Annals of the Great Recession XIII.

A couple of polls from back in late 2015 may give some indication of fundamental beliefs that will play out in the general election in November 2016.

Back in September 2015, almost half (49 percent) of Americans saw the free-market as the best escalator out of poverty, while a mere 18 percent disagreed.[1]  That still leaves a disturbing 33 percent “not sure.”  Similarly, when asked if the American economic system gave everyone an equal chance to succeed, 52 percent said that it did, while 45 percent said that it did not.[2]  This second report is bizarre.  Do most Americans really believe that the children of upper middle class suburban whites have an equal chance to succeed as a fifteen year-old black girl living with her mother or grandmother in North Philadelphia?  Perhaps it depends on the meaning of “success.”  No two people have an equal chance to end up in the same place, but perhaps they have an equal chance to improve on their starting position.  Perhaps it reflects a belief that people don’t have an equal chance, but that if you admit that there is a problem, then the Democrats or Republicans will come up with some new scheme that doesn’t work any better than the previous ones.  In any event, faith in capitalism has been undermined—by capitalists.

Just under half saw the economy as good, but a plurality saw it as stagnating.  That is, the country had recovered from the “Great Recession,” but it wasn’t moving forward to new heights.  Why was it stagnating?  Not for the reasons that Bernie Sanders might think.  On the issue of government regulation’s impact on the economy, 54 percent said that it posed a more urgent danger than did economic inequality, while 38 percent said that too little regulation posed a more urgent problem.  Republicans and a majority of Independents believed that the Republicans would do a better job managing the economy and creating jobs.[3]  This in the wake of the financial crisis, the “Great Recession,” and Republican opposition to a big stimulus bill!  How is this possible?  Well, perhaps things like the roll-out of Healthcare,gov have made lots of people go “even those idiot Republicans would be better than these clowns.”  Democrats and a minority of Independents beg to differ.  On the question of priorities, the vast majority (61 percent) saw unemployment as a greater problem than inequality (12 percent).[4]  Since the “Great Recession,” Democratic politicians and their favorite economists have been talking about the injustices and economic problems created by income inequality.  Broadly, Americans weren’t buying it.  Get the economy growing again and the inequality stuff will go away.

Wall Street’s reputation hadn’t recovered from the financial crisis.  A large majority (61 percent) expressed Not Much (29 percent) or No (32 percent) confidence in Wall Street bankers and brokers.  Almost a third (31 percent) expressed only Some confidence.  Related to this lack of confidence in Wall Street itself, a majority (58 percent) expressed Not Much (34 percent) or No (24 percent) confidence in the ability of the federal government to regulate financial institutions.  Again, almost a third (31 percent) expressed only Some confidence.  Perhaps this is one source of the distrust and unpopularity of Hillary Clinton?  We know that the Republicans are sold to the big money, but it’s disconcerting to see the guardian of Main Street “walking hand in hand with the one I love.”[5]

[1] Tim Montgomerie, “A Fading Faith in Capitalism,” WSJ, 7-8 November 2015.

[2] Andrew Ross Sorkin and Megan Thee-Brenan, “Many Feel American Dream Is Out of Reach, Poll Shows,” NYT, 11 December 2015.

[3] Then how come Romney didn’t win?  Because, although a very nice and accomplished man, he was an incredible bust as a national level politician?

[4] Montgomerie, “A Fading Faith.”

[5] See—if you can bear it–

Annals of the Great Recession VI.

The “Great Recession” led to much head-scratching. How could this disaster have come about? Who or what was responsible? How should we proceed going forward. Many books have poured forth in an attempt to answer these questions. Four of them take a critical look at the the materialism that drives modern life. The books raise more questions than they answer. The questions are worth some thought.

People used to live with scarcity we can’t imagine.  They had to work very hard just to have enough to survive on.  Then industrialization and the agricultural revolution created abundance.  People had to work very hard to have enough, then later to have a lot of stuff.  Now people ask what to do with this abundance.  Consideration of this question can lead people into areas that will be unfamiliar to most people.

The philosopher Michael Sandel argues that people start to think of money as the solution to everything, instead of just as a situationally-appropriate tool.[1]  Moreover, “the more things that money can buy, the more the lack of it hurts.”  Economic inequality leads to experiential inequality.

The writers Robert and Edward Skidelsky identify certain “basic goods”: health, security, respect, “personality,” harmony with nature, and leisure.[2]  How much is “enough”?  Should people continue to produce and consume ever more?  What do people get out of having more stuff or more activities?  Should they make do with less to have more time?  What would they do with more time?   Among their solutions: tax consumption, not income; tax spending on advertising.  What if the prescription for the good life offered by the Skidelskys conflicts with what most people want?

Luigi Zingales argues that Americans used to think that capitalism was a “fair enough” system, even if it wasn’t perfectly fair.[3]  The economist Alan Meltzer argues that Capitalism is the only system that produces freedom and prosperity.[4]  It makes no claim to produce virtue or stability.  This means that freedom and prosperity have an ugly reverse face.  However, “corruption, fraud, and greed” are common in all other systems, and less likely to be corrected than under capitalism.  What concerns Meltzer and Zingales is the government response.

American government tends to provide benefits to selected businesses without thinking about actually helping society as a whole.  For example, the mortgage interest deduction helps the construction industry, but amounts to a tax on renting that makes it less reasonable. Similarly, subsidies for ethanol amount to a tax on regular gasoline.  Zingales thinks that both education and health-care are “protected” industries.  They need to be exposed to competition.

It also tries to control the flaws.  Very often these efforts at “reform” miscarry.  For example, government seeks to correct for inequality of result by means of paying benefits funded by debt (the obligation of future generations to pay for benefits enjoyed by the present generation) or by regulatory systems that favor present established interests over newcomers.

Similarly, people who behave immorally need to be publically shamed even when they cannot be prosecuted. Bankers have taken their share of this, but someone needs to go after the “jingle-mail” borrowers.  They decided “enough is enough” and abandoned their obligations and assets. Probably not the answer the Skidelskys and Sandel had in mind.

[1] Michael Sandel, What Money Can’t Buy: The Moral Limits of Markets (2012).

[2] Robert Skidelsky and Edward Skidelsky, How Much Is Enough?  Money and the Good Life (2012).

[3] Luigi Zingales, A Capitalism for the People: Recapturing the Lost Genius of American Prosperity (2012).

[4] Alan Meltzer, Why Capitalism?  (2012). A