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Wrecking, wrecking, wrecked; how Republican conservatives destroyed the U.S. economy

 
 
Reply Mon 29 Sep, 2008 09:58 am
Posted September 29, 2008
Wrecking, wrecking, wrecked.
by Thomas Frank

The great fear that hung over the business community in the 1970s was death by regulation, and the great goal of the conservative movement, as it rose to triumph in the 1980s, was to remove that threat--to keep OSHA, the EPA, and the FTC from choking off entrepreneurship with their infernal meddling in the marketplace.

Defunding those agencies was one way to stop the killer bureaucrats; another was to stuff them full of business-friendly personnel who would go easy on regulated. The signature conservative regulatory idea became "voluntary enforcement", because everyone now knew that efficient markets regulated themselves. Bad practices or tainted products drove away consumers; therefore firms had an incentive to behave, an incentive far more powerful than some top-down scheme in which big brother told them what to do.

Whether people ever truly believed this nonsense or not, its application over the years makes up the basic story of conservative governance as I tell it in my book, The Wrecking Crew. This is the philosophy by which conservatives gutted the EPA and the Labor Department, turned over the Interior Department and the FDA to the industries they were supposed to regulate, let the CEO of Enron advise the vice president on energy policy, and generally came to regard business, not the public, as government's "customer" (a word that crops up with disturbing frequency in conservative regulatory history).

But it is only now, as we watch the financial system crumble around us, that we can really see the devastating consequences of this folly. It turns out the Securities and Exchange Commission (SEC), which was responsible for regulating investment banks, did a significant part of its job through a voluntary program which firms could participate in or not as they saw fit. As the New York Times told the story on Saturday, this system had--of course--been pushed for by the investment banks themselves, who wanted it in order to avoid the stricter rules from European governments that they would otherwise have had to obey.

And now, as a consequence, the SEC has almost no industry left to regulate. Bear Stearns, Merrill Lynch, Lehman Brothers, Goldman Sachs, Morgan Stanley: All of them are gone or restructured. At business's urging, business was left up to its own devices; its own devices turned out to be precisely the things that our grandparents set up regulatory agencies to guard against: euphoria that leads to panic; perverse incentives that lead to fraud; boom that leads to bust.

As you watch the world crumble, try taking your Armageddon with this sprinkling of irony: Over the last three decades, business has got virtually everything it wanted, and its doomsday scenario from the 1970s has come true because of it. The regulators have indeed killed the regulated--not by intrusive meddling but by doing nothing, by taking a nap while the financial sector puffed up the bubble and blew itself to pieces.

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Type: Discussion • Score: 0 • Views: 888 • Replies: 6
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dyslexia
 
  1  
Reply Mon 29 Sep, 2008 10:11 am
@BumbleBeeBoogie,
huffingtonpost I assume.
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kuvasz
 
  2  
Reply Mon 29 Sep, 2008 11:42 am
Just to show you how venal and stupid the wealthy are in America, they ignored the first principle of parasites; "don't kill the host."
BumbleBeeBoogie
 
  1  
Reply Mon 29 Sep, 2008 01:18 pm
@kuvasz,
How true. They depend on buyers of their products or services, yet insist in keep wages so low that working people can't afford to buy them.

Henry Ford was very smart, except for his anti-semitism, because he paid his employees enough so that they could afford to buy the autos they produced for him.

BBB
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talk72000
 
  2  
Reply Mon 29 Sep, 2008 09:44 pm
@BumbleBeeBoogie,
As a student I mused about obsolete laws and regulations that needed have sunset clauses as any law student could tell you that there are thousands of laws that are in the books but never enforced or obsolete owing to progress, technological advancesment and general social improvement.

Never in my wildest imagination did I think the Conservatives would take that musing to such extremes as to eliminate regulations altogether and risk removing safety.
TilleyWink
 
  1  
Reply Mon 29 Sep, 2008 11:13 pm
@BumbleBeeBoogie,
Turns out they may have done the ultimate and shot not only their feet off but the body and the tail too.
0 Replies
 
BumbleBeeBoogie
 
  1  
Reply Tue 30 Sep, 2008 10:43 am
@talk72000,
A must read book for anyone who is uneasy about having Treasury Secretary Paulson in charge of fixing the US economy collapse. I've singled out just one small section of the book given today's economic crash. ---BBB

Casting his eye back to the early days of the conservative revolution, Frank describes the rise of a ruling coalition dedicated to dismantling government. But rather than cutting down the big government they claim to hate, conservatives have simply sold it off, turning public policy into a private-sector bidding war. Washington itself has been remade into a gold landscape of super-wealthy suburbs and gleaming lobbyist headquarters---the wages of government-by-entrepreneurship that has been practiced so outrageously by figures such as Jack Abramoff.

It is no coincidence, Frank argues, that the same politicians who guffaw at the idea of effective government have installed a regime in which incompetence is the rule. Nor will the country easily shake off the consequences of deliberate misgovernment through the usual election remedies. Obsessed with achieving a lasting victory, conservaties have taken pains to enshrine the free market as the permanent creed of state.

This excerpt from The Wrecking Cren; How Conservatives Rule, by Thomas Frank page 264:

And then, act 3, George W. Bush proceeded immediately to plunge the budget into deficit again. Indeed, after seeing how the Reagan deficit had forced Clinton's hand, it would have been foolish for a conservative not to spend his way back into the hole as rapidly as possible, That deficits defund liberalism was no longer just a theory; it was a historically tested reality, a plan that got results.

Besides, think of the possibilities that opened to our conservative friends as they realized they were not free to taxcut-and-spend their way deep into the red. Oh, the earmarks they could hand out to people working on privatizing outer space or building experimental jet airplanes. All the different ways they could reward the right lobbyists, the right consultants, the right contractors. And after they'd burned through the bank account and brought on the crisis, think of the points they could win by screaming about too-generous "entitlements," the insolence of publicly funded art, and all the fat and lazy bureaucrats who needed a pay cut.

If, along the way, all this idiotic spending happened to bump up public cycicism toward deficit spending a notch or two---why, that's just gravy. "It's perfectly fine for them to waste money," says former labor secretary Robert Reich, summarizing the conservative viewpoint. "If the public thinks government is wasteful, that's fine. That reduces public faith in government,, which is precisely what the Republicans want." It's not just sabotage; it's win-win sabotage, a charming addition to win-win incompetence and win-win corruption.

Put simply, takeovers constitute the key solution to the most serious problem inherent in the operation of publicly traded corporations, namely, the failure of corporate management to keep the shareholds' interest foremost in the decision-making, wrote two experts in corporate law in 1988. With the advent of the leveraged buyout or hostile takeover, this situation was changed: 'Thus, to reduce the risk of being swept out of office, managers are constrained to keep stock prices as high as possible by running their companies efficiently and in the interests of the shareholders."
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