodoo economics"), or the Trickle Down theory whereas if we reward the rich with more wealth a little will "trickle down" to the the middle class workers actually producing the real wealth.
And they sold all of these as a package called Reaganism. And boy oh boy we LOVED it. Most of us at least. (Not me but I've always been a contrarian.)
Now we call what emerged from this mess both neo-liberalism and a royal fuck-up. Because the bonds of mutual need between labor and management were destroyed. Faith in collective action got labels as "socialism." And that made it akin to the Evil Empire. We became even greater war-mongers starting little wars in Central America for no decipherable good reasons. Meanwhile "defense" spending exploded to $456.5 billion in 1987 (2005 dollars). Damn the man! (Now going to 741 billion if we include spending for our two wars.)
With the big payouts to armament providers came support for the Federal Reserve that is a lasting legacy. Meanwhile the income gap between the rich and everyone else in America widened. Wages for the average worker declined and the nation’s homeownership rate fell. During Reagan’s two terms in the White House, which were boon times for the rich, the poverty rate in cities grew. And so did homelessness.
Sound's familiar doesn't it?
It should. The Reagan Revolution blossomed during the GW Bush years.
So we are children of the Reagan Era yet.
His cold dead hand strangling us.
Yet they want to put him on a US coin.
http://www.coinnews.net/2009/07/29/ronald-reagan-gold-and-silver-coins-proposed/
Gary
This article is full of the standard Stiglitz distractions and diversions and utterly fails to speak to the essence of the global financial "market" which is that it is an unproductive circus in which financial "players" insist their money must "work" and make money for them without them personally producing anything of value. This "global financial economy" (about which there is nothing the least bit economical) is just a system by which all resources, goods and services get monetized so they can be owned by the players. This isn't economics, it's exploitation. And it is all based on universally accepted usurious debt-based banking practices.
Stiglitz has been writing these limited hangout analyses for the past year, going on and on about the problem being "uncoordinated macroeconomic policies", inflation, regulation, liquidity, mobility, "flawed governance structure", and now "the underlying moral deficit". But he never discusses the fundamentally sociopathic nature of the privatized monetary/banking system. The essence of the crisis lies within the essence of that system - that with our privatized monetary system, owned and operated by the bankers within and behind the Federal Reserve, money is created by debt and debt is inherently multiplied by interest. It's not intended to be the foundation of an economy that serves the population; it's intended to be a reliable method of wealth extraction and wealth concentration. And it works. Except that in the end (very close at hand) the monetary system collapses and takes the entire economy with it.
To answer Stiglitz' question: It is not WE who are letting Wall Street off easy, it's the professional and celebrity economists such as himself who know what the real problems are but will neither discuss them nor condemn the system's beneficiaries. THAT is the underlying moral deficit.
Sioux Rose
JIM ELDON: Well done! You took a very complex subject and brought it down to its simplest components and explained the key dynamics driving this travesty with powerful succinctness. I recognize all the factors you relate, but had difficulty explaining how to connect the dots that others might understand and see through the nebulous atmosphere surrounding this grand larceny. You make the matter quite clear. Thank you for doing so.
Thanks Sioux Rose, and you're welcome.
It's hard to believe that the "nebulous atmosphere" surrounding this issue and so many others is anything but deliberate. Status quo gatekeepers offering limited hangouts to placate the masses, is my take on it.
Wall Street/Big bank CEOs are the pinnacle of capitalist greed.
Prof. Stiglitz criticizes "market fundamentalism" in his third paragraph, but gives away the game in his penultimate paragraph when he complains that "we" have changed "the very rules of capitalism" to create an "ersatz capitalism" with "little or no market discipline." Presumably a more genuine capitalism is called for; which reveals Stiglitz as a reformer of the Ron Paul sort, seeking the unsullied capitalism of yore. Conveniently, capitalism as a system is let off the hook. Unsurprisingly, nothing of human worth will come from such an approach, the author's vigorous moralizing notwithstanding.
Err no. Stiglitz not a capitalist of the Ron Paul sort. You might not care for the fact that Stiglitz advocates (a version of) capitalism, but do not distort facts, or, if you have never read anything by Stiglitz, talk out of your ass. Stiglitz is one of the foremost opponents of the idea of perfect free markets. Among modern day economists, it is Stiglitz who has done more than anyone else to challenge the notion of perfect free markets.
It Stiglitz is equivalent to Ron Paul, then words and ideas become completely utterly meaningless.
But a "prefect free marker" which can be defined thus:
1) perfect competition
2) there is a sufficiently large number of participants such that no individual can affect the market
3] perfect information - every participant is fully informed
4) Free entry and free exit
5) everyone acts in their rational self-interest
6) Homogeneous - All firms sell an identical product
7) there are no transaction costs.
http://encyclopedia.thefreedictionary.com/Perfect+market
Is a _fantasy_ creation without regulation yet actually imperfect as greed and monopoly are still fatal flwas without checks and balances. How does a "free market" prevent "agencies" from becoming prevalent and all-powerful. It doesn't. A fatal flaw in Stiglitz's ideal marketplace.
As for number 6, that one is silly. If the products were the same where is innovation? And I have my doubts about the feasibilities of 5 and 7 as well.
No, the perfect marker is hardly perfect. Nice effort to reform a inherently unbalanced entity however. And such a perfect market would hardly be suited for human interactions which in the end-game is what economics truly is about humans interacting with each other in never perfect ways.
Gary
I have to agree with the other commenter. This has little to do with Stiglitz's work. Even *I* know that he has written extensively on information asymmetry.
Frankly, I don't see how anyone can advocates in this day and age of highly concentrated wealth and power, for a highly centrally controlled economy.
I actually think that IS what we have, it's just that--this must come as a shock to some people--the GOVERNMENT is not doing what YOU want because YOU aren't their REAL constituency.
>>Frankly, I don't see how anyone can advocates in this day and age of highly concentrated wealth and power, for a highly centrally controlled economy.<<
But look who has the power. That's the key. Power and wealth are certainly more concentrated; as during a monarchy. But the producers of most of the real wealth have no real say in what happens to that production.
I was not advocating a strongly centralized solution, something like a state and regional approach would be more flexible. But some regulation DOES require the federal level to function. It depends.
My point, which you avoided, was a fair market REQUIRES regulation to protect it from the kind of corruption we see here and elsewhere where a "free market" functions. And a "perfect" one is still susceptible to banditry and distortion, if not as easily.
Gary
So true. The insidiousness of the propagandizing of corporate capitalism is overwhelming even to such knowledgeable scholars such as Stiglitz. We have erected a Potemkin village to hide the falseness of the market dynamics at work. Whereas a "free" market always falls victim to greed and avarice -- a fair market is regulated to protect the people transacting with one another (and FROM one another). But as long as we let corporations pretend to the rights of persons and allow them to grow to such proportions they are "too big to fail," then we will be held victims to a corrupted system without proper checks and balances.
There MUST be consequences for cheating and stealing and putting an entire economy at risk. There must be!
Gary
Sioux Rose
GARY: Excellent post. Although I'd prefer to see those consequences enacted through human agencies like states attorneys general, the law of karma is universal Law and ultimately will not be mocked. Or as my friend Leslie says, "Their karma will catch up with them." Caveat: It may take more than one lifetime!
Why isn't the word, "CRIMINAL" used to describe the bankers and Congress? Why aren't we hearing more about deserved "PROSECUTION" and "INCARCERATION" of these thieves, liars - and "VAST RESTRUCTURING" of these corrupt institutions?
The passivity, i.e. Bill Moyers' latest interview with the Rolling Stone reporters for their latest issue is another example of how demonstrated anger and aggressive attacks against both the bankers AND Congress needs to be expressed - but wasn't.
The powerful won't change until far more anger, and I expect, violence is done. They will murder and assassinate to maintain their power. Must the same be directed towards them if any effective change is to occur?
They cannot 'get off' from the consequences of the imbalance they are helping to create--all debts, in the end, MUST be paid. Further, lack of awareness does not shield one from the consequences of their actions:
Anyone who knows anything about broader cosmic 'law' knows this as well. Ghandi gave us an insight into it with his 7 deadly sins, whose commission always has negative or unwelcome consequences for those committing them. This is not something religious, but means that whatever energy we 'invest' will bring a 'return' of its own type and kind, both physically and psychologically:
1) Wealth without Work
2) Pleasure without Conscience
3) Science without Humanity
4) Knowledge without Character
5) Politics without Principle
6) Commerce without Morality
7)Worship without Sacrifice
We can see the first 6 in full bloom today. The jargon and subterfuge has evolved around them, but the principle is the same.
What has to be realized is that EVERYTHING must be PAID for. There is an expenditure of energy and resources required to build and/or change the form/function of anything. Generally, this translates to effort, whether 'slave' effort or otherwise. SOMEONE has to make an investment of energy for any kind of production to take place.
Presently, we have a society based upon exploitation, and is why things have been divided into classes, namely, the 'haves' and the 'have nots.' What the haves fail to realize (or do not care) is that within human beings there are severe psychological consequences--translating to the suppression of vital energies within the oppressed individual--for those who are exploited, and thus find it impossible to achieve a balance in their individual lives, leading to drug use, consumerism (which is encouraged, regardless of the consequences to the environment or desperation due to debt), and other means of 'escape' in an attempt to achieve a balance.
The haves are not immune either; they suffer the direct consequences of committing sins 1 and 2, and indirect consequences for 3, 4, 5, and 6.
The further out of balance things become, the more dangerous for mankind, including the haves. So, regardless of the gibberish and high-sounding jargon, cosmic debt (nature's debt works here as well) remains the same, and must, in one way or another be paid.
Thus, there will come a day of reckoning for these monsters; if not outwardly, then inwardly. They must live in the 'atmosphere' they create. There is no escaping it.
I'd say 7)Worship without Sacrifice is in full bloom today as well. We have worship services now inside giant malls. We have churches and temples where other than the tithing no real sacrifices, certainly none of ego, greed, avarice or vanity are demanded. We have hypocrisy without consequences.
Gary
Good point. Worship has a lot of religious connotations, so I'm not so sure how that fits in. There are negative connotations as well--as with ego-worship, and self-worship (narcissism), and a less well know kind of worship: thought worship, or worship of the intellect above all else. Maybe Gandhi should have used the word love, that of the unselfish kind.
Sioux Rose
CHESS GAME: Thank you for a most interesting post.
Why are 'we' letting Wall Street off so easy? Who exactly are these 'we' you speak off? Do you mean 'we' as in 'they' the elite? Or 'we' as in 'we the sheeple'?
Exactly. I see *very little* tendency to excuse these people out here in the real world, including a lot of people who currently work or previously worked in the financial sector.
Stiglitz says "Market fundamentalism has eroded any sense of community and has led to rampant exploitation of unwary and unprotected individuals."
People who want to criticize "market fundamentalism" are going to have come to grips, in detail, in the ways in which THE GOVERNMENT facilitated not only this particular crisis, but the whole of the "free market" economy that generated a whole swath of the US population that cannot afford the high cost of housing.
The REASON the perpetrators are not being held to account NOW is that the agency that must hold them accountable, the GOVERNMENT, is FULLY COMPLICIT in the crisis and in the depression economy we'll have for some time to come.
So, personally, I am not having this "market fundamentalism" without a full accounting of government culpability. Asking "the government" to fix this right now is like asking Robert Rubin to fix it--and about as likely.
There are no "economies" only POLITICAL economies.
CORP IS BORG.
Let's not forget that the current mortgage based crisis was largely a product not of "market fundamentalism" or a Congressionally sanctioned (or otherwise) lapse in "regulation" but of collusive mortgage and securities FRAUD.
That's not a working market that someone took too far in a capitalist direction, as implied in the term "fundamentalist"-- that's something that was a functional market that was criminally broken so that people at the top of the food chain could LOOT IT. And then they systematically LOOTED the GOVERNMENT itself.
Yes, people can't afford housing in this country because the GOVERNMENT allowed the asset holding classes to scr*w the working classes.
But, the problem is actually much deeper than the term "market fundamentalism" implies. We're talking real, massive GUTTER CRIME lead from the top down by people who have served IN THE GOVERNMENT.