Wednesday, November 18, 2009

Steve Forbes: "How Capitalism Will Save Us"

Here we go again. Steve Forbes' How Capitalism Will Save Us is on the shelf and it, according to sound bytes from his book promotion tour, claims that Capitalism will do what the title says it will: Save Us . How can we possibly believe that? Well, I fear that some people will read the book, or only hear about it, and say, “Yep. Let's take the country back!” Really? I think there's a little more to it than that.

I have to wonder whether the most important thing we have to live for is a capitalistic society where the most fortunate are allowed to run roughshod over those less fortunate. By the fortune of providence, Forbes has had an extraordinarily good life. He was lucky to be borne into a super-rich family, lucky to have attended the best schools and lucky to have the temperament and aptitude to become what he has become. But, Forbes is a libertarian, free, laissez-fair market guy. He was Senator McCain's economics adviser and he doesn't believe in government regulations on markets or corporations. He's a Reaganomics, deregulation guy. He doesn't believe in luck or chance in life. He believes he earned his fortune by his own effort and skills. That being in the right family, in the right place at the right time in history is beyond his thoughts. From what I've heard so far, his book is an extension of his campaign advice that he summarized several times during the 2008 presidential campaign; for example here in Forbes Magazine and here on National Public Radio. The book is just more detail along the same lines of thought. As a libertarian, it's funny that he's speaking out of both sides of his mouth.

On the one hand he believes as today's libertarians do: that the cause of the current economic recession is caused by bad government policy. He's right, but he cites the wrong reasons. He claims the primary cause for the sub-prime mortgage bubble was the Federal Reserve 1) printing too much money, and 2) not doing its job in regulating banks. That's funny considering it was a super-libertarian administration in office at the time the so-called offense was committed. Alan Greenspan fully admitted in a congressional testimony the he was wrong. He said, “I thought the market would regulate itself, that free market competition would prevent greed and corporations would self-correct misbehavior. I was wrong.” Alan Greenspan is, or was, a premier libertarian and believer in laissez-fair markets and that's why he personally prevented the Fed intervention when market indicators showed a sub-prime bubble ready to crash. He probably still is libertarian in spite of his admission that he was wrong.

The other thing that happened under a Republican, libertarian Congress was that important parts of the Glass-Steagall Act of 1933 that protected the ordinary man from wayward banks was repealed by the Gramm-Leach-Bliley Act ( Banking Reform Act of 1999) . What you really need to know is who wrote and sponsored these laws. The Glass-Steagall Act came out of the investigations into the causes of the Great Depression and was primarily written by Democrat and Republican members of Congress who conducted the investigation. The sponsors were Senator Carter Glass and Congressman Henry B. Steagall, both Democrats. The Gramm-Leach-Bliley Act was written by lobbyist and corporate lawyers representing banking, both commercial and investment banks, and insurance corporations. It was sponsored by Senator Phil Gramm and Congressmen Jim Leach and Thomas Bliley, all Republicans. Phil Gramm took a high paying job with UBS after he left Congress, the Swiss bank whose lobbyist wrote the Banking Reform Act of 1999 . UBS, by the way, is one of the bank that recently opened its secret offshore accounts to the IRS to identify offshore tax evaders; 14,700 tax evaders took advantage of the IRS amnesty offer to avoid jail for tax evasion. That doesn't give a person a warm, fuzzy feeling for the ethics UBS practices, or the ethics of anyone associated with the bank. The Gramm-Leach-Bliley Act loosed the banking dogs of greed on the world that allowed commercial banks to become investment and insurance banks; in other words, they began gambling in the dark markets of derivatives. It was the greedy banks that caused the Great Depression that the Glass-Steagall Act protected us from and with it gone, history repeated itself. It was the Gramm-Leach-Bliley Act that let the banks nearly cause another Great Depression in 2008-2009.

In one breath, Forbes supports the government bail out, and in the next breath says “government should stay out of business,” an ideological position, not a pragmatic and reasoned stance. It seems that anytime we choose ideology over reason, we get ourselves in trouble. The fact is that libertarian ideology does not consider the less fortunate and when the proportion of poor in our population continue to grow, a tipping point will come where citizen income will be unable to support the country; tax revenue will not be enough for needed government services.

We desperately need government to sensibly regulate and, in some cases, provide services directly that protect the less fortunate, the poorest in our society, from the most greedy and the powerful monied interests. For example, government should provide the higher education programs, not private corporations, yet President Reagan privatized higher education loan programs and Sallie-May (SLM Corporation) made a fortune from college students who couldn't afford the high interest rates and punitive college loans. Government should ensure that all get reasonably priced healthcare; private insurance corporations cannot be trusted to provide that. Government should provide consumer protections from credit card and bank lenders because banks have no way, nor do they desire to, self-regulate the fees, interest rates, terms and amounts they provide in loans to citizens. These will forever be biased to their own purposes.

Forbes says the sub-prime mortgage crisis was caused by “a few greedy people.” From the number of banks receiving government aid and the number of banks being taken over by FDIC and the number of reckless and failing insurance companies, not only in the U.S., but all over the world; it seems to me that the crisis was caused by many greedy people. And, it hasn't changed after government aid. CEO's still get huge, obscene bonuses and stock options. Banks are still limiting credit, using high interest rates and extravagant fees and they're more interested in buying other banks (getting to big to fail) instead of serving those who deposit money in those banks or borrow from the banks. Insurance companies are raising rates. Drug companies are raising prices. These are just a sample. From high-tech traders, hedge funds, mutual funds and private investment bankers you see the same greedy practices that got us into this mess. I simply don't see the proof that capitalism will “save us.” That seems to be putting all our eggs in one philosophical basket.

So, what is the purpose of human life on earth? Is it servitude to corporations? Or, is it to have a chance for a good, if not wealthy then reasonably secure, life? Capitalism serves a purpose to provide a good life for many, not just a few. But, it seems to me that human tendency for greed and avarice needs a leash, and only good government can provide that. Forbes is all wet.


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