Saving capitalism

By Carter Bundy

As I’ve said many times here and elsewhere, capitalism is terrific. Adam Smith has it exactly right when he says the invisible hand of the market will generate the right products in the right places, creating prosperity.

At least in most areas of our economy, market forces are quite effective. Education and health care, where profits and society’s need for widespread positive end results are often inherently in conflict, are two notable exceptions.

But – and y’all had to know there was a “but” – near total deregulation, combined with lack of enforcement, is a disaster for not only consumers, but for capitalism itself.

Anybody remember high-school history? There was an AP question that went something like, “Just as only Nixon could have opened up China, only a member of the wealthy aristocracy like FDR could have saved capitalism by introducing regulations and safety nets. Discuss.”

I can’t remember my exact response, but essentially I disagreed that it had to come from someone with FDR’s background, but agreed that his status as part of New York’s wealthy elite made it harder to call him a communist.

I also agreed that his actions did save capitalism by ensuring a minimal base level of wages and retirement security for all.

You can’t spell ‘Worse than Hoover’ without ‘W’

We’ve seen seven years of aggressive deregulation and a near total lack of enforcement of the laws that do survive, generating more “freedom” for financial institutions than at any time since Herbert Hoover’s days.

The difference between Hoover and Bush segundo is that Hoover was willing to let the market play out, while the current administration doesn’t truly believe in laissez-faire capitalism.

W believes in crony capitalism, whereby profits are privatized, but risk and loss is socialized (that is, put on the backs of the rest of us and the next generation).

Privatize profits, but socialize risk. That’s the lobbying mantra of everyone from developers in New Mexico seeking tax increment financing to shift virtually the entire risk of (even good, new-urbanist) developments to the responsibility-challenged captains of Bear Stearns.

At least with Hoover, the market punished those who were largely responsible for creating the mess without a taxpayer bailout.

Where’s the next FDR?

I’m conflicted on the Bear Stearns bailout, because there’s no doubt that a collapse of our large financial institutions would wreak havoc on the lives of many folks who have done nothing to deserve that chaos.

Yet there’s something really, really wrong with the principals of Bear Stearns keeping their hundreds of millions of dollars while the guys who haul solid waste in Albuquerque pay federal taxes to bail them out.

Paul Krugman did an excellent job this week in deconstructing the Potemkin village that is Secretary Paulson’s attempt at reform. This administration’s top (only?) area of demonstrated competence is proposing catchy programs to placate voters while either doing nothing or worse, doing harm (Clear Skies and Healthy Forests, anyone?).

The big question is who will do something about it all. Senator McCain’s proposal is similar to his health-care plan: Markets will take care of it all. So if you’re looking for more of W’s laissez faire deregulation, there’s your guy. Good luck with that.

My guess (and lots of us were right about this in 2000, so it’s at least a guess with a track record) is that Bush-McCain’s hands-off approach will lead to more of the same.

On the other side of the aisle, the media is mostly focused on Senator Obama’s and Senator Clinton’s plans to freeze or shore up existing mortgages. Their plans do have some merit, although buyers who were speculating and gambling on ever-increasing home values to keep flipping homes don’t deserve a spot in the plan. Those folks can and should trade down (it’s not as though that million-dollar Santa Monica waterfront property is suddenly worth zero).

But what’s more important is that each of the Dems are also talking about re-instituting some semblance of common-sense regulation for lenders and those who seek to profit from mortgages.

In the rush for primary votes, Obama and Clinton may want to talk more about rescuing individuals, but the real future of our economy depends on sensible regulation and enforcement.

If one of them is on the steps of the Capitol on Jan. 20, as soon as his or her hand comes off the Bible, it ought to be phoning Nancy Pelosi and Harry Reid to push through serious reform. They have 11 weeks between Nov. 4 and Jan. 20 to finalize their plans, and it can’t come too soon.

They’ll make enemies with some of Wall Street, including many of their donors, but lots of Wall Street types will support them for doing what’s good for the long-term health of America and capitalism.

Oh, and by the way, it’ll be good for the long-term health of America and capitalism.

Bundy is the political and legislative director for AFSCME in New Mexico. The opinions in his column are personal and do not necessarily reflect any official AFSCME position. You can learn more about him by clicking here. Contact him at carterbundy@yahoo.com.