the-lone-pamphleteer.tumblr.com: Sundown in America
April 4, 2013
Rarely do journalists reporting on the state of the American or world economy write with the accessibility and honesty of David A. Stockman in his recent New York Times opinion piece, called “State-Wrecked: The Corruption of Capitalism in America.” The former Republican Congressman and Office of Management & Budget director during the Reagan administration has the experience with financial markets and central economic planning that most critics of the system lack, and it makes his column seem both more reliable and more frightening than the alarmist pleas of many other doomsday prophets.
With carefully explained figures and simplified (yet, to my knowledge, accurate) descriptions of the history of twentieth century American capitalism, Stockman takes us through the eras of mistaken governmental policies, avoiding the typical biases that pervade in financial opinion writing:
“The culprits are bipartisan, though you’d never guess that from the blather that passes for political discourse these days.”
Stockman’s willingness to criticize Republicans and Democrats alike is refreshing, as when he points to 1933 as the origin of our current “state-wreck,” when “when Franklin D. Roosevelt opted for fiat money (currency not fundamentally backed by gold), economic nationalism and capitalist cartels in agriculture and industry,” but then only a few paragraphs later emphasizes Richard Nixon’s “sin [arguably] graver than Watergate”: ending the convertibility of gold to the dollar, essentially defaulting on the nation’s debt obligations and launching a “four-decade spree during which we have lived high on the hog, running a cumulative $8 trillion current-account deficit.”
Many of his claims, though controversial, strike me as correct: World War II did more to end the depression than the New Deal; the only reason Alan Greenspan’s monetary policies—keeping interest rates too low for too long and flooding Wall Street with freshly minted cash—didn’t set off inflation was that domestic prices for goods and labor were crushed by the huge flow of imports from the factories of Asia; we’ve been living on borrowed time, spending Asia’s borrowed dimes; beginning under Reagan, and especially under Bush, the GOP basically “embraced Keynesianism—for the wealthy”; that the overblown fear of another Great Depression in 2008 was concocted by Wall Street to force a panicked bail-out from Washington; and—perhaps most frighteningly—that the 10-year deficit is actually $15 to $20 trillion—much larger than the $7 trillion that even “deficit hawks” like Paul Ryan would have us believe (Stockman explains that this disparity is partially made possible by the Congressional Budget Office’s projection of 16.4 million jobs over the next decade, compared with only 2.5 million in the last ten years).
I find myself convinced by Stockman’s column not only because of his seemingly accurate portrayal of the many mistakes made by government and industry alike, but also because he seems genuinely concerned with the stark and widening inequality created by the broken system. He sounds like Bernie Sanders when he says that Paul Ryan’s “proposal for draconian 30 percent cuts over a decade on the $7 trillion safety net—Medicaid, food stamps and the earned-income tax credit—is another front in the GOP’s war against the 99 percent.”
Like many critics of the harshly unequal outcomes of the supposed “recovery,” he invokes mind-boggling figures: real median family income growth has dropped 8 percent; the real net worth of the bottom 90 percent has dropped by 25 percent; the number of food stamp and disability aid recipients has more than doubled, to 59 million (which is one in five Americans).
In the 1980s Stockman was a true believer in Chicago School neoclassical economics and the trickle-down theory. Unlike most of his peers, however, he’s willing to look, 30 years later, at the disastrous outcomes and know how misguided that ideology was.
Stockman is no Kissinger, warning of the future of an empirical China in America’s image. Instead, he recognizes that just as America will soon follow Greece and Cypriot’s lead, the rest of the world won’t be far behind:
“The greatest construction boom in recorded history—China’s money dump on infrastructure over the last 15 years—is slowing. Brazil, India, Russia, Turkey, South Africa and all the other growing middle-income nations cannot make up for the shortfall in demand. The American machinery of monetary and fiscal stimulus has reached its limits. Japan is sinking into old-age bankruptcy and Europe into welfare-state senescence. The new rulers enthroned in Beijing last year know that after two decades of wild lending, speculation and building, even they will face a day of reckoning, too.”
He joins other pragmatic truth-tellers, like former Comptroller General David Walker, in calling for drastic reforms, but is more than pessimistic about the potential to realize them, writing that “the way out would be so radical it can’t happen.” I disagree with Stockman on what appears to be a faith in truly free and functioning markets that could save the global economy while decreasing inequality—especially because he doesn’t address how constant growth could be compatible with an ecologically sustainable future—but I am willing to concede that many of his measures would be improvements over the status quo. I also agree that they’re completely unfeasible as a matter of politics.
So what are we left with? How do we proceed? Is there any way to stop this latest bubble, “inflated by an egregious flood of phony money from the Federal Reserve rather than real economic gains,” from bursting and leaving us in ruins? I don’t know, but Stockman’s closing line leaves me with chills: “If this sounds like advice to get out of the markets and hide out in cash, it is.”
— Written & submitted by the-lone-pamphleteer.tumblr.com whom you should follow.
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